The European Commission projects that the benchmark allowance price in the EU emissions trading scheme (EU ETS) will reach €38-42 per tonne of CO2 equivalent (CO2e) by 2030, assuming the implementation of existing policies agreed at the EU and member state level. Mechthild Worsdorfer, the director of energy policy at the European Commission DG Energy, stated that the share of coal in the EU's energy mix will steadily decrease from 15% in 2030 to 5% in 2050, primarily due to the impact of a rising EU ETS price in the power generation sector.
The EU Reference Scenario 2016, which outlines the assumptions behind the price projection, considers EU energy system developments, transport, greenhouse gas (GHG) emissions, as well as population and GDP growth trends. Worsdorfer emphasized that while fossil fuels will continue to play an important role in the short to medium term, the overall trend of declining fossil fuel production will persist.
In the absence of additional policies, oil is expected to meet around one-third of the EU's overall energy demand until 2050, with fossil fuels still accounting for over 90% of the transport sector's demand. The EU's gas consumption will stabilize, with an increase in demand in the power generation sector due to a rising EU ETS price and greater demand for flexible generation. However, this will be offset by decreasing demand in the residential sector due to energy efficiency improvements.
Regarding coal, Worsdorfer noted that its future in the EU relies on carbon capture and storage (CCS) technology. Without CCS, coal will disappear from the energy mix, but the economic viability of CCS remains uncertain. However, fossil fuels will not vanish from the EU's energy mix immediately, as the EU remains dependent on energy imports. Worsdorfer highlighted that globally, fossil fuel developments will be influenced by countries' level of ambition and implementation of climate change policies.
The ratification of the Paris climate agreement by 28 countries, including the US and China, is expected to impact global fossil fuel developments. The EU is aiming for the agreement to enter into force before the COP22 conference in Marrakesh by achieving the threshold of 55% of global emissions and 55 countries. Worsdorfer indicated that if the 2°C target is met, oil demand will revert to 1990 levels, while gas demand will correspond to 2010 levels.
