Preserving the competitiveness of European industry and power prices
On Wednesday 27 October 2021 – we publish a report that analyses the impact of different speeds of renewables expansion on the CO2 price in the EU’s Emission Trading System (ETS) under the conditions of the Commission’s Fit-for-55-package.
The results are timely, as they coincide with significant political momentum for the European energy transition such as ongoing European climate negotiations and German coalition talks just one week before the start of COP26 in Glasgow. It also falls into a time of record high European natural gas prices driven by an unprecedented global supply shortage.
This study was commissioned by the European Climate Foundation and its key findings include:
- An accelerated rollout of wind and solar would stabilize the CO2 price at today’s levels until 2030. Sluggish expansion and delayed coal exit would lead to an 80 per cent price increase over the same period.
- Prices would rise even higher if slow EU renewables build out is combined with an additional support for coal generation. An analysis based on the Polish government’s PEP2040 plan to continue to burn coal until 2049, sees the CO2 price more than double by 2030, raising costs for businesses all over the EU.
- However, a rapid expansion of wind and solar would stabilize or even reduce European wholesale electricity prices by 2030 – for example cutting costs by 14 percent in Germany and by as much as 26 percent in Poland. By contrast, further stalled expansion would increase prices: in Germany by 31 percent, in Poland by 14 percent (in each case compared with the first half of 2021).
- In order to secure the competitiveness of European industry in the long term, governments will need to quickly remove current hurdles to the expansion of renewables. This would also reduce the power sector’s dependence on natural gas and counteract future gas price shocks.
View the public version of the report to explore the findings in greater detail.