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Document 52019DC0175

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK Fourth report on the State of the Energy Union

COM/2019/175 final

Brussels, 9.4.2019

COM(2019) 175 final

REPORT FROM THE COMMISSION

TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK



Fourth report on the State of the Energy Union


I.    INTRODUCTION

The Juncker Commission’s Energy Union project 1 set out to give EU consumers secure, sustainable, competitive and affordable energy by overhauling Europe’s energy and climate policies. It also committed to making the EU the world leader on renewable energy, to placing energy efficiency first and to continuing to lead global efforts to fight climate change. Four years on, the Energy Union is a reality. With strong support from the European Parliament, Member States and stakeholders, the Energy Union has made Europe more resilient and thoroughly modernised European policy on energy and climate in a number of essential ways.

First, it has resulted in a comprehensive and legally binding framework for reaching the Paris Agreement goals, while simultaneously helping to modernise the European economy and its industry. The Energy Union includes a governance framework, which will allow Member States and the European Commission to work together to develop the policies and measures necessary to deliver on our climate and energy goals. It is also firmly embedded in the broader framework of EU priorities. The Energy Union helps to meet the Sustainable Development Goals and implement the circular-economy and air-quality agendas. It is closely linked to policies for the Capitals Market Union, the Digital Single Market, the New Skills Agenda for Europe, the Investment Plan for Europe, and the Security Union.

Secondly, this comprehensive approach to the Energy Union has enabled the EU to put in place clear and ambitious targets for 2030 in renewable energy and energy efficiency. It has enabled the EU to set up equally ambitious policies on clean mobility including emissions for new cars, vans and lorries. It has also provided a solid basis for work towards a modern and prosperous climate-neutral economy by 2050. The European Commission’s 2050 vision 2 has laid out a framework for future climate and energy policy that will put Europe on a path towards climate neutrality, while providing significant benefits for the economy and for the quality of life of its people 3 .

Thirdly, the Energy Union provides a combination of a fully up-to-date regulatory framework and a vision for the policies that are required between now and 2050. This provides the certainty necessary for high-quality, innovative investment to modernise the EU economy and create local jobs. There are more than 4 million ‘green jobs’ in the EU today, and the energy transition provides clear opportunities to create more. More green jobs will be created by EU investment through cohesion policy funds; research and innovation funds; the Juncker Plan; and the European Commission’s recent initiatives on sustainable finance. The Energy Union supports the competitiveness of European industry by fostering innovation that creates a global ‘first mover’ advantage. The Energy Union is also promoting the creation of European value chains in critical and emerging sectors such as batteries and hydrogen.

Fourthly, the Energy Union has at its core the deepening of the internal energy market, which is key to providing all citizens with a supply of secure, sustainable, competitive and affordable energy. Investments in smart infrastructure, including cross-border interconnections, and common arrangements to prevent and manage possible disruptions, have increased the security of energy supply and improved the overall resilience of the EU’s energy system to external energy shocks. These investments have also prepared the EU’s grid for the changing energy system. In parallel, recent changes to the design of the electricity market will make access to this market more competitive, ensure the cost-efficient integration of renewables, and deliver better value for consumers, who will be able to offer their production and flexibility to the market.

Fifthly, in parallel to the regulatory framework, the European Commission has put in place an enabling framework of supporting measures to address social, industrial, and other issues. These measures seek to empower citizens, businesses, cities, and innovators to play an active role in the energy transition. New approaches that the European Commission has pioneered are proving to be effective, notably in helping to create a European battery industry, supporting coal regions in transition, or giving cities the means and motivation to scale up their climate and energy action. The enabling framework will be critical to mobilise the investment that is necessary to take full advantage of the energy transition, and to ensure that the transition is fair and socially acceptable for all. The social implications of these changes must be a part of the policy process from the outset, and not simply be an afterthought.

Finally, the Energy Union has allowed the EU to speak with one voice on the international stage. The EU has been able to exercise effective climate leadership by being a key player in the Paris Agreement, ensuring that the Agreement entered into force in record-time, and implementing the Agreement through the Katowice Rulebook adopted in December 2018. In this process, the EU’s credibility is underpinned by concrete action and the adoption of the full legislative package needed to reach its 2030 commitment under the Paris Agreement. In line with its firm commitment to multilateralism, the EU’s unity and determination has been key to maintaining international confidence in the climate regime, faced with the vacuum of leadership following the post-2017 withdrawal of the United States from this regime. Europe has continued close international cooperation on climate and energy policies. For example, it worked with China on kicking off a nationwide emissions trading system in 2017.

