Periodic Reporting for period 3 - INNOPATHS (Innovation pathways, strategies and policies for the Low-Carbon Transition in Europe)
Reporting period: 2019-12-01 to 2021-07-31
The European Union (EU) has ambitious decarbonisation targets for both 2030 and 2050, while maintaining security of supply and industrial competitiveness. The overall objective of INNOPATHS was to generate new enhanced low-carbon pathways for the European Union, taking full account of the global context.
Achieving the target set forth in the Paris Agreement requires an unprecedented effort worldwide: traditional economic systems will need to be transformed to ensure carbon neutrality.
Technologies for decarbonisation
There is a wide range of low-carbon technologies that can contribute to decarbonisation. Increasing investment in innovation and human capital, through more spending on low-carbon R&D and training, can reduce the cost of decarbonisation. Learning curves and expert elicitation have been used to provide insights into how decarbonisation costs might develop. While probabilistic learning curves tend to perform better than elicitations, all forecasting methods have underestimated technological progress.
Labour markets and decarbonisation
The low-carbon transition may have significant implications for labour markets and competitiveness. Empirical evidence shows that high-demand skills in ‘brown’ sectors can be switched to ‘green’ sectors relatively easily in terms of the extra training required, but there is a greater skill distance between manual jobs and green jobs, and a greater requirement for on-the-job training in green jobs. Moving manual labour employment into green jobs is likely to require targeted support.
Finance for decarbonisation
Policy makers need to focus on reducing risks as well as increasing returns if they wish to encourage deployment of new decarbonisation technologies at scale. State Investment Banks (SIBs) can reduce project risk. Because of the relative capital-intensity of renewables technologies, an increase in interest rates could detrimentally affect their competitiveness compared to the use of fossil fuels. Costs of capital (CoC) vary markedly across countries. Assuming a realistic cost of capital in Europe results in much lower low-carbon transitions costs than previously assumed.
Distributional and justice implications of decarbonisation
The replacement of high-carbon technologies may cause injustices that need to be addressed, but can also correct injustices by mitigating impacts on those who have contributed little or nothing to causing climate change. Many stakeholders may experience detriment from decarbonisation measures, which will need to be managed, through transfers within or between countries.
The INNOPATHS online tools
INNOPATHS created four online tools for policy makers and stakeholders. The Technology Matrix Tool (https://tm.innopaths.eu/#/) contains historical and forward looking data on technologies in four sectors: power, transport, industry and buildings. The Decarbonisation Policy Evaluation Tool (https://dpet.innopaths.eu/#/) contains the results of a systematic literature review of the impact of ten types of decarbonization policy instruments on seven technical and socioeconomic outcomes. Two other online tools facilitate the development and exploration of EU decarbonisation scenarios - the Energy System Decarbonisation Simulator [https://innopaths-esds.eu/] that allows users to create their own scenarios, and the Low Carbon Pathways Platform [https://innopaths.eu/lcpp/#/]) that presents the INNOPATHS scenarios described below.
The INNOPATHS scenarios
Four different narratives of deep decarbonisation were created, differentiated by the principal actors and the state of the world in which they operated: New Players and Systems; Incumbents; Efficiency and Sufficiency; and Europe of Multiple Speeds. They were translated into quantitative scenarios through the use of models. All the modelled scenarios reached net zero emissions in 2050, mainly through electrification through renewables. Synthetic fuels, bioliquids and hydrogen also played a major role in the decarbonisaton of heavy industries and in heavy-duty transport. Energy efficiency reduces energy demand in all sectors, but most in the Efficiency and Sufficiency scenario.
Sectoral modelling studies
A number of detailed sectorial models were used to undertake new studies of decarbonisation in different sectors: electricity (issues related to carbon prices, capacity value, curtailment, flexibility constraints, flexible operation, and the pre-existing grid and storage formulation); buildings (deep electrification, issues related to standards for new buildings and the retrofitting of energy efficiency measures in the existing building stock); transport (the role of electricity, biofuels, synthetic fuels and hydrogen, charging infrastructure and electric vehicles (EVs), the impact of RD&D investment for transport decarbonisation); and industry (low-carbon options in iron and steel, non-metallic minerals, chemicals and petrochemicals, and pulp and paper include electrification, hydrogen, e-gas, and moves towards a circular economy).
Modelling the EU Green Deal
Global cooperative action along the lines of the EU Green Deal can reduce global GHG emissions in 2050 by 65% from a Reference case. Global GDP growth rates fall from 2.7% p.a. to 2.62% p.a.. When the EU acts alone, carbon leakage can be reached with a Border Carbon Adjustment (BCA). EU decarbonisation produces substantial energy security co-benefits.
Bioenergy makes a significant contribution to EU decarbonisation as biomass for energy would need to increase by a factor of 2, requiring 60-100% more land over 2015 to 2050. 1.5-degree scenarios generally need substantial implementation of negative-emission technologies (NETs). These can be reduced through supply-side policies that phase out the production of fossil fuels n combination with demand-side constraints.
