NewEnergyNews: TODAY’S STUDY: THE COSTS AND BENEFITS OF AN EU NEW ENERGY ECONOMY

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Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge now: To make every day Earth Day.

YESTERDAY

  • ORIGINAL REPORTING: Turning Distributed Energy From Threat To Opportunity
  • ORIGINAL REPORTING: Solar Policy Action Heats Up
  • ORIGINAL REPORTING: Maine’s Almost Solar Policy Breakthrough
  • THE DAY BEFORE

  • TODAY’S STUDY: How To Balance Competing Solar Interests
  • QUICK NEWS, December 6: Sliver Of Hope? Al Gore In Climate Change Meet With Donald Trump; The Opportunity In New Energy; Google Seizing New Energy Opportunity
  • THE DAY BEFORE THE DAY BEFORE

  • TODAY’S STUDY: A Way For New Energy To Meet Peak Demand
  • QUICK NEWS, December 5: Trial Of The Century Coming On Climate; The Wind-Solar Synergy; The Still Rising Sales Of Cars With Plugs
  • THE DAY BEFORE THAT

  • Weekend Video: Trump Truth And Climate Change
  • Weekend Video: The Daily Show Talks Pipeline Politics
  • Weekend Video: Beyond Polar Bears – The Real Science Of Climate Change
  • AND THE DAY BEFORE THAT

  • FRIDAY WORLD HEADLINE-Aussie Farmers Worrying About Climate Change
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 1
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 2
  • FRIDAY WORLD HEADLINE-New Energy And Historic Buildings In Europe
  • THE LAST DAY UP HERE

    THINGS-TO-THINK-ABOUT THURSDAY, December 1:

  • TTTA Thursday-First Daughter Ivanka May Fight For Climate
  • TTTA Thursday-Low Profile High Power Ocean Wind Energy
  • TTTA Thursday-A Visionary Solar Power Plant
  • TTTA Thursday-EVs Have A Growth Path
  • --------------------------

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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews

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    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • THINGS-TO-THINK-ABOUT THURSDAY, December 8:

  • The Record Of The New EPA Head
  • The Undeveloped New Energy
  • Walking On New Energy
  • Electric Tractor For Emissions-Free.Farming

    Monday, July 07, 2014

    TODAY’S STUDY: THE COSTS AND BENEFITS OF AN EU NEW ENERGY ECONOMY

    Macro-economic impacts of the low carbon transition

    June 2014 Ernst & Young

    Executive Summary

    In its 2011 Roadmap for moving to a competitive low carbon economy in 2050, the European Commission (EC) established its plan for achieving 80% carbon emission reductions by 2050 compared to 1990 levels. The Roadmap set out the contribution expected from each economic sector, in comparison with a Business-As-Usual (BAU) scenario which, by means of the current policy framework, would be expected to achieve a 40% reduction by 2050. In January 2014 the Commission published a new Impact Assessment and associated documents focussing on the 2030 timeframe, reflecting an updated reference scenario published in December 2013.

    The present study compiles the findings of recent expert research on macroeconomic impacts of the low-carbon transition in the European Union (EU). Many actors representing the targeted economic sectors (power, transport, buildings, and industry) have responded to the EC’s findings, transposing them into their own sector-specific roadmaps and decarbonisation scenarios. This body of work has nurtured the debate on the impact of the transition on key macroeconomic features: the EU’s energy import dependency, investment costs, energy costs, industrial competitiveness, GDP and employment. The analyses are often produced with milestones in 2020, 2030 and 2050, thus projecting the time horizon by when investments made in the short run would possibly generate returns.

    This executive summary outlines the key findings of the study, and synthesises the arguments put forward in the reviewed body of literature. The full study is intended for readers interested in the detailed arguments, the sources from which they are drawn, and the extent to which some sources may differ.

    Continuing with BAU will bring major economic challenges

    Irrespective of the choices made by the EU regarding decarbonisation, it will face major economic challenges over the coming years. In particular:

    ► An aging energy infrastructure: according to the EC (2011), under a BAU scenario, average energy infrastructure investments across all sectors of the economy would increase from around € 800 billion per annum over the period 2010-2020 to € 1000 billion per annum over the period 2040-2050. The updated reference scenario prepared by the European Commission (2013) estimates similar investment needs, with average annual investments amounting to € 816 billion over the period 2011 to 2030, illustrating that in any case the EU will have to mobilise significant amounts to maintain its energy infrastructure.

