Comparison of Fit-for-55 Policy and Cost Optimal Scenarios for the EU

Introduction

This modelling exercise was carried out to directly answer the stakeholder question “How does the implementation of the updated draft National Energy and Climate Plans compare to the cost optimal EU approach?”. However, due to delays in the release of the National Energy and Climate Plans by EU member states and model limitations in representing granular national policies, cost-optimal model scenarios to achieve the EU emissions mitigation targets are compared here to EU-wide modelling of the Fit-for-55 policy package. While this may not capture all national idiosyncrasies, it captures a number of key EU-level targets for mitigation pathways that differ from the cost optimal outcomes in IAMs. The Fit-for-55 package includes policies limiting energy sector and industrial emissions, promoting renewable deployment, and limiting energy demand in order to reach the EU goal of 55% emissions reduction in 2030, compared to 1990. Below we elaborate on the models included in this analysis and the Fit-for-55 components included in the study.

Methodology

In this study, three models were included to compare Fit-for-55 to cost optimal scenarios: two global IAMs, GCAM and TIAM-Grantham, and one global energy model PROMETHEUS. Within each global model, there is an EU region, although with some slight variations. In the version of GCAM used here, the 27 EU member states are split into two regions, combined in all results presented in this analysis; results for TIAM-Grantham combine a Western Europe and Eastern Europe region, which includes the EU member states as well as the UK, Switzerland, Iceland, Norway, Albania, Bosnia-Herzegovina, Czech Republic, Macedonia, Serbia, and Montenegro; PROMETHEUS results include all EU member states plus the UK.

The Fit-for-55 package and other major EU climate policies are included in the current policies modelled under the NDC_LTT scenario. Below (Table 1) we outline the major EU policies that are modelled in the NDC_LTT scenario:

Table 1: EU Fit-for-55 climate policies modelled in the NDC_LTT scenario
Policy	Variable	Target
Renewable energy directive	Share of renewables in final energy	40 % in 2030 (target was increased to 42.5% after study began, not captured in these scenarios)
Renewable energy directive	Share of advanced renewables in energy use in rail and road transport	5.5% in 2030
Emissions trading system	ETS sector (electricity generation, industry) emissions reduction	62% reduction in 2030 from 2005 level
Energy efficiency directive	Energy consumption - maximum final energy	763 Mtoe
CO₂ vehicle emission standards	Light-duty Vehicle emissions intensity	0 g CO2/km for vehicles sold from 2035 onwards
Strategy on offshore renewable energy	Installed capacity - offshore wind energy	60 GW in 2030; 300 GW in 2050
REPowerEU plan	Installed capacity – solar energy	320 GW in 2025; 592 GW in 2030
European wind power action plan	Installed capacity – wind energy	in 2030

Scenario protocol

The scenarios are designed to specifically compare the difference in the EU when achieving emissions targets for the NDC and long-term target between a pathway including current climate policies and a cost-optimal pathway in the models: 

NDC_LTT: Identical to the scenario described in section 2.3.2, this ambitious global scenario includes current policies, NDC targets, and long-term targets in all global regions.

EU_Optimal: In this scenario, the EU achieves the same level of mitigation of GHG emissions or CO2 Fossil Fuel and Industrial (CO2 FFI) emissions from 2030 to 2050 as in NDC_LTT. GCAM measures all GHG emissions while TIAM-Grantham and PROMETHEUS only track CO2. However, here EU emissions reductions are achieved with emissions constraints, and no inclusion of the current climate policies, allowing the models to choose the cost-optimal pathway to reduce emissions. For other global regions, the same scenario protocol from the NDC_LTT is modelled, including both current climate policies and emissions targets.