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Europe needs an options-based climate strategy

February 23, 2023

EU policymakers need to formulate a new strategy if they want to meet net-zero targets on time. In addition to renewables, policy must also support nuclear, as well as carbon capture and storage, and zero-carbon fuels.

Amidst the energy crisis and shifting geopolitics, it has become clear that Europe needs a new approach to climate neutrality that also achieves long-term energy security and economic growth.

With European policymakers on the EU and national-level mulling over the details of Europe’s answer to the global trend of green industrial policy, now is the time to develop a new climate strategy that reflects the scale and complexity of the problem with a more options-based set of policy and technology solutions.

First, European policymakers must formulate climate policies incorporating broad solutions options.

Europe must build as many renewables as possible. But to ensure cross-sectoral emissions reductions and around-the-clock power reliability across diverse national economies, policy must also support conventional and next-generation nuclear, as well as carbon capture and storage, climate-beneficial zero-carbon fuels, and their enabling infrastructure. 

Methane emissions urgently need to be addressed with proper regulation. In fact, we also need to invest in commercialising visionary solutions like permanent carbon dioxide removal, nuclear fusion, and superhot rock geothermal.  

What if any of today’s solutions do not pan out at scale? For example, to reach REPowerEU’s targets, Member States need to more than double the renewables capacity built over the past decades in just 7 years, yet permitting and installation rates are lagging.

As we shift from Russian fossil fuels to renewables with supply chains dependent on China – the origin of nearly 98% of the EU’s rare earths– we risk moving from one over-reliance to another. We can only hedge against these risks with more options. 

Voters are clearly open to the idea. Recently, 67% of German respondents said that Germany should continue using existing nuclear plants for the next five years. 41% said Germany should build new nuclear plants.

Second, history teaches that scaling tech requires long-term policy and investment planning. It took solar roughly 30 years to move from lab to market introduction and another 20 to commercial uptake.

For wind, these intervals were 20 years and ten years. Yet, net-zero models assume unprecedented compression in deployment timelines.

The International Energy Agency’s Net-Zero Scenario shortens commercial uptake for cement carbon capture, direct air capture, and hydrogen-based iron-making to well less than a decade.

The same goes for scaling supply chains and shared enabling infrastructure, such as transmission and hydrogen pipelines.

If we reach the 2030 target of 55% emissions reductions from 1990s levels – and there is much uncertainty about whether we can achieve this goal – we still need to plan for achieving the additional 45% emissions reductions and carbon removal after that. Most of the additional reductions will require technologies and markets not yet in place. 

Third, policymakers should focus on how existing funding could be dispersed more efficiently. In the US, project developers can predict whether they will qualify for incentives.

While similarly generous to the US if added up, it is often unclear how EU and Member State policies can work together for deployment and innovation; they might even conflict. Scholars reference a “kaleidoscope” of policies lacking coordination and undermining abilities to reach economies of scale.

Take the Important Projects of Common European Interest (IPCEI). They are one of the options for European industrial policy, but the lack of harmonised procedures and the bottom-up process, including limited administrative capacity, has led to unnecessary burdens on companies, and consequently, these projects have taken too long to implement. Calls for streamlining and coordinating policies are imperative. 

Fourth, additional policy tools and funding are needed to deploy different technology options and support the build-out of connecting infrastructure. U.S. innovation policy, including the Inflation Reduction Act, offers incentive structures that differ based on technology readiness.

This includes grants for pilots, demonstrations, and front-end engineering and design studies, along with production tax credits and low-interest loans to catalyse tech and infrastructure deployment.

The EU Innovation Fund provides good demonstration incentives. Limited in size, is not designed to drive cost reductions through continuous deployment of the multiple technologies it supports.

On the Member State level, European countries provide generous support for renewable deployment. Additional funding and policy tools are needed to deploy further technology options. This can include instruments like carbon contracts for differences, such as the Netherlands’ SDE++ scheme. 

Fifth, proactive planning significantly improves the chance of delivering a more efficient and less costly future energy system. Planning will also support pre-permitting and ensure that community benefits accrue.

Hence, policymakers need a better understanding of future energy demand, what kind of manufacturing capacity, skills, and the scale of shared cross-border full-value-chain infrastructure such as transmission, CO2 transport and storage, and generation capacity will be needed to decarbonise Europe.

For example, more than 100 GW of new clean firm power capacity is expected to be needed by 2035. Shifting to 24/7 clean electricity targets – instead of allowing producers to claim to be “100% clean” by buying renewable energy credits regardless of when and where they are generated – can promote more clean electricity technologies.

Still, proactive system planning is necessary to reach such a target. The UK’s Mission Zero Report recently recommended a cross-sectoral infrastructure strategy by 2025.

The upcoming National Energy and Climate Plans revision will be a stress test of how well Member States comprehend their climate infrastructure and technology support needs. 

So, where do we go from here? European policymakers should think expansively about the solutions needed for a climate-aligned future and how the evolving industrial and geopolitical landscape affects them.

This will require a better understanding of what we need to do today to fill the policy and technology gaps to go beyond 2030 targets.

It also requires asking hard questions about whether our current policies are fit-for-purpose and developing bespoke sectoral and technology roadmaps informed by industry needs and checked against steel-in-the-ground reality.

The next few years will determine whether Europe continues to inch along with incremental climate progress that may not add up or pivots to a strategy fit for the long term. We need to think harder.

Originally published in EURACTIV.

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