    ► Evolution of energy demand, fossil fuel production and energy prices: according to the EC, while energy demand in the EU is expected to stabilise under BAU, fossil fuel production in Europe would halve over the period 2010- 2050, increasing the EU’s dependency on imports from third countries. Under the BAU scenario drawn by the Commission, Europe’s import dependency would go up to 56.5% in 2050 compared to 52.6% in 2010. Regarding oil specifically, under BAU Europe’s dependency on imports would increase from 74% in 2010 to 84% by 2030, and almost 90% by 2050 – even though import volumes would stagnate. Regarding natural gas, under BAU Europe’s dependency on imports would increase from 64% in 2010 to over 70% by 2030, and almost 80% by 2050. With fossil fuel import prices set to rise, the total energy import bill of the EU is projected to rise by about 80% from 2010 to 2050, reaching around €600 billion (in 2010 euros) in 2050. For electricity, the average, pre-tax price is projected to increase by 40% between 2005 and 2030, though it would stabilise thereafter. The updated reference scenario dating from 2013 provides a slightly different picture, since it supposes that the EU is now embarked on a more ambitious decarbonisation trajectory, with the expected implementation of most recent policies (Energy Efficiency Directive, national policies). Consequently, power generation costs increase more significantly than in the previous BAU scenario until 2020, because of higher capital costs (e.g. ENTSO-E provisions, RES 2020 investments). However, beyond 2020, prices are expected to stabilise, and even slightly decrease by 2050, as fuel cost savings materialise.

    ► Challenges of sustaining the growth of the transport sector: the transport sector has been persistently dependent on oil for years. 96% of energy used in transportation in the EU-27 today is fossil fuel. Although final energy demand in the transport sector is expected to stabilise by 2050 under BAU, this dependency rate would only be reduced to 90%. A study by Cambridge Econometrics finds that even with Europe maintaining domestic extraction rates on fossil fuel, the annual cost of oil imports to supply the transport sector would rise to € 590 billion by 2030 and further still to € 705 billion by 2050 based on price increases alone, compared to € 350 billion in 2012. Without reductions in the demand for oil, imports are also likely to increase in volume as domestic production depletes Europe’s oil reserves. Europe thus faces a serious challenge to increase technological and system efficiency to reduce its oil dependency.

    ► A need to upgrade the current building stock: buildings account for 40% of total energy consumption in the European Union. With energy costs set to keep rising, there is a strong interest in maximising the energy efficiency of the building stock, and great potential to achieve this: Fraunhofer estimates saving potential of around 60% by 2030. Yet average demolition rates are currently only 0.1% per year. The greater part of the saving potential will therefore have to be realised in the existing building stock, whose average annual renovation rate is currently only 1% according to the Buildings Performance Institute Europe (BPIE).

    ► Challenges to the competitiveness of industry: despite the economic crisis, most European industrial sectors have managed to maintain or even enhance their competitive advantage since 2007. Regardless of past performance, however, most sectors will face increasingly strong competition on their key competitiveness drivers (labour productivity, labour cost, skills, capital formation, innovation, regulatory framework) over the coming years. Energy prices will play a secondary role, though they will remain an important driver for energy-intensive industries. Regardless of climate policy choices made, these industries will find it in their interests to continue to pursue energy efficiency gains as part of their competitiveness strategy, and will meanwhile face increasing cost competition on drivers other than energy prices.

    These challenges illustrate that BAU differs from a mere “comfortable” continuation of the current situation, and will present difficult economic challenges. The question investigated by this report is whether decarbonisation could propose a path which is more desirable than BAU. The key macroeconomic value proposition of decarbonisation consists of increasing current investments in energy efficiency, alternative energy generation and grid infrastructure, to eventually achieve savings on fuel costs – and potentially generate employment - resulting altogether in a profitable equation. The body of literature reviewed in this study brings estimates on three key parameters of this equation, namely import dependency (and the EU external fuel bill), investment costs and energy costs. It also examines the effects on industrial competitiveness, GDP and employment, and a range of co-benefits.

