Decarbonizing the EU Power Sector

The paper examines the EU power sector's transition toward a low-carbon future, highlighting the critical role of the electricity sector in decarbonizing transport and buildings. It identifies significant risks in current investment trends, such as carbon lock-in from new gas and coal plants, and argues that the EU Emissions Trading System (ETS) fails to provide a credible long-term signal for post-2020 investments. The authors recommend establishing post-2020 emissions caps and calibrating the ETS to ensure carbon scarcity after accounting for energy efficiency and renewable energy objectives.

• The electricity sector is central to EU decarbonization because it accounts for approximately 32% of EU27 CO2 emissions and has lower marginal abatement costs than other sectors, enabling it to support the decarbonization of heating, cooling, and transport.
• Current investment trends in the EU power sector are dominated by a significant expansion of gas-fired generation and renewable energy sources (RES). In 2010, gas represented 51% of newly installed capacity (28,280 MW), while solar PV and wind represented 22% (12,000 MW) and 17% (9,295 MW) respectively.
• The EU power sector faces high inertias due to long lead-in times for investment and asset lifetimes of 20 to 40 years, meaning current decisions create long-term legacies. This is particularly acute for nuclear power, where lead-in times are at least 10 years.
• There is a risk of carbon lock-in; bottom-up projections suggest that current trends would leave a legacy of roughly 430 GW of unabated fossil fuel capacity by 2025, comprising 250 GW of gas and 180 GW of coal.
• The EU Emissions Trading System (ETS) does not currently provide a credible long-term signal for investment. The current annual cap reduction of 1.74% is inconsistent with 2050 goals, as it would only reduce emissions by about 50% by 2050 compared to the 88-92% reduction required for the sector.
• Policy uncertainty in the ETS, particularly regarding the post-2020 cap trajectory, creates incentives for investors to delay decisions to 'learn-by-waiting,' which may threaten energy security in countries with high investment needs like the UK, Poland, and Germany.
• There is a significant imbalance between the ETS and complementary policies. Non-ETS policies for renewables have been the dominant driver of decarbonization; in the UK and Germany, implicit abatement subsidies were estimated at 52.5-138.6 Euro/ton and 95.9-122.5 Euro/ton respectively, far exceeding the carbon price of 14 Euro/ton.
• The economic crisis led to a decline in energy demand and emissions, resulting in a projected buffer of unused allowances. Between 2008 and 2012, approximately 2.3 Gt of unused permits are expected to accrue, potentially weakening the transformational signal of the 2020 ETS cap.
• Decarbonization requires a massive ramp-up in investment. Estimates suggest cumulative costs for generation plants between 2020 and 2035 could reach 1.3 trillion Euro, with annual generation investment needs rising to 55-70 billion Euro per year from a previous 25-30 billion Euro.

APA

Spencer, T., Marcy, C., Colombier, M., & Guérin, E. (2011). Decarbonizing the EU Power Sector. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/wp-1311-decarbonizing-eu-power-sector.pdf

Chicago

Spencer, Thomas, Céline Marcy, Michel Colombier, and Emmanuel Guérin. Decarbonizing the EU Power Sector. Climate Strategies, 2011. https://climatestrategies.org/wp-content/uploads/2014/11/wp-1311-decarbonizing-eu-power-sector.pdf.

Wikipedia

{{cite report |last1=Spencer |first1=Thomas |last2=Marcy |first2=Céline |last3=Colombier |first3=Michel |last4=Guérin |first4=Emmanuel |title=Decarbonizing the EU Power Sector |publisher=Climate Strategies |date=November 2011 |url=https://climatestrategies.org/wp-content/uploads/2014/11/wp-1311-decarbonizing-eu-power-sector.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{spencer2011decarbonizing, author = {Spencer, Thomas and Marcy, Céline and Colombier, Michel and Guérin, Emmanuel}, title = {{Decarbonizing the EU Power Sector}}, institution = {Climate Strategies}, year = {2011}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2014/11/wp-1311-decarbonizing-eu-power-sector.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }