Energy system transition and macroeconomic impacts of a European decarbonization action towards a below 2 °C climate stabilization

The European Union has recently established the “Clean Energy for all Europeans” climate policy framework, aiming at the achievement of the European Nationally Determined Contribution (NDC) submitted to the Paris Agreement. The EU28 NDC includes a commitment for emission reductions in 2030 but also refers to an economy-wide effort towards 2050 so as to contribute effectively to the long-term mitigation of climate change. We discuss the respective EU28 emission pathways in the context of a well below 2 °C global climate stabilization target and estimate the macroeconomic impacts for the EU28 economy by considering alternative levels of climate action for major non-EU emitters. We employ two models, the technology-rich energy system model PRIMES, and the global large-scale hybrid computable general equilibrium model GEM-E3. The two models are soft linked so as to ensure a consistent and robust framework of analysis. We find that emission reductions in the energy supply sector are dominant up to 2030 while transport takes the lead in 2050. Transport and non-CO2 emissions are the main remaining emitting sources in 2050. We present the key decarbonization pillars and confirm that the impacts on the EU28 economy largely depend on the level of mitigation action adopted by the rest of the world and by the relative carbon intensity across regions. Due to asymmetric ambition of climate policies, a global implementation of NDCs results in economic losses for the EU28 when compared with a “pre-Paris” policy reference scenario, despite positive effects on energy-intensive and clean technology exports. On the contrary, we find that the region registers economic gains in the case of coordinated 2 °C global climate action.