How the EU response to the Russia-Ukraine war can still accelerate low-carbon transition
The Russia-Ukraine war and the sanctions taken against Russia have had a swift impact on energy decision-making in Europe. While the U.S. and the UK have put an immediate ban on Russian oil and gas imports, Europe remains divided.
A European Parliament resolution stated that the EU should immediately cease imports of Russian oil and gas in the event of an invasion. Yet Member States currently disagree on a prompt and complete ban. Germany is among those blocking it.
This division is no surprise. The EU imports 90% of its gas. Of that amount, Russia provides more than 40% of the EU’s total gas consumption. Russia also accounts for 27% of oil imports and 46% of coal imports to the EU.
Yet given this context, could the current crisis still be a game changer for the EU and Member States instead of throwing us back to high fossil fuel reliance and jeopardizing climate targets and the Green Deal? With the increased pressure to abandon Russian fossil fuels, this moment could be an opportunity to accelerate adoption of renewables, energy efficiency, and other crucial climate policies.
A chance to accelerate the green transition
The Ukraine crisis has changed Europe. The humanitarian consequences are tragic. On the resources side, the way forward for Europe is to end the EU’s high dependence on Russian oil and gas and to transform the crisis into an opportunity to speed up the delivery of existing frameworks for the green transition towards the 2050 climate targets.
Despite the current disruption to energy markets, Europe is prepared to make a clean energy transition. At the heart of this transition is the Green Deal—an all-encompassing program of environmental improvement, from agricultural approaches and biodiversity to renewables and energy efficiency. Part of the Green Deal, the climate policy package ‘Fit for 55’ focuses on the specific climate goals within it—the ambition to reduce net greenhouse gas emissions by at least 55% by 2030 and for Europe to become the “first carbon neutral continent,” as the European Commission’s President Ursula von der Leyen announced when presenting the Green Deal.
The EU’s Recovery and Resilience Facility, created in response to COVID-19, brings an employment generation lens to the existing Green Deal priorities. It aims to help the EU mitigate the economic and social impact of the pandemic and emerge stronger, with new ‘green jobs’ that help transition to a lower carbon, more resilient future.
The EU’s REPowerEU energy plan could deliver the most direct impact on the import of energy resources from Russia. The plan represents a commitment to reduce demand for Russian gas by two thirds before the end of this year, and to be free of it by 2027.
ICF has considerable experience in helping to deliver many of the areas that REPowerEU focuses on. These include helping governments accelerate wind and solar deployment and bring about energy efficiency improvements in homes and industry, including large-scale insulation, rooftop solar, and heat pump deployment programs. We have found that integrating strong anti-fraud measures within our digital application processing system is particularly effective at making sure funds are used for their intended purpose.
The aim is to move Europe towards the more efficient electrification of heat and away from using gas boilers, making better use of the renewable electricity created through improvements to wind and solar. This work was already happening before the Ukraine crisis. But there is now an opportunity to do more, more quickly—with the added incentive of improving Europe’s energy security.
Transforming Europe’s homes and industry and leaving no one behind in the “Just Transition”
There is a clear motivation to now make more rapid progress towards the Fit for 55 and Green Deal goals. The latest findings from climate scientists, including the IPCC’s 6th Assessment Report on physical science (2021) and on impacts, adaptation, and vulnerabilities (2022), confirm the increasing urgency to act both by reducing greenhouse gas emissions and adapting to the changing climate simultaneously.
The COVID-19 pandemic caused the EU to provide recovery and resilience funding aimed at “building back better, greener” with large funds already earmarked for building energy efficiency renovation. ICF also has considerable experience in the UK and U.S. of developing the local partnerships required to implement these programs. We have found, for example, that most household solar/insulation/heat pump installations tend to be done by a few large installers, and that proactive engagement with these large installers by account managers from the grant administrator can result in much quicker achievement of deployment targets. There are real opportunities for creating more green homes—speeding up energy efficiency and installing heat pumps, insulation, and rooftop solar.
There are obstacles, of course. In Germany, for example, there are few social measures around energy efficiency in buildings equivalent to the UK's Green Homes Grant scheme (which has benefitted low-income households, both in owner-occupier homes and in social housing). There are encouraging signs, however—for example, the European Investment Bank’s support in Erlangen, providing insulation and energy efficient buildings for low-income households. It is the first of its kind in Germany and something we need to see more of across Europe.