    Import dependency

    Projections from the International Energy Agency (IEA) show Europe’s energy demand as stabilising up to 2050, whilst overall energy production is expected to reduce significantly. This will be due in particular to a significant decrease in fossil fuel production, as presented in the European Commission’s reference scenario to 2050. As stated earlier, these elements are likely to lead to a rise of the EU’s energy import dependency and its external fuel bill.

    Decarbonisation scenarios analysed by the European Commission would also see an increase in Europe’s fuel bill compared to today, but to a much lower extent than under BAU. The Commission’s Energy Roadmap 2050 predicts that in 2050, compared to BAU the EU could save between € 518 billion and € 550 billion annually by taking a strong decarbonisation pathway. This can be achieved through a combination of energy efficiency and the promotion of a diverse portfolio of low-carbon carbon generation technologies across Europe, including wind, solar, hydro, geothermal, biomass and other promising options.

    In all decarbonisation scenarios, electricity would have to play a much greater role than now, contributing significantly to the decarbonisation of transport and heating/cooling of buildings, and almost doubling its share in final energy demand in 2050. In order to achieve this, the energy system would have to undergo substantial structural changes and achieve a significant level of decarbonisation by as early as 2030.

    Reducing Europe’s fossil fuel import dependency would result in reduced exposure to fossil fuel price spikes and their potentially adverse economic consequences. The reduction of the overall fossil fuel bill would also benefit consumers directly, in particular regarding fuel savings related to personal transport (reduction in transport fuel bill of up to € 180 billion per year in 2050 according to Cambridge Econometrics) and energy savings in buildings that lead to lower energy bills for households (up to € 474 billion savings over the next 40 years according to BPIE). This can have further positive effects for the European economy when consumers spend their increased disposable income that results from energy savings in other products or services, potentially more likely than fossil fuels to have been produced within the EU.

    Energy prices and costs

    Regarding energy prices, the European Commission’s Impact Assessment (2014) indicates that energy prices would increase rather significantly in the next decades, under both BAU and decarbonisation scenarios. Though there are uncertainties surrounding model projections over the long-term, there is at this stage little indication that there would be significant energy price increase or decrease resulting from decarbonisation as compared to BAU.

    Energy prices are the result of energy subsidies and taxes applied by governments, as well as the cost of energy production and sale. European Commission modelling predicts that under decarbonisation, electricity costs (as with overall energy costs) increase slightly higher than under BAU in the 2030 horizon, but that in the longer term they would follow a more desirable course than under BAU.

    Alternative energy generation is also a fast-moving industry, and is increasingly cost-competitive compared to conventional generation. Fixed and variable expenses are embodied into the Levelised Cost of Energy (LCOE) which expresses the cost of different energy sources on a € / kWh basis. Recent research from Fraunhofer, using LCOE analysis, has shown empirically that investment costs for onshore wind, offshore wind and especially solar PV tend to fall even below the most recent assumptions from the European Commission. Solar PV has already achieved cost reductions in Germany which were predicted to occur only by 2035 in the European Commission’s model. A study by the Lawrence Berkeley National Laboratory in the US also highlights how the right framework conditions (including a supportive policy framework and easy access to finance) can significantly lower the costs of alternative energy deployment.

    The EC has partly acknowledged the fact that these costs have fallen faster than anticipated, by using reduced cost assumptions in its most recent scenarios. Further indication that the advantages of the decarbonisation route may be greater than expected is estimations of “indirect” cost savings. According to a study by Ecofys, energy efficiency measures could, in a short-term 2020 horizon, limit the increase (or even reduce) energy and electricity prices through indirect mechanisms: decrease of fossil fuel prices through lower demand, reduction of electricity spot prices by reducing tension on expensive peak-load generators, and a reduction of investments required in heavy energy infrastructure.

    Regarding subsidies, it is worth noting that conventional energy sources (fossil fuels and nuclear) have historically accumulated subsidies which far exceed those received by alternative energy sources at this point in time. As a point of comparison, Green Budget Germany has estimated that coal has received € 418 billion in subsidies in Germany over the period 1972-2012, while nuclear energy has received € 213 billion. During the same period, renewables have received € 67 billion.

