Interview with Prof. Nebojsa Nakicenovic, energy economist and systems analyst from the International Institute for Applied Systems Analysis and Vienna University of Technology and Deputy Chair of the EU’s Scientific Advise Mechanism.
The EU’s Scientific Advise Mechanism (SAM), comprised of the Group of Chief Scientific Advisors to the European Commission (GCSA) and the Scientific Advice for Policy by European Academies (SAPEA), has evaluated the suggested Green Deal energy transition measures and published their “Scientific Opinion and the Evidence Review report on a Systemic Approach to Energy Transition in Europe”. With the regulatory proposals of the European Commission’s ‘Fit for 55’ package, the EU will start implementing the general approach. The ‘Fit for 55’ measures aim at a reduction of greenhouse gases in the European Union of 55% by the year 2030 compared to the 1990 levels.
Prof. Nakicenovic, the Chief Scientific Advisors provide an opinion to the suggested overall approach of the EU towards the transition of the European energy systems. What do you think, can the EU realistically achieve a reduction of 55% of CO2 emissions by 2030 ?
In brief, it’s doable, if Europe is determined to use a holistic approach. This implies the maximisation of synergies and the removal of barriers across technologies, the set-up of regulatory and market measures, and social and behavioural changes. The core of the EU strategy would be in the electrification of energy systems while the economy needs to be widely decarbonised.
Does this goal follow the science?
Research communities are really delighted that the vision and ambition of the Green Deal is strongly rooted in science, based on the Paris agreement to stabilise global warming at 1.5° Celsius above pre-industrial levels. This will be achieved if global greenhouse gas emissions decline every decade by half; this means declining by half from now to 2030, and then again by half till 2040, to end up with net-zero in 2050. The European goal is a 55% reduction by 2030 compared to 1990 levels and net-zero by 2050. I call this the “global carbon law” that is reflected in ‘Fit for 55’.
The big question is: how will the EU reach this goal?
It will be a Herculean effort. Our Scientific Opinion report sets out several recommendations that centre around a policy of developing clearly designed, flexible, efficient, and resilient energy systems based on electrification and the use of green hydrogen. For both, huge efforts still need to be mobilised. Consistent regulatory systems demand the coordinative support of policies. Barriers should be removed, and trade-offs avoided. Research, innovation and deployment will require huge investments. And finally, nobody should be left behind – put people at the heart of energy transition policies.
Can all sectors – industry, transport, buildings, and agriculture – be covered by electrification, and which one will be the first and fastest sector to transform?
In the EU we see a huge diversity between Member States and regions. The common vision on the way forward should allow for different pathways, energy systems and scales of implementation. Fossil energy will continue to be more important in some Member States, and some others will still opt to continue using nuclear power. But all will need to transform their energy systems towards decarbonisation and electrification. The diversity across Europe is an asset and could be a source of resilience for responding to a multitude of future uncertainties.
How optimistic are you that all the involved countries will reach the benchmarks by 2050?
The future is indeterminate, which is the main reason why action plans, roadmaps and strategies are required to face future uncertainties and challenges. I am optimistic because there is a general consensus in the scientific community that viable pathways to reach net-zero emissions by 2050 exist. Although determined action is required now, we still need to take into account that some Member States and sectors may not be able to fully decarbonise by 2050.
What will Member States that cannot fully decarbonise have to do?
Their emissions would need to be offset by net-negative emissions, meaning removal of carbon dioxide from the atmosphere, preferably by nature-based solutions such as afforestation and sustainable land use. Some sectors such as electricity and light-road transport are likely to be first to decarbonise by using ever more renewable primary energies. One of the effective triggers is the Emission Trading Scheme (ETS) that should be extended to other sectors. Other sectors like steel, iron, or cement would be more difficult to decarbonise although potential solutions exist such as iron reduction with hydrogen instead of carbon. We propose to start with the low hanging fruits. The difficult will need some more time.
Is it mainly the supply side that has to undergo deep transformations?
Not at all. The demand side and the end-users can be drivers of the process with changes in consumption patterns, ownership to usership, shared economy, new mobility services, you name it. There are lots of new opportunities and many could be facilitated by digitalisation. A consequence of this is that energy systems would provide the needed flexibility such as through alignment and integration of new transmission infrastructures and storage systems, as well as the inclusive involvement of all agents and groups from private and public organisations, academic and educational institutions, to services provisioning, stakeholders, citizens, and NGOs. This is about the common future of the people on a sustainable planet.
To steer progress and to check the impact, a lot of control and monitoring in many dimensions will be required. Will we see the rise of a huge new control bureaucracy?
In my opinion, Europe is well placed to lead the way towards a socially just transition, towards the knowledge society, green but also digital at the same time. Digitalisation is a great opportunity but with some inherent dangers. My hope is that the convergence of digital technologies from big data and artificial intelligence to the Internet of Things and augmented reality will help us to cope with decarbonisation and other challenges and will deliver a new vision without creating new administrations. Digital Europe is high on the agenda, as are stronger safeguards for cybersecurity, protection of data and everybody’s privacy.