With this modern governance framework for climate and energy policy firmly established on the European level, Member States are now working to integrate and upgrade their national policies. The Energy Union ensures that all Member States move forward together, as they agreed to finalise their National Energy and Climate Plans by the end of 2019. These plans will be based on national public consultations and feedback from the European Commission on initial drafts, which all Member States have now officially submitted. The common framework promotes mutual learning and maximises the opportunities for regional cooperation. It also kicks off a learning-by-doing exercise, as the Energy Union plans regular ‘checkpoints’ to review and collaboratively improve policies. The management of this iterative dialogue will be a key challenge for 2019 and an essential element in ensuring that the Energy Union collectively delivers all its benefits.

Beyond energy and climate policy, the Energy Union is about a structural modernisation of the European economy. It promotes structural reform of energy and resource use in all key sectors: energy, with its central role; buildings; transport; industry; agriculture; and land use more generally. The Energy Union is also an investment strategy, which has positive impacts on the economy and employment, and takes into consideration its impact on vulnerable regions and people. Through its focus on efficiency and domestic energy resources, it will strengthen the EU’s position in global markets.

II.    TRENDS AND POLICY OBSERVATIONS

Greenhouse gas emissions and energy consumption are increasingly decoupled from economic growth. The transition to a modern, low-carbon and energy-efficient economy is well underway, and Europe is on a credible pathway to meeting its Paris Agreement commitments. The EU is well on track to achieve its 2020 target for reductions in greenhouse gas emissions (i.e. a reduction in emissions of 20 % by 2020 compared to 1990 levels). Between 1990 and 2017, the EU economy grew by 58 %, while emissions decreased by 22%, according to preliminary data submitted by the Member States 4 (Figure 1).

Figure 1: Changes in EU Gross Domestic Product (in real terms), EU greenhouse gas (GHG) emissions, and GHG-emissions intensity of the EU economy

Since 1990, emissions have decreased in all economic sectors except transport. The most marked fall has been in emissions from energy supply (Figure 2). Economic growth is less dependent on energy consumption (Figure 3). Both energy productivity and the greenhouse gas intensity of energy consumption have continuously improved in the EU, thanks primarily to energy efficiency measures in Member States.

Figure 2: EU greenhouse gas emissions by sector 1990-2016

However, there is a need to further intensify efforts to reach the 2020 energy efficiency target. The most recent analysis 5 shows that following a gradual decrease between 2007 and 2014, energy consumption has started to increase in recent years, and is now slightly above the linear trajectory for the 2020 targets. This is due to weather variations, notably colder years 2015 and 2016, but also increased economic activity and low oil prices. Energy intensity in industry has continued to improve by as much as 22 % between 2005 and 2017 and energy savings have indeed helped offset parts of the impact of these increases. But they have been insufficient to maintain total consumption on a downward trend. While the 2020 energy efficiency target is still within reach, continued increase in energy consumption could put it at risk. This is why the European Commission has established a Task Force with Member States to mobilise efforts and fully exploit energy efficiency potentials.

In the transport sector, energy consumption and emissions decreased between 2007 and 2013, but are now roughly back at 2005 levels. The positive impact of efficiency policies (and, in a more limited manner, the positive impact of a modal shift in transport) has been outweighed by increased transport activity, and low capacity utilisation in road- freight transport.

Figure 3: Changes in EU GDP and primary energy consumption

Strong growth continued in the renewable sector but with an unequal deployment. Since 2014, the share of renewable energy in the EU energy mix has significantly increased, reaching 17.5 % in 2017 6 . Investments in renewable energy are increasingly driven by market decisions and Member States increasingly grant support for renewable energy through competitive tenders and ensure that renewable energy installations are integrated in the electricity market, as required by State aid rules 7 . This has significantly decreased the costs of renewable deployment 8 . However, the penetration of renewable energy varies across sectors, with renewable energy reaching 30.8 % in the electricity sector, but only 19.5 % in the heating and cooling sector, and 7.6 % in the transport sector. The pace of increase in the share of renewable energy has also slowed since 2014. While the EU is on track to meet its 2020 targets for renewable energy, efforts should be stepped up to ensure that 2030 targets are met (Figure 4).

Figure 4: Renewable energy shares in EU gross final energy consumption vs Renewable Energy Directive and National Renewable Energy Action Plan trajectories 9

In 2017, 11 Member States 10 already had a renewable energy share above their 2020 targets. In addition, 21 Member States 11 met or exceeded their average indicative trajectory from the Renewable Energy Directive 12 for the two-year period 2017-2018. The remaining 7 Member States 13  needed to step up efforts to comply with the average 2017-2018 trajectory towards 2020.

However, for 11 Member States 14 , the policies currently being planned or implemented to promote renewable energy appear insufficient to meet their indicative trajectory if only domestic supply, without cooperation mechanisms, is considered 15 . Moreover, for 7 Member States 16 , there is some uncertainty on whether they will achieve the 2020 renewable targets.

