Check against delivery
Thank you very much and thank you very much for inviting me to your annual meeting. Indeed, I would like to share a couple of ideas we have at the European Commission of how we get to climate neutrality by 2050.
You know when we came up with the Green Deal, over a year ago, the idea was not just to commit to climate neutrality by 2050, but to also demonstrate very clearly how to get there. What this would mean to 2030, what this would mean for the period between 2030 and 2050 and what this would mean for the whole of the economy. How can we reset our economy on a growth path – which does not mean carbon, but which is circular.
That was how we started, but then of course the pandemic hit and initially some people were saying, well we like your Green Deal, but come back in ten years’ time when we’ve recovered from the pandemic and we’ll see what we’ll do then.
But, since then, we’ve seen the crisis that followed the pandemic – the pandemic, which is far from over by the way. The crisis that followed the pandemic left us with an extra challenge. We will have to invest massively to get growth back, to make sure jobs come back.
If we don’t do this in a sustainable way, if we don’t use this opportunity to also set our economy and our society on a path of growth within planetary boundaries, then we would have missed an opportunity. I say this because I believe it, although I’m of course very happy that so much money is now being mobilised to invest in our society and economy.
The pitfall here, the danger here is that we spend it on the wrong things. We’ve done that in the past in an economic crisis. If we spend all this money, or too much or part of it, on economic structures that have very little future, then we will burden our children and grandchildren with unsupportable dept. They will not be able to pay it back and by the way, we would then also never be able to reach our climate goals. The temperature would rise substantially above 2 degrees and we would reach a number of tipping points, which would mean that humanity will no longer be in control of its own destiny.
If we get this wrong, our children will be fighting wars over water and over food. So, we need to get it right, and we need to get it right urgently, because we see already now, with the slight recovery we’ve already seen, emissions are going back to pre-pandemic levels quite quickly. We need to avoid that from happening.
What we need to do is extremely urgent. It sounds a long way in the future, 2050 or even 2030, certainly for politicians, who in this unstable political era, are thinking about the next election rather than their children and grandchildren.
But we now have an incredible opportunity, also as politicians, to start putting things in the framework of what we’re going to do for our kids.
I find this extremely exciting, also on a personal level. That we’re now not doing things just for ourselves, we’re doing this for our children and grandchildren. I think this could have a mobilising effect on wider society.
The role of the energy sector
Moving quickly to the energy sector, because the energy sector is crucial, in this transition.
We have made huge progress in deploying renewable energy, technologies are also advancing, but our EU energy system still relies heavily on fossil fuels for 75% of its energy needs.
We already know now that by 2050 our energy system will have to change completely, fundamentally. At the end of that road, there will be no more space for coal, very little room for oil and only a marginal role for fossil gas. This is not only because science tells us, it is also because the market shows us. So, instead of waiting for the inevitable, and face ever higher costs of transition, it is better to adapt, prepare and adopt new, sustainable business models.
I think it is true that the longer you wait, the more expensive it becomes.
What does this mean for us in Europe? What does this mean for your industry? What does this mean for our citizens?
Decarbonisation and coal exit
First – I think we have to decarbonise our power sector as soon as possible, and electrify new sectors such as road transport and parts of the industry. Electrify what can be electrified, I would say.
By 2050, we will need 10 times more solar and onshore wind power. We will also take our offshore wind capacity from 12GW to 300GW. This, by the way, is paying for itself. The economic opportunity is huge and there are huge investments in that area.
As we connect these new technologies to our power grids, we will be able to take old polluting technologies offline. The most urgent step we need to take is to shut down coal-fired power plants. 21 of our Member States are either coal free or have committed to coal phase-outs.
It is encouraging to see these commitments picking up pace, as the growth of renewable energy drives down demand for coal. But in reality closures are happening much faster than phase out plans, simply because coal is no longer a competitive source of electricity in Europe! You can compare it to what we’ve seen during the Trump years in the United States, such a strong political commitment to coal. He would ‘dig up more coal’, but the only thing that really happened was the closure of pits and the diminishing of coal as part of the energy mix. Simply by market forces. There was no ideology behind it, the ideology didn’t work, because the ideology was ‘let’s keep digging coal’ and the market said ‘no, we have alternatives’. So I think this is something we should never forget.
So it is important that timetables for phase out do not turn into a liability and an obligation for governments to keep dirty power plants online with taxpayers money. Because you need to do the math. How much does it cost to keep a pit open that produces coal that nobody wants to buy. How much is the cost on the taxpayer, on the environment and on the people working in that industry if their transition to new jobs and new skills is delayed?