At a recent workshop in the European Parliament, which was organised by STOA Member MEP Tiemo Woelken you quoted a study showing that a global increase of only 2% in renewable energies has required investment costs of over $300 billion between 2019 and 2020. So, who will pay the bill?
These numbers are from the recent global status report by think tank REN21 and indicate that these investments in renewables include future lower costs that come with a potential benefit through “learning by doing” as has been the case in the past with photovoltaics and many other technologies. Globally we are talking about trillions of necessary investments in future energy systems. Let us think forward: currently we are dependent on 80% fossil energies that are also capital-intense and cause about 60% of import-dependence in Europe.
What will happen if we continue with business as usual?
It is my view that by sticking to business as usual, future energy will become much more expensive even without accounting for negative externalities. Efficient and decarbonised energy systems require high up-front capital costs that are likely to decline in time and renewables like wind and solar do not have any fuel costs.
Regarding the huge sums for the transition, is there enough transparency towards the public?
It’s very clear that the public must be prepared for rising carbon prices. At first, the high investments will have to be catalysed by governments to support the fundamental change in the energy systems – the power plants, the storage facilities, the vehicles, the heating and buildings – so that the bulk of investment comes from the private side. The private sector needs a portfolio of measures reaching from regulation to standards and from research to incentives for innovation. At the same time, there will be huge co-benefits of a long-term investment in decarbonised energy systems: they will not only foster modernised capacities, but also result in less natural damages, increased health, energy security, and saved resources. Not to forget the creation of a digital knowledge society and the educational agenda to acquire new skills helping job creation in new energy systems. Overall, it’s the long-term investments in people and knowledge that is a public good to the benefit of all of us. I think the EU Recovery Fund should be much more targeted to these purposes.
Pricing and capping could be the drivers of the transition. Where should the revenues from auctions, taxes and trading be going to?
The auctioning of permits for the ETS scheme with ever declining cap, especially if extended to other sectors, will create large and increasing revenues. In my view, these revenues should be neutral and not be regarded as an extra pot of money for the Member States, but rather be dedicated toward strategic and catalytic funds, as a financial incentive to support innovation and to assure that no one is left behind including the 30 or so million people in Europe today who cannot afford their heating bills. We must avoid this energy poverty. The systems transition needs to be just, fair and safe.
Decarbonisation in Europe also means planned carbon price adjustments at the borders for imported goods and services. Can this create a new kind of protectionism?
No, so long as it is done collectively and in compliance with World Trade Organisation rules. Now we have the big advantage that all major emitters – the G7, including Russia and China – strive to become net-zero by 2050 or 2060. It’s conceivable that the EU takes the lead in creating an International “Climate Club” that could be the base of a carbon free-trade zone with a border tax adjustment for import of products and services that are not climate neutral, thereby establishing a huge market and, at the same time, an incentive for the laggards to catch up.
For the time being, Europe has the global edge in hydrogen-power technologies. The STOA panel will present a study in the autumn about ‘The Potential of Hydrogen for Decarbonising EU Industry’. When you looked at the overall system approach, how did you rate the chances for the already-hyped hydrogen-economy?
The Scientific Advisors recommend the use of hydrogen as an energy carrier in addition to electricity especially because it would provide storage for intermittent renewables. There will be very interesting hydrogen markets in industries such as green steel production. Also, I see niches and applications when electricity is not an option due to limited storage possibilities for big vessels or heavy trucks, for example. Hydrogen is most promising, but the end-use technologies – such as the fuel cell for example – still need upscaling, new infrastructures, and more development – and a lot of investment.
What time scale do you see for hydrogen technologies becoming applicable?
Let me put it in my own words: The switch from horses to cars took 30 years in most countries, as did the pervasive adoption of mobile phones. Let’s give hydrogen technologies a 30 years’ time scale to become a complementary energy carrier to electricity. This would still be in time to achieve climate neutrality by 2050.
How important is the geopolitical dimension of the EU’s energy autonomy?
Today, the EU is the biggest importer of energy of all world regions. Half of the energy used in Europe comes from outside, compared to a third in China while the United States is a net energy exporter. The net-zero strategy with renewables will make Europe much more independent and less vulnerable. But we must be careful not to create new dependencies, given for example new raw materials for batteries such as lithium or cobalt. One solution lies in the introduction of a circular economy by minimising and recovering waste, together with a green industrial strategy. So, my answer to your question is: create a participatory environment that supports clean energy choices and uses the right combination of regulatory instruments, which are necessary steps to make this transition efficient, inclusive, and fair, and to lead the world toward decarbonisation while avoiding new dependencies.
Useful links
A systemic approach to the energy transitions in Europe. Scientific advice to strengthen the resilience of the European energy sector.
The CSA Opinion Paper; 29 June 2021
The SAPEA Evidence Review Report, 29 June 2021
Energy transition and the EU hydrogen strategy
STOA meets experts (online event ), 2 July 2021