    Some EU countries have succeeded in achieving greater energy efficiency and financing alternative energy deployment through taxation measures. A study by PwC empirically demonstrates that in some EU Member States such as Denmark and Germany, these taxes have represented a significant portion of electricity price rises. However they have generally not increased the overall tax burden, and have remained a minor part of total taxation. The EC’s updated reference scenario dating from 2013 indicates that taxes and levies will represent an increasing percentage of electricity costs over time.

    Investment costs

    Between today and 2050, a wide-scale replacement of infrastructure and capital goods in Europe will have to be implemented, both in the energy system and throughout the economy as a whole. Regarding investments in the energy system, the Commission’s Energy Roadmap 2050 estimates that total energy system costs (including fuel, electricity, capital costs, investment in equipment, energy efficient products) would represent slightly less than 14.6% percent of European GDP in 2050 in the case of BAU, which represents an increase of about 20% compared to today’s level (approx. 12%).

    Investment levels in decarbonisation scenarios do not differ substantially from this figure. All decarbonisation scenarios established by the Commission model a transition from an energy system based on high fuel and operational costs, to a system based on higher capital investment (CAPEX) and decreased fuel costs. Overall, total energy system costs related to GDP under decarbonisation remain close to BAU.

    Power sector

    Grid investments are prerequisites to decarbonisation, costs for which are fully recovered in electricity prices. Cumulative grid investment costs alone could range from € 1.5 trillion to € 2.2 trillion cumulated between 2011 and 2050 in decarbonisation scenarios, with a significant part of this due to investment to support renewable energy development.

    As presented by Fraunhofer, renewables have been following an accelerated cost reduction trajectory for the last few years and CAPEX needs for Renewable Energy Sources (RES) are likely to be lower than modelled in the Commission’s Roadmaps. Indeed, the January 2014 impact assessment estimates investment needs in decarbonisation scenarios as being in the range of € 854-909 billion in the period 2011-2030, and € 1188-1333 billion in the period 2031-2050. This represents a greater divergence between BAU and decarbonisation scenarios in the period 2031- 2050 than in the 2011 work, indicating that estimates of the costs of decarbonisation have been revised downwards.

    Furthermore, an integrated European approach could reduce transmission and generation costs related to the development of renewables. A study by Booz & Co has estimated that net savings of about € 16-30 billion a year could be achieved through cross-European planning of investments, the range reflecting cost uncertainty of PV capacity.

    Transport sector

    While deeper cuts can and will need to be achieved in other sectors of the economy, a reduction of at least 60% of GHG emissions by 2050 compared to 1990 will be required from the transport sector. According to the EC, average annual investments in transport would strongly increase under BAU, from less than € 700 billion in 2011 to more than € 800 billion by 2050. The increase is even greater in decarbonisation scenarios, amounting to € 1100 billion on average in 2050. However, fuel bills are expected to be much lower in decarbonisation scenarios than under BAU, decreasing to less than € 300 billion per year over the period 2040- 2050 in the case of global action (vs. € 473 billion per year on 2011-2020), compared to € 728 billion under BAU over the same period.

    According to a study by Cambridge Econometrics, decarbonisation scenarios for the transport sector that rely on conventional technologies add € 22-45 billion to the yearly capital cost of the car and van fleet in 2030. However this is more than offset by avoided yearly spending on fuel worth € 59-80 billion in 2030. This makes the total cost of running and renewing the EU car and van fleet in 2030 about € 36 billion lower than if the fleet were to continue running on today’s technology.

    Although technology costs are likely to rise after 2030 to meet increased fuel efficiency requirements in decarbonisation scenarios, additional capital costs continue to be more than offset by the fuel savings. It should also be factored in that regardless of the chosen path regarding the carbon transition, no major change in transport would be possible without the support of an adequate network and more rational use of the infrastructure. According to the EC, the cost of EU infrastructure development to match the demand for transport has been estimated at over € 1.5 trillion cumulated from 2010 to 2030. The completion of the Trans-European Transport Networks (TEN-T) would additionally require about € 550 billion until 2020.

