A European Energy Transition based on three pillars: targets, markets and law

By Leonie Reins and Anne Houtman

Tilburg Institute for Law, Technology and Society (Tilburg University)

The European Union had already been engaged in 30 years of climate policy before setting itself the objective of becoming carbon neutral by 2050 and adopting the European Green Deal in 2019. Prior to these recent developments, targets on emissions reduction had been progressively raised over the years in connection with the successive commitment periods under the Kyoto Protocol and the Paris Agreement. In parallel, progressively ambitious supporting targets were introduced for the reduction of energy demand and increasing the share of renewables. To achieve these targets, increasingly stringent legislation was implemented, covering a larger number of activities and energy vectors, sources or uses, and with an increasingly European market dimension and integrated governance.

The paper “A European Energy Transition based on three pillars: Targets, markets and law” analyzes the EU’s long-term energy strategy adopted to reach climate neutrality, drawing on 30 years of energy and climate policies and drastically accelerating their pace. The EU’s energy transition strategy is based on three main pillars: targets, markets, and legislation.

The first pillar focuses on setting ambitious targets. The EU has committed to significant emission reduction goals, such as a 55% reduction in greenhouse gases by 2030 and achieving full carbon neutrality by 2050. These targets are linked to international commitments like the Kyoto Protocol and the Paris Agreement. The “Fit for 55” legislative package is designed to meet the interim targets for 2030.

The second pillar emphasizes the importance of well-functioning markets. Effective European energy markets are crucial for the energy transition. This includes mechanisms like carbon pricing and energy taxes. The EU Emission Trading System (EU ETS) is a key tool for reducing emissions in industrial and energy sectors. Market rules and infrastructure must be adjusted to integrate renewable energy and encourage innovation.

The third pillar revolves around specific sectoral legislation. Legislation supports the broader energy and climate goals of the EU, including directives on energy efficiency and laws promoting renewable energy. The energy efficiency directive includes measures for both demand and supply sides and sets consumption targets. The renewable energy directive sets binding targets and promotes the use of renewable sources in electricity, heating, cooling, and transportation.

The paper also discusses the challenges and governance of the energy transition. Integration of national plans and monitoring by the European Commission are essential to achieve the targets. National Energy and Climate Plans (NECPs) must cover the five dimensions of the Energy Union and encourage cooperation between member states. A significant challenge is fostering behavioral changes and citizen engagement, with special attention to vulnerable consumers. Acceptance of new technologies and infrastructure, as well as the development of necessary skills, are crucial.

The EU has made significant progress over the past 30 years, but the path to full carbon neutrality remains challenging. Maintaining the ambition of the “Fit for 55” package is crucial, especially for sectors like transport and buildings that are lagging behind. The energy transition requires not only technological and infrastructural adjustments but also significant changes in behavior and acceptance by citizens. The EU’s three-pronged approach of setting targets, creating favorable market conditions, and implementing sector-specific legislation is fundamental for a successful transition to a carbon-neutral future.

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This research is part of the research project MegaMind (Measuring, Gathering, Mining and Integrating Data for Self-management in the Edge of the Electricity System), (partly) funded by NWO (Dutch Research Council) through the Perspectief program under number P19–25.

Reins, Leonie and Houtman, Anne, A European Energy Transition based on three pillars: Targets, markets and law (September 8, 2022). TILEC Discussion Paper No. 2022-015, Available at SSRN: https://ssrn.com/abstract=4213658 or http://dx.doi.org/10.2139/ssrn.4213658