For industry, a range of decarbonization measures are needed. RePowerEU, with its focus on building more wind and solar capacity and simplifying permitting procedures, will help where processes can be electrified e.g., for lower temperature heating. However, different solutions are needed to decarbonize high temperature industries, such as making steel or glass. In these cases, hydrogen or biomethane offer potential alternatives to natural gas for industry.
Any meaningful contribution from ‘green’ hydrogen (made from wind energy driven electrolysis) to Europe’s 2050 net zero targets is more likely from 2035 onwards, since relevant accelerator schemes are just getting started. However, LNG facilities built in response to the Ukraine energy crisis could one day be used for green hydrogen.
The transition will be more challenging for some EU members
The transition to clean energy may be more difficult for some EU member states than others. Germany currently imports 55% gas, 50% coal, and 35% oil. An immediate ban on Russia’s energy resources would have a highly negative impact on German industry, households, and citizens.
Despite its dependance on Russia, Germany has asserted plans to push the energy transition forward in the EU. The new federal government wants to restructure the economy to make Germany a climate-neutral, industrialized country. It has increased its ambitious plans on renewable energies in response to the war in Ukraine: Germany intends to cover 80% of its electricity through renewables by 2030, and 100% by 2035.
The government is looking for imports from other countries and planning new LNG terminals. It has also re-opened discussions on the timeline for phasing out coal, and on whether the three remaining nuclear plants should be kept open for longer than planned.
Germany also demonstrates how the social aspect of Europe’s response to the energy impact of the Ukraine war will be critical. While its government blocks a ban on Russian energy imports, the majority (55%) of Germans would support a boycott. Prominent voices include the former President of Germany, civil rights activist Joachim Gauck, and the conservative politician Norbert Roettgen. They argue that Germany is well enough positioned to cope with the consequences of a ban, by lending money elsewhere or reducing energy consumption.
While there is currently significant support for a ban on Russian energy imports, in Germany and other European countries, the consequences may prove painful in the short term. The EC and national governments across Europe should consider a long-term communications and stakeholder engagement strategy if they want to maintain citizen support for these policies in the short- and long-term.
The opportunities of a more decentralized future
Crucially, the EU’s climate measures will ultimately contribute to a breakup of current market power, as Europe moves more to decentralized energy generation. This is a fundamental change with social, political, and commercial implications. Are we moving towards a market dominated by self-sufficient, well-insulated ‘prosumer’ households with PV panels, batteries, heat pumps, and smart controls that enable flexible interactions with utilities? Or will that future world simply replace centralized fossil fuel supply dominance with centralized wind power dominance? How can we store renewable energy longer term, so that it is always available when needed and we are not forced back to fossil fuels? The answer probably lies in a resilient energy mix that respects Europe’s need for a secure, affordable, low-carbon energy system that makes the most efficient use of European resources and embraces relevant technology options.
In the long term, Member States must consider these implications.
In the short term, cooperation, communication, and constructive dialogue are essential. The current high energy prices have a huge impact and demand a swift response. The EU will support Member States to protect society, especially the socially disadvantaged.
To make this happen, the EU will need to upscale the tools it currently uses to do this—the Social Climate Fund, the Just Transition Fund, and the EU Globalisation Adjustment Fund. These will then need to be complemented with a dedicated fund to compensate specific countries, regions, or sectors suffering losses due to the sanctions imposed on Russia. Member States will also take their own approaches based upon local context.
In March, European Union Vice-President Frans Timmermans told the European Parliament that fairness is crucial in the energy transition and will decide if we succeed or fail. The situation in Ukraine has made that even more apparent. Social cohesion is of the essence, and we need constructive dialogue across Europe to work on the social measures that the EU also needs to support REPowerEU.
Citizens, companies, and unions must work together with policymakers on targeted social support schemes that are fit for purpose and that lead to social cohesion and affordability. The result will be a wider acceptance across the EU of the need for both short- and long-term climate and energy measures.
This will all help to turn this tragic crisis into a game-changing moment for Europe’s transition to a greener future.