    Buildings sector

    Meanwhile, Europe’s greatest energy savings potential lies in buildings. Technology is already available to cut existing consumption of buildings by half or three quarters, and to halve the energy consumption of typical appliances. According to the EC, BAU would see a yearly investment in buildings renovation of € 52 billion over the period 2010-2050. On the other hand, the EC’s decarbonisation scenario would entail average annual investments over the period 2011-2050 of € 130 billion, i.e. about € 80 billion higher than under BAU. This greater investment effort would generate reductions in fuel and electricity expenses of around € 70-105 billion over the period to 2050.

    The scale of decarbonisation’s greater economic potential compared to BAU is further confirmed by BPIE’s research, which estimates considerably higher net savings than the EC. According to the study Europe’s Buildings Under the Microscope, BAU would generate cumulated net savings to consumers amounting to € 23 billion over the period 2010-2050, whereas the most ambitious decarbonisation scenarios would lead to much higher cumulated net savings of € 381-474 billion over the same period.

    Industrial competitiveness

    With the “servo-industrial” economy accounting for close to half of EU’s GDP, the ambition of the European Commission is to maintain a strong industrial base in the decades to come. Most industrial sectors would be little affected by decarbonisation and its potential effects on energy and carbon prices; their priority will be to enhance their key global competitiveness drivers (labour productivity, labour costs, skills, capital formation, technology and innovation).

    Decarbonisation would mostly affect energy-intensive industries (EII), notably steel, cement, aluminium, chemicals, pulp & paper, which account for the bulk of carbon emissions by EU industry. These industries contribute about 3.5% of EU employment and will have an important role to play in the industrial landscape of the future. At the same time they are particularly exposed to international competition, often with little possibility to differentiate their products on drivers other than production costs, which are particularly sensitive to energy costs and will thus face challenges over the coming years considering that, whether under BAU or decarbonisation, energy costs are set to rise.

    The European Commission has estimated that a € 10 billion yearly investment until 2030 would be necessary to develop and deploy breakthrough technologies which would allow these sectors to reduce their energy use and to decarbonise process-wise. If the rest of the world does not undertake climate action to an extent comparable to Europe, the Commission’s roadmap intends to shelter EIIs against international competition and the rise of carbon prices, with a system of continued free allocation of carbon credits, to be periodically reviewed.

    EII Associations have responded to the Commission’s 80% carbon reduction target with a commitment to continue pursuing energy efficiency, which also forms part of their global competitiveness strategy. Some of them (aluminium, pulp & paper) have expressed optimism regarding the prospect of reaching the reduction target in an economically viable way, while others (steel, cement, chemicals) state the need for major technological breakthrough, such as CCS, to be available by 2030 for deployment until 2050.

    An important contribution to the technical part of the debate was made by CE Delft, which has assessed the technical and economic feasibility of breakthrough technology deployment in the cement, paper, and steel industries. The study concluded that breakthrough technologies in these sectors would be reaching market maturity in 2030 or before, enabling reductions of 80% or more.

    Beyond the question of whether decarbonisation is technically feasible, all five EII Associations have identified this route as an opportunity for expanding their future business by providing new products to all economic sectors (power, building, transport, industry) and supporting them in reaching their decarbonisation targets. For instance, the steel industry sees an opportunity in further weight reduction of vehicles and building of wind power equipment, while the chemical industry would have a strong role to play in the energy efficiency of buildings (e.g. insulation, lighting, smart windows). The pulp & paper industry has gone the farthest in investigating the opportunity. The Two Team Project has identified eight breakthrough technologies to be supported immediately, with the promise of significantly contributing towards the industry’s objective of increasing added value by 50% by 2050 and gaining strong competitive advantage in the global market, while reaching its carbon reduction target.

    GDP and Employment

    The impacts of decarbonisation on employment appear to be modest, but positive compared to BAU. The 2014 Impact Assessment covering the period 2020 to 2030 projects that compared to the reference scenario, a decarbonisation scenario with a 40% GHG reduction by 2030 would create an estimated 0.7 million additional jobs and that a decarbonisation scenario with a 40% GHG reduction, ambitious EE policies and a 30% RES target would generate 1.25 million additional jobs in 2030.

