Pathways for Pan-European Energy System Decarbonization: The Effect of Emission Policies on Target Alignment

Decarbonization of the energy system is a major challenge for today's energy system to combat climate change. This challenge is addressed in the EU through different political strategies and plans such as the European Green Deal, Fit-for-55, and REPowerEU, which set specific emission reduction goals for 2030 and 2050. Different mechanisms are in place to achieve these goals, such as the system-wide ETS and the country-level National Energy and Climate Plans. However, there is a difference in the enforcement level between European countries, despite their connection to the same integrated energy system. Hence, there might be discrepancies between the effectiveness of the EU system-level target and the achievements of national goals and plans. To understand and address these discrepancies, we utilize the open-source, sector-coupled energy system optimization model Balmorel to analyze the impact of different decarbonization methods in a fully interconnected, pan-European energy system. In three scenarios, we consider 1) the use of only a system-level carbon budget in line with Fit-for-55 and the European Green Deal, 2) the application of a carbon budget at the country level, and 3) the use of a carbon tax instead of a budget on all production of electricity, heat, and hydrogen. The novelty of this paper lies in the first comparison of these three decarbonization mechanisms and their impact on alignment with policy targets. We demonstrate that the pan-European energy system can reach decarbonization targets across all scenarios. Still, diving from the system perspective into the country level, challenges appear, causing nations to overshoot their allocated budgets. Country-level emission targets are more effective with little cost increase compared to the only system-level target scenario but also cause crossborder effects of fossil fuel based energy production. The carbon tax scenario is the most effective at decarbonizing but comes at up to 27 % higher costs in intermediary years, requiring more early investments.