The European Union (EU) has taken the lead in the global transition from fossil fuels to renewable energy in recent years with a series of normative measures.

Initiatives such as the EU Emissions Trading System and the European Green Agreement were the first of their kind on a global scale.

The region’s efforts in this direction should accelerate in the years to come, as shown by the recent proposal of the “Fit for 55” bloc, which sets a target of 55% less carbon emissions by 2030. compared to 1990. There are also targeted incentives for individual industries.

These measures, combined with greater public attention to climate change, have fueled increased investor support for green projects, with 2021 being the first year that renewables have received more investment than other energy products. This trend is expected to continue.

The climate neutral continent

Presented in 2019, the European Union’s green agreement planned to make Europe the first carbon neutral continent by 2050. In November 2021, the European Parliament published a study on the decarbonization of energy in which describes exactly what is needed to achieve that goal. . The study said:

“To achieve this ambition, the decarbonization of the energy sector is crucial as the production and use of energy represents more than 75% of the EU’s greenhouse gas emissions (EEA, 2021). Today, almost three quarters of the EU’s energy system depends on fossil fuels. The European Green Deal can therefore only be successful when the relentless burning of oil, natural gas and coal is phased out. ”

Of course, energy demand will always remain, especially for transportation, heating, cooling, lighting and manufacturing, according to the study:

“For all of these energy-based services, a number of technological options and alternative climate-friendly energy carriers are possible, ranging from electrification to synthetic methane and other synthetic hydrocarbons to hydrogen.”

Oren Klachkin, Chief US Economist at Oxford Economics, said: “Europe has always been at the forefront of the global effort to deal with change, and I expect them to do so. forward intensely. However, trying to achieve net zero, or even just climate neutrality, will be a very difficult task.

Carbon emissions trading

The EU Emissions Trading Scheme (EU ETS), launched in 2005, places a price on CO2 emissions that companies must pay for the emissions they create. This makes the production of energy from coal, oil and gas more expensive.

A company can only produce the amount of emissions for which it has a quota and will be fined € 100 per excess tonne. Companies are encouraged to reduce their emissions because they can sell allowances that they do not use.

While this system is a useful tool to encourage businesses to switch to cleaner energy sources, efforts have failed.

According to Klachkin: “The program is certainly a step in the right direction, but much remains to be done given the serious threat of climate change.

“Policymakers today are trying to balance climate and economic considerations, but the economy will suffer in the long run if climate issues are not addressed. It’s about weighing the short-term costs against the long-term benefits.

The great transition

The transition to renewables has been accelerating for a number of years, but the past two years have shown that the transition is happening at a much faster pace.

In 2020, the International Energy Agency (IEA) reported a record growth in renewable energy capacity of 15%, while 2021 established another record growth level of 18%.

According to JP Morgan, 2021 will be the first year that renewables will attract more investment than oil and gas.

However, he adds a note of caution, citing an IEA report saying that 70-75% of global primary energy consumption could still be met by fossil fuels in 2040.

“Renewable energy is still mainly used to generate electricity, and electricity as part of the final energy consumption on a global basis is still only 18% ”, explains the report.In other words, the direct use of fossil fuels remains the main engine in the modern world.

The IEA has revised its expectations since Cop26. He now expects global renewable energy capacity to increase by 60% between 2020 and 2026. Renewable energy capacity levels will then be higher than current levels of fossil fuels and nuclear power combined. The reports also expect China and Europe to exceed their targets.

Continuous growth

When it comes to getting things done, Klachkin believes individual companies are ahead of decision-makers. “The declarations from COP26 are actually weaker than those to which governments have previously committed. However, private companies are essentially moving forward independently of governments to tackle climate change. “

This is due to public pressure and profitability, so sustained growth is expected in the renewable energy industry.

Klachkin concludes: “What is happening today represents a structural change in the energy supply that stimulates economic activity, which will be a boon for companies specializing in clean energy production and technologies that reduce energy. ‘carbon footprint. “

Read more: Renewable energy sector grows to meet global net zero target

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