Today we can leapfrog from coal to clean energy. But this is not always possible at the scale that we need, and as quickly as we need. Where, and as long as, clean energy cannot yet be deployed on the scale needed, fossil gas may still play a role in the transition from coal to zero emission electricity.
But I want to be crystal clear with you – fossil fuels have no viable future. That also goes for fossil gas, in the longer run.
The future is in carbon free electricity and a decarbonised gas sector, which embraces hydrogen as the new energy carrier and green hydrogen as the final destination.
The second area that will see major change is the transport sector.
Today it is running mainly on fossil fuels. And, contrary to emissions from power generation, emissions from transport have been rising.
But by 2050, we will need to reduce them by 90%.
We will need a lot more zero emission cars on our roads, and the infrastructure to facilitate that.
Part of it is psychological: instead of thinking ‘what car will I buy?’ people must be thinking ‘how can I get from A to B?’ and picking their transport options accordingly. But I, for one, know perfectly well, how emotionally tied we are to our cars. It is something that is part of our culture and this is not something you can change overnight. But I do see with the youngest generation, if I look at the millennials, but especially generation Z, they have a completely different attitude towards cars and transport. They just want to get from A to B without too much hassle and I think that’s the future.
We will also need aviation and maritime transport to become cleaner, including through clean fuels. This is biofuels, you can blend fuels, you can look for synthetic fuels. Hydrogen can play a role too, or hydrogen based fuels. So many things we need to do.
We need to limit short-haul flights and make collective travel under 500 km climate neutral. That means more trains and cleaner public transport.
Across Europe, it's a change already happening; the night train is back, and airlines are linking tickets with high-speed rail, creating a win-win situation. A win-win-win situation, for the airlines, for the rail sector, and for the environment. And for the citizen, a fourth winner.
We need to bring the transition already happening in power plants and industrial parks to our roads, our railways, ports and airports. And to our offices and homes.
This brings me to my third point – buildings.
A large share of the change has to happen in our homes; the heating and cooling technologies, the energy efficiency of our appliances and the building stock itself. We need to double our building renovation rate to make our homes more efficient and reduce our energy use. This also helps drive down energy bills for consumers, and spurs local construction jobs. Near zero standards for new buildings and minimum energy efficiency performance standards for buildings will drive the change.
We also need to see a much higher share of heating produced from electricity, rather than fossil fuels. We can do this by accelerating the deployment of heat pumps, and putting in place district heating solutions.
There are families in Europe that are still burning coal or wood to keep their houses warm. And the toll on their health is huge. Our first step must be to get rid of coal so that Europeans in the most polluted regions can breathe freely again
You know that we lose 400.000 Europeans every year prematurely because of air pollution? We really need to do something about this. For some Member States, where there are no other affordable options, gas will have to play a transitional role, for a limited period of time. I was discussing this also yesterday with the Polish government. Because Poland will be one of those countries where this will be necessary.
I think we made it clear now and again that electrification is our end-game in many areas. It is the fastest route to decarbonisation for most, and the most energy efficient solution in many end-use sectors.
New energy carriers and fuels
But electrification will not be the answer everywhere.
Some hard-to-abate sectors, think about steel, heavy transport, aviation, and the maritime sector will need alternative solutions. Clean hydrogen can be a game changer.
In Europe, we aim to stay ahead of the curve and create a strong European hydrogen market. For this to happen we need three ingredients: supply, demand and infrastructure.
We expect markets to scale up hydrogen supply. Our hydrogen strategy aims for 40GW of electrolyser capacity producing green hydrogen in Europe by 2030. If we work well with the regions bordering on Europe, North-Africa and the East, we can double that to 80GW of green hydrogen capacity. You know in North Africa, Morocco, Libya, Algeria, they are already producing cheap renewable electricity from solar energy. Producing hydrogen becomes an interesting option.
Today, these countries depend on revenues from fossil fuels. A decade from now they could be selling clean energy. The same goes for Ukraine, and for Russia, hopefully. A year ago, our hydrogen targets were seen as unachievable. Now it looks like we might overshoot them in the next decade. The market might go faster than our biggest dreams.
We will also support the production of biogas, which can offer new opportunities for cleaner energy systems, but also opportunities for farmers in Europe and additional revenues for our rural areas. We need to develop the concept of carbon farming. Both in terms of carbon sink and in terms of production of renewable energy.
