Sustainable energy: trade-offs and synergies between energy security, competitiveness, and environment

03-05-2006 | Publication

Sustainable energy policies are needed in Europe to reduce air pollution and greenhouse-gas emissions. EU-policies aim to improve the EU's energy security and enhance its' competitiveness by promoting innovation and limiting energy costs (as part of a.o. the Lisbon Strategy). This quick scan report by MNP shows that climate mitigation strategies also reduce air pollution and increase energy security, and offer chances for innovation. Hence it could improve the efficiency of EU energy policies without negatively affecting Europe's competitiveness.

Sustainable energy policy requires integrated approach

Energy is key to economic growth. Prolonged use of energy cannot be taken for granted. Concerns about energy security in the EU are growing and energy is a main driver behind climate change and local air pollution. A more sustainable energy policy can improve on energy security and reduce environmental impacts, like air pollution and greenhouse-gas emissions. Such policies incur costs to society, and may deteriorate economic growth and competitiveness. This requires a policy-mix that serves to achieve multiple goals and thus increases the efficiency of EU-policy.

There is a large scope for synergy between policies related to climate, air pollution and energy security. The mix of options and policies that maximizes this synergy can significantly improve the efficiency of EU policy.

Attractive options - from the viewpoint of synergies - include efficiency and more renewables. Trade-offs may occur; e.g. coal use to enhance energy security may result in higher greenhouse gas emissions (unless in combination with gasification and carbon capture and storage). Another example concerns bio-energy technologies, which reduce emissions of greenhouse gases, but not necessarily those of other air pollutants.

The ancillary benefits of greenhouse gas abatement policies are significant. In the case of air pollution, these may even approximate the greenhouse gas abatement costs.

There are costs involved in reducing greenhouse gas emissions, increasing energy security, and avoiding damage from air pollution. Abatement costs for stringent climate policies are likely to be in the order of 1-2% of GDP by 2030, assuming broad international participation. A shrinking coalition size - while maintaining reduction targets for its members - will lead to higher abatement costs. Large greenhouse gas emission reductions in the EU-25 will also reduce the emissions of SO2, NOx, and Particulate Matter. This in turn will lower the chronic exposure of European citizens to these substances. And this again is likely to reduce the number of premature deaths, chronic bronchitis, and absence from work due to illness. Moreover, estimates of monetarized benefits seem to equal the costs of greenhouse gas abatement.

In addition to these monetarized benefits (of avoided damages), climate and air pollution policies could also boost technological developments - and thus lead to EU leadership in some areas. Efficient EU policies could include strict emission standards as to promote clean innovative options and create a market for cleaner products that meet the long term environmental targets.

Many of the technology options for greenhouse gas emission reduction need to be further developed in the next decades. This leads to costs, but it may also lead to opportunities for enhancing the EU’s international competitiveness. While picking winners is hard, the EU could focus its technology policy on breakthrough options with early mover advantage and major export potential. Examples of these options are gasification technology (which would create more fuel flexibility, can easily be adapted to carbon capture and storage, creates very low air pollution and is easy changeable to further advanced energy systems) and advanced car technology (like biofuel-hybrid cars)