Study on the Macroeconomics of Energy and Climate Policies

Funding body: DG Energy, European Commission

The focus of EU energy strategy has been for many years on three main concerns: competitiveness, climate change and security of supply. However, there has often been some tension between these three key objectives on the one hand and the EU and Member States’ other policy priorities on the other (as reflected in the EU Energy Union Package). The Package acknowledges that a fundamental transformation of the European energy system is needed in order to make progress in meeting the three objectives in an effective and cost-efficient way. The current market design is failing to attract sufficient investment in flexible power generation capacity and to achieve an adequate level of competition, while the European energy landscape remains too fragmented. The vision of the Commission, as expressed in its Communication, is to evolve to ‘an integrated continent-wide energy system where energy flows freely across borders, based on competition and the best possible use of resources, and with effective regulation of energy markets at EU level where necessary’. A goal of particular importance tp the present study is to maintain leadership in the development and implementation of innovative technologies (including the next generation of conventional and renewable energy technologies, smart appliances and grids, DSM, storage), due to the key role the new technologies need to play in the provision of lower-cost ways to raise energy efficiency and increase the share of low carbon sources.