    According to Cambridge Econometrics, between 660,000 and 1.1 million net additional jobs could be generated by 2030 in the transport sector. In 2050, this rises to between 1.9 million and 2.3 million additional jobs, taking into account the jobs lost during the transition. Most new jobs would be created outside the automotive value chain, in sectors such as services and construction, which benefit from the shift in spending away from the fossil fuel value chain and towards domestically-produced goods and services.

    Regarding the building sector, while continuing with BAU would create less than 200,000 net jobs over the next 40 years, accelerated renovation scenarios would generate between 500,000 and 1 million jobs according to BPIE. Employment and economic impact stimulated by investing in a more sustainable building stock can be seen across a wide range of players in the value chain, from manufacturing and installation through to provision of professional services such as financing and project management. New jobs would also be stimulated by the need for products, components and material used or installed in better-performance building.

    Regarding the power sector, estimates of the employment impact of decarbonisation are also generally net positive. For instance, the EmployRES report, funded by the European Commission, assesses that achieving a 20% share of renewables in final consumption could provide a net effect of about 410,000 additional jobs by 2020 and up to 656,000 additional jobs by 2030. The 2014 Impact Assessment anticipates that underlying structural changes would have a relatively small positive or negative impact on overall employment, depending on the assessment methodology, but significant shifts in employment among or within sectors is expected.

    As for GDP, impacts of decarbonisation are limited: the impact on economic growth of achieving a 40% GHG reduction target, with or without additional EE policies or RES targets is limited, with impacts by 2030 expected to be less than 1% of GDP (in either direction). Projected impacts in the latest Impact Assessment for the period 2020 to 2030 for a scenario with a 40% GHG reduction compared to the reference scenario are estimated at a loss of between 0.1% to 0.45% of GDP, assuming a single target for GHG reduction and in function of the approach to carbon pricing in the non-ETS sectors and the use of auctioning revenues under the ETS. Scenarios with a 40% GHG reduction to be achieved partly through more ambitious explicit EE policies result in 0.46% to 0.55% GDP increases in 2030 as compared to the EC’s reference scenario. A GDP increase of 0.53% is projected in the case of a 45% GHG target with complementary efficiency and renewables efforts. Long-range forecasts are difficult, but as with employment, avoided spending on fossil fuels would also enable a reallocation of these monetary benefits within the EU economy and stimulated GDP growth.

    Co-Benefits

    A number of additional benefits can be identified as being associated with the decarbonisation path, often referred to as ‘co-benefits’. These especially include savings on health costs arising from reduced air pollution, which are estimated to be €38 billion a year by 2050 in the Commission’s Roadmap for moving to a competitive low carbon economy in 2050. This order of magnitude is confirmed by other studies, such as one produced jointly by the Health and Environment Alliance (HEAL) and Health Care Without Harm Europe (HCWH E). However, a soon to be published report by CE Delft suggests that air pollution-related benefits from decarbonisation may be underestimated, as they do not take into account increased welfare; by taking into account assumed income growth of 1.5%, air quality benefits would increase by a factor of 1.27.

    Further benefits would include savings on air pollution control, whose costs could decrease by € 50 billion a year by 2050 under decarbonisation, according to the EC; reduction of climate change adaptation costs, which would amount to € 250 billion per year by 2050 under BAU according to the EC; and reduction of fuel poverty. CE Delft has also provided an estimation of the avoided damage costs for CO2, with calculated benefits ranging from € 10.2 billion to € 48.6 billion in 2030 for scenarios with a 40% GHG emissions reduction and from € 16.4 billion to € 74.3 billion for a scenario with a 45% GHG emissions reduction.

    These co-benefits are to be added to the central value proposition of decarbonisation, namely that fuel savings generated in the power, transport, and building sectors justify the extra investments necessary for achieving them. Besides reducing its external fossil fuel bill, these investments will enhance Europe’s energy security and help it to become less vulnerable to energy price spikes. This proposition also holds for most of the industry sector, though uncertainty remains for energy-intensive industries on the extent of climate action in other industrialised regions of the world, the scale of business opportunities arising from decarbonisation, and the future availability of breakthrough technologies.

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