The International Energy Agency’s Review of European Energy Policy

27 July, 2020

Since taking office in December 2019, the President of the European Commission Ursula von der Leyen set out an ambitious programme to decarbonize the European Union: the European Green Deal (EGD). Presented on the 11th of December 2019, the EGD envisions a climate-neutral European Union by 2050—with dedicated sectoral strategies including the Sustainable and Smart Mobility Strategy, the EU Industrial Strategy and the Circular Economy Action Plan, alongside the promise of leaving no member state behind during the transition—by creating the EU ETS Innovation and Modernisation Fund and the Just Transition Mechanism.

In April 2020, in the midst of the Covid-19 public health crisis, the European Council asked presidents of both the European Commission and Council to prepare an EU recovery plan to consolidate the existing debt of EU member states and to foster economic growth. Once again, the von der Leyen Commission upheld the EGD’s significance for the Union’s economic future by designing a budget proposal and a transnational recovery fund that lays out the foundation for a resilient low-carbon European Union, as well as by twining digitalization and decarbonization in an effort to convey EU leadership in these sectors. However, with an expected decrease in GDP of at least 7.4% in 2020, many experts believe that the implementation of the EGD is no longer a challenge, but rather an opportunity to couple economic recovery with a just transition towards a clean energy system.

Within in these circumstances, the International Energy Agency’s (IEA) recent publication, the European Union Energy Policy Review 2020, was highly anticipated by political figures and policymakers alike. This review represents the first comprehensive analysis on how the challenges of clean energy transition have been approached by the EU during the last five years, as well as what challenges are expected in the near future given the Covid-19 crisis. As more than two thirds of the EU’s emissions are produced in activities related to energy production, distribution or usage, such an extensive review of the EU’s energy policy is crucial to construct the EGD and reform existing policies.

The relevance of the IEA’s review

In the past, the IEA was a subject of criticism for its consistently inaccurate predictions on the role played by renewables in the energy mix, with predictions almost always falling in line with those put forward by industry leaders, such as Shell.

The source of the bias is often explained through the history of the organization, which was originally established in the wake of the 1973 oil crisis, under the framework of the Organisation for Economic Co-operation and Development (OECD). During its initial years, the IEA served as a key provider of information regarding the global supply of oil, as well as facilitating responses towards physical disruptions in the oil market. As such, a large proportion of the IEA’s expertise is from the fossil fuels industry, which makes predictions regarding the deployment of renewables or the development of energy storage much more conservative.

Nevertheless, exactly because conservative forecasts allow policymakers to prepare for worst-case scenarios, publications of the IEA remain crucial. Because of this, the IEA is one of the most widely cited think-tanks in the world of policymaking, despite the inaccuracy of its predictions. Thus, even if their predictions are to be treated cautiously, we need to understand that such a comprehensive IEA publication, including the European Union Energy Policy Review, still contains powerful calls to action that will be read by numerous politicians and policymakers—and therefore, will be considered for actual reforms.

Ultimately, a proper understanding of this review allows us to better prepare for the expected reforms at the EU level in the upcoming years.

European Energy Policy

One motif of EU energy policy identified by the IEA is the determination to achieve net carbon neutrality by 2050, an objective that would become legally binding with the adoption of the European Climate Law proposed in March 2020. However bold, this objective is an orderly continuation of previously successful directives that led to significant reductions in CO2 emissions: between 1990 and 2017, the total energy-related CO2 decreased by 20%.

The IEA review points out that beyond regulatory regimes, these improvements are in part determined by the diversity of the EU energy mix, with nuclear, bioenergy and renewables making up for more than 28% of the total primary energy supply (TPES). While this leaves almost three quarters of the energy mix portfolio for fossil fuels, this proportion is significantly smaller compared to the rest of the world.

However, regardless of this diversity, member states’ economies are still largely dependent on fossil fuels and thus, on imports of gas and oil. Furthermore, because renewable energy from wind and solar is by definition intermittent (and thus time-heterogenous), increases in the share of variable renewable energy entails the need for flexible fossil fuels, such as natural gas, that can be easily ramped up when needed. Given this advent of renewables, the planned phase-out of coal in multiple member states with the closing or reduction in nuclear power generation due to economic and ethical reasons, imports of oil are expected to grow in the coming year.

