Strategic Perspectives: Turning the European Green Deal into reality

The publication of this report marked the launch of Strategic Perspectives as a new European think tank. Cambridge Econometrics’ modelling and analysis provided a supporting evidence base to help Strategic Perspectives form a quantitative assessment of the European Green Deal’s energy, environmental and socio-economic impacts, particularly in the context of energy price disruptions in Europe.

In 2019 the European Green Deal was launched. Since then, events including the Covid-19 pandemic and the Ukraine war have brought about challenges, such as higher energy prices, as well as opportunities including accelerated deployment of renewables, in delivering Europe’s great ambition to become carbon neutral by 2050. Taking all of this into consideration, Strategic Perspectives and Cambridge Econometrics studied key policy and social implications of the policy package, reflecting on progress to date and what is required over the next seven years.

The modelling was carried out using Cambridge Econometrics’ global macroeconomic model E3ME, previously used to inform the European Commission’s own impact assessment of the Green Deal policy package and more widely in evaluating economic impacts of decarbonisation across the world. The policies were simulated together for estimating their combined impacts; they were also modelled with different energy price assumptions, to demonstrate how this may influence the effectiveness of the policies. The modelling was complemented by additional analyses to quantify key metrics regarding the potential size of the heat pumps and electric vehicles markets in Europe, which are important considerations for both policymakers and households.

Outcomes from the effective implementation of the European Green Deal up until 2030:

• Coal could be phased out completely from power generation, as wind and solar increase their market shares to 55%.

• At least 29 million electric cars and 58 million heat pumps will be operational in Europe, contributing to the most significant emissions reductions after power generation.

• Economy-wide decarbonisation measures could reduce fossil fuel energy consumption by over 30%, improving Europe’s energy security by reducing dependency on fossil fuel imports and opening up opportunities to develop new specialisations in low-carbon technology exports.

• Accelerated renewable deployment and improved energy efficiency means that not only can energy prices be reduced (contributing to stabilising inflation) but also spending on energy would likely become a smaller proportion of households’ budget.

• The European economy will benefit from 475,000 net additional jobs, mainly in renewable electricity generation, advanced manufacturing and infrastructure building.

• Potential benefits of the Green Deal are estimated to require €351 billion in additional investment, relative to a business-as-usual baseline, equivalent to 10% of total annual investment in the EU in recent years.