To meet the 2020 renewable energy targets and sustain these levels as a baseline from 2021 onwards, Member States should continue to increase their efforts to both deploy renewables and reduce energy consumption. In addition, all Member States should consider the possibility of using statistical transfers, as provided for in the Renewable Energy Directive 17 , either to ensure that they achieve the target when there is a deficit or to sell their potential surpluses to other Member States. The Commission stands ready to support Member States in this.

In this context, a number of actions are underway across the EU. These are taking place through the task force on energy efficiency, which the Commission launched, the new renewable energy auctions announced by several Member States, including France, the Netherlands, Portugal, and the wider use of corporate power purchase agreements through which European companies bought a record amount of wind power capacity in 2018.

Good progress has been made towards a more integrated European energy market. Energy is now traded more freely (although still not sufficiently freely) across borders 18 , building on the Electricity and Gas Market Directives 19 as well as antitrust enforcement 20 . Antitrust decisions have notably given customers in Central and Eastern Europe an effective tool to make sure they have access to more competitive gas prices. As concerns electricity, the measurable decrease in wholesale electricity prices by 6.4 % between 2010 and 2017 contributed to a decrease in the costs of energy for households and industry by 6 % and 30 %, respectively. However, the increase in network charges as well as taxes and levies led to an average increase in final consumer prices of 19.3 % for households and 8.7 % for industrial consumers across the EU over the same period (see Figure 5). Energy-related taxes and levies represent up to 40% of the retail energy prices for households.

Figure 5: Changes in energy prices for households and industry (source: Eurostat)

Air quality has progressed, but further improvements remain necessary. Thanks to joint efforts by the EU and Member States, emissions of air pollutants have decreased in the EU in recent decades, with the exception of ammonia (Figure 6). This trend has contributed to better air quality. It has also led to a decrease in the number of air quality zones exceeding EU limit values for particulate matter, and a decrease in the estimated number of premature deaths due to air pollution, to around 400000 in the latest estimates 21 . Emissions of air pollutants in the EU are projected to continue decreasing, as Member States implement measures to fulfil their national commitments on reductions in emissions of pollutants for 2020 and 2030 onwards 22 . The implementation of several Energy Union policies makes these emissions reductions easier and less costly to achieve for example, reductions in the use of coal, energy efficiency measures to replace inefficient heating equipment, and the development of more sustainable means of transport 23 .

Figure 6: Changes in EU emissions of air pollutants 24 , as a percentage of 2000 levels

The EU’s Emissions Trading System is more robust. The start of operation of the Market Stability Reserve in January 2019, and the adoption of the reform of the post-2020 Emissions Trading System in early 2018, significantly strengthened the carbon price (Figure 7). The Market Stability Reserve will address the current surplus of 1.65 billion emissions allowances and improve the system’s resilience to major shocks in the future by adjusting the supply of allowances to be auctioned. The stronger carbon price signal is already boosting confidence in greater development and deployment of low-carbon technologies. According to market analysts, the Market Stability Reserve will maintain its effect on the carbon market in the following decade with carbon prices at a similar or higher level. This is combined with concrete measures to avoid carbon leakage, protecting the competitiveness of European industry.

Figure 7: Changes in the carbon price on the European carbon market 2005-2018 (source: ICE)

Public investment (national and EU) in the Energy Union’s research and innovation priorities was relatively stable throughout 2014-2017. Public investment in these priorities during this period averaged around EUR 5.3 billion a year (Figure 8) 25 . With national funding of EUR 4.1 billion on average per year 26 , the EU’s Horizon 2020 research programme and cohesion policy funds were essential in keeping research and innovation investment steady over the last 4 years. The European Commission is on track to invest almost EUR 2 billion in 2020 in clean energy research and innovation, meeting its commitment to double its public research and innovation investment in this area since 2015 as part of its membership of Mission Innovation. However, the private sector remains the main provider of such investment, consistently accounting for more than 75% of EU investments in clean energy research and innovation, having increased annual spending from about EUR 10 billion to over EUR 16 billion within a decade. Public funding will continue to play a key role in coordinating research and steering private investment to priorities compatible with our long-term strategic vision, also through smart specialisation. This will help bridge the gap from research to commercial deployment and attract new private investments by de-risking technologies. Strong policies and predictable price signals are necessary conditions for promoting innovation in the clean-energy ecosystem, which will ultimately boost research investment in clean energy technologies.

Figure 8: Public investment in Energy Union research and investment priorities 2014-2017 (source: Joint Research Centre)

III.    AN AMBITIOUS AND MODERN LEGISLATIVE FRAMEWORK

Under this European Commission, the EU has successfully adopted a completely new legislative framework for energy and climate policies 27 . The European Parliament and Council agreed on a revision of the EU’s climate legislation, including the Emissions Trading System Directive 28 , both for stationary installations and for aviation, the Effort Sharing Regulation 29 , and the Regulation on Land use, Land use change and Forestry 30 . They also agreed on the eight legislative proposals in the ‘