Health co-benefits from decarbonisation
It is well-known that decarbonisation produces health co-benefits from reduced mortality from air pollution. An INNOPATHS modelling exercise confirms that in all scenarios the best welfare outcome is delivered by strong climate policy combined with stringent air pollution control
Technologies for decarbonisation
There is a wide range of low-carbon technologies that can contribute to decarbonisation. Increasing investment in innovation and human capital, through more spending on low-carbon R&D and training, can reduce the cost of decarbonisation. Learning curves and expert elicitation have been used to provide insights into how decarbonisation costs might develop. While probabilistic learning curves tend to perform better than elicitations, all forecasting methods have underestimated technological progress.
Labour markets and decarbonisation
The low-carbon transition may have significant implications for labour markets and competitiveness. Empirical evidence shows that high-demand skills in ‘brown’ sectors can be switched to ‘green’ sectors relatively easily in terms of the extra training required, but there is a greater skill distance between manual jobs and green jobs, and a greater requirement for on-the-job training in green jobs. Moving manual labour employment into green jobs is likely to require targeted support.
Finance for decarbonisation
Policy makers need to focus on reducing risks as well as increasing returns if they wish to encourage deployment of new decarbonisation technologies at scale. State Investment Banks (SIBs) can reduce project risk. Because of the relative capital-intensity of renewables technologies, an increase in interest rates could detrimentally affect their competitiveness compared to the use of fossil fuels. Costs of capital (CoC) vary markedly across countries. Assuming a realistic cost of capital in Europe results in much lower low-carbon transitions costs than previously assumed.
Distributional and justice implications of decarbonisation
The replacement of high-carbon technologies may cause injustices that need to be addressed, but can also correct injustices by mitigating impacts on those who have contributed little or nothing to causing climate change. Many stakeholders may experience detriment from decarbonisation measures, which will need to be managed, through transfers within or between countries.
The INNOPATHS online tools
INNOPATHS created four online tools for policy makers and stakeholders. The Technology Matrix Tool (https://tm.innopaths.eu/#/) contains historical and forward looking data on technologies in four sectors: power, transport, industry and buildings. The Decarbonisation Policy Evaluation Tool (https://dpet.innopaths.eu/#/) contains the results of a systematic literature review of the impact of ten types of decarbonization policy instruments on seven technical and socioeconomic outcomes. Two other online tools facilitate the development and exploration of EU decarbonisation scenarios - the Energy System Decarbonisation Simulator [https://innopaths-esds.eu/] that allows users to create their own scenarios, and the Low Carbon Pathways Platform [https://innopaths.eu/lcpp/#/]) that presents the INNOPATHS scenarios described below.
The INNOPATHS scenarios
Four different narratives of deep decarbonisation were created, differentiated by the principal actors and the state of the world in which they operated: New Players and Systems; Incumbents; Efficiency and Sufficiency; and Europe of Multiple Speeds. They were translated into quantitative scenarios through the use of models. All the modelled scenarios reached net zero emissions in 2050, mainly through electrification through renewables. Synthetic fuels, bioliquids and hydrogen also played a major role in the decarbonisaton of heavy industries and in heavy-duty transport. Energy efficiency reduces energy demand in all sectors, but most in the Efficiency and Sufficiency scenario.
Sectoral modelling studies
A number of detailed sectorial models were used to undertake new studies of decarbonisation in different sectors: electricity (issues related to carbon prices, capacity value, curtailment, flexibility constraints, flexible operation, and the pre-existing grid and storage formulation); buildings (deep electrification, issues related to standards for new buildings and the retrofitting of energy efficiency measures in the existing building stock); transport (the role of electricity, biofuels, synthetic fuels and hydrogen, charging infrastructure and electric vehicles (EVs), the impact of RD&D investment for transport decarbonisation); and industry (low-carbon options in iron and steel, non-metallic minerals, chemicals and petrochemicals, and pulp and paper include electrification, hydrogen, e-gas, and moves towards a circular economy).
Modelling the EU Green Deal
Global cooperative action along the lines of the EU Green Deal can reduce global GHG emissions in 2050 by 65% from a Reference case. Global GDP growth rates fall from 2.7% p.a. to 2.62% p.a.. When the EU acts alone, carbon leakage can be reached with a Border Carbon Adjustment (BCA). EU decarbonisation produces substantial energy security co-benefits.
Bioenergy makes a significant contribution to EU decarbonisation as biomass for energy would need to increase by a factor of 2, requiring 60-100% more land over 2015 to 2050. 1.5-degree scenarios generally need substantial implementation of negative-emission technologies (NETs). These can be reduced through supply-side policies that phase out the production of fossil fuels n combination with demand-side constraints.
Health co-benefits from decarbonisation
It is well-known that decarbonisation produces health co-benefits from reduced mortality from air pollution. An INNOPATHS modelling exercise confirms that in all scenarios the best welfare outcome is delivered by strong climate policy combined with stringent air pollution control
INNOPATHS has generated information and knowledge about European decarbonisation to net zero that goes well beyond what was previously known and available, which has been published in the around 100 published academic journal articles, with further articles either submitted or in preparation. The project results have been very widely disseminated through accessible Synthesis Reports, together with eight Policy Briefs on different topics, and a summary Roadmap of Decarbonisation for the EU. A series of nine National Dissemination Events took place in different countries. The Final Conference was organised by the European University Institute (EUI) at the end of April 2021, held over Zoom and was included in the official All4Climate – Italy 2021 programme. A series of three five-minute films, accessible from the project website, has also been produced.