But working on supply is not enough. You can’t flood the European market with hydrogen and expect industries to absorb it within the next decade. Supportive policy frameworks will be needed to help generate demand for renewable and low-carbon fuels in the transitional period until these fuels become fully competitive. We are looking at options to make this happen, for example via carbon contracts for difference. Recovery and Resilience Facility funding could make a big difference and we encourage Member States to use this opportunity.
The final element is infrastructure. We are very clear on this point. Europe doesn’t need to invest in any new infrastructure for carrying fossil gas. Instead, we should be thinking about retrofitting existing pipelines to transport hydrogen. This can be done at about 25% of the cost of building brand new pipelines.
Our flagship policy framework for trans-European energy infrastructure – the TEN-E regulation - was reviewed last December to support both electrification and the uptake of renewable and low-carbon gases.
And let me just say, that I count on your industry not to see hydrogen, e-fuels and biomethane as a fig leaf or a side activity. They will become the new mainstream. Our policy will reflect that. And I trust that your investment decisions will too.
Fit for 55
The direction is set, and we have a lot of work ahead of us.
This path will require new policies, which we will present in June.
This Summer, the Commission will present our Fit for 55 Package of legislation – which, with around a dozen proposals, will help us to put the European economy on the right track
The package will include a reform of the EU ETS and a possible extension to buildings and to transport. We need a strong carbon price signal to drive investments in clean power and clean gases.
We will also propose new renewable energy and energy efficiency targets, and new CO2 standards for cars. As part of the review of the Renewable Energy Directive we will propose a fully fledged scheme for hydrogen certification, including renewable and low-carbon hydrogen, but also other low-carbon and renewable fuels such as biogas and synthetic fuels.
Robust, clear and reliable certification is an important first step to allow for renewable and low-carbon gases to be traded across Europe. But we also need new market rules. This will be the main focus of the review of the gas market legislation, which we will adopt by the end of this year to support the uptake of renewable and low carbon gases and the development of an EU hydrogen market.
During our transition away from fossil fuels, we also have to make sure that fossil gas doesn’t move us further away from our climate ambition. That is why we will also propose in December new rules to reduce methane emissions in the oil, gas and coal sectors.
We have to address the problem of leaks throughout the fossil gas fuel value chain and work with our international partners to create new standards.
While Europe makes this essential transformation, it is absolutely vital that we don’t push our CO2 emissions across the border. The climate crisis is a global crisis, and emissions must go down all over the world. We will propose a Carbon Border Adjustment Mechanism in June, designed to prevent the risk of such carbon leakage. The more ambition other economies show in their climate regulations, the less it will be necessary to apply this tool.
Let me finish with the most important point. We must ensure that this transition is just, or there just will be no transition.
We need to make sure that our proposals help create a just transition. Through the Just Transition Mechanism, but throughout all the policies we will present. We need to make sure that all the money we put in there will make it possible to leave no one behind. And I think this is extremely important, because if you look at the political spectrum across the European Union, if people have the impression they will be left behind in this transition, they will prevent this transition from happening. So it’s in everyone’s interest that we leave nobody behind.
It’s not just a moral point, for me the moral point should be enough. But those for whom the moral point is not so important, the economic point should then prevail and the economic point only makes sense if we take everybody along in this transition.
Yes, there are many places, coal-mining regions. I come from a coal-mining region myself, where the transition will be difficult, but it also comes with an incredible opportunity if we make the right investments. Given our demographics, we will need everyone to work in the new economy, but then everyone will have to have the skills to be able to work in a new economy and this demands a lot of both, the private sector and public authorities, to make this happen.
So Ladies and Gentlemen,
Coal will be the first fossil fuel to retire from our European energy mix. But we have to present the coal-mining regions with a future that is interesting, enticing, that is exciting. And this is possible.
But, after we have successfully dealt with that transition, fossil gas is also a fuel that will need to be scaled back at considerable speed as we pursue the transition to net zero.
I really want to welcome the fact that you are engaging constructively in this transition.
Because we need everyone in Europe to embrace the growth potential of the Green Deal and get started with the transition.
Make no mistake: the only free-ride in a race to net zero, is a ride over the cliff-edge. And that’s something we cannot afford to do. We have a responsibility for future generations. And both the scary situation we are in today, and the exciting situation we are in today, the steps we will take in the next couple of years will determine whether we will be successful in coming to terms with a climate crisis, in coming to terms with the industrial revolution, in coming to terms with the fact that we need to leave our children a better society.
Thank you very much.