While the IEA notes that global markets for liquefied natural gas are being developed, regions of the EU, such as Eastern Europe, will likely not be properly integrated into the new framework, leading to more imports and a less secure energy supply. As such, any policy package that addresses decarbonization will need to account for the role of oil and natural gas, and to prioritize measures that increase the security of supply. Some requirements for supply security are inevitably linked to the way in which the European Investment Bank will position itself, especially regarding R&D in the field of energy storage, but also on projects intended at facilitating more flexible nuclear power plants in countries where such energy forms have substantial political support, such as Romania or France.

A second rationale of European energy policy is the large variation of energy mix portfolios across member states; for example, fossil fuels only accounted for 26% of TPES in 2017, but for more than 95% in Malta. While these may appear to be extreme examples, the average share of fossil fuels in TPES is around 76%; therefore, the transition towards green energy is dependent on an EU-wide governance framework that balances the interests of different producers, from fossil fuel-dependent states, such as Poland or the Czech Republic, to the nuclear energy producers in France. With regional tensions already existing between the Visegrad Group and some Western EU countries, such as Germany or France, the EGD will depend on the Commission’s capacity to accommodate interests of less developed member states and, in some cases, prioritizing funding towards their energy transition.

Given these constraints, the trajectory of EU-policymaking in the energy sector can be described as a complex network of national and transnational policies attempting to create European energy markets supporting innovation towards decarbonization, while also accounting for energy security challenges posed by geopolitical considerations.

The IEA reviews in detail the following pillars of energy policy:

  • The 2020 Climate and Energy Package, consists of a number of directives adopted before 2010 and headlined by the ambitions to reduce greenhouse-gas emissions by 20% compared to 1990 levels, increase the share of renewables to 20% in gross final energy consumption and reduce total primary energy consumption by 20%.
  • The Energy Union Strategy, a collaborative approach to bring national efforts together through a common governance framework.
  • The Clean Energy Package sets a 32.5% renewable energy target by 2030, an EU-wide target of 32% renewable energy, more rights for consumers and a more efficient and secure electricity market. Many of the Clean Energy Package objectives were implemented through EED II and RED II directives, which have stipulated clear rules and review clauses for both energy efficiency and renewables share targets.

The conclusion of the IEA, especially in light of the new EGD proposal, is that previous the legislation was a driver of investment and competitiveness across the European Union, allowing the EU to emerge as a global leader in crucial fields, such as offshore wind technology. Moreover, it highlighted that the Energy Union framework fostered greater consistency and managed to offer proper incentives to marshal the interests of all member states along the lines delineated by the five pillars: energy supply security, an integrated energy market, increased energy efficiency, decarbonization and innovation.

Lastly, the IEA supports both the EU Climate Law and EGD overall and applauds the leadership displayed by the current Commission.


The main conclusion of the European Union Energy Policy Review 2020 is that by international comparison, the EU has managed through sustained policies to obtain significantly lower emission intensity in power generation, with only 270 g of CO2 per kilowatt-hour. However, the IEA points out that while the success of previous policies is not to be denied, most of the positives come from electricity generation, with certain sectors, such as transport and heating and cooling, still lagging behind targets. As such, the EU is currently not on track towards a targeted share of renewables share of 32% in 2030, nor energy efficiency savings of 32.5%.

The IEA justifies that the current public health crisis thus offers a unique opportunity for the EGD in the form of targeted investments towards a clean energy transition. More than ever, this period of low fuel prices would allow both the liberalization of energy markets and a phase-out of subsidies for fossil fuels. While this is a national endeavor, the Commission could facilitate it through expanding the role of the EIB, while fostering innovation and economic growth.

Ultimately, carbon neutrality is becoming more of an urgency rather than a simple policy objective. Eventually, the EU will need to make the transition towards a clean energy sector and the IEA’s review clearly demonstrates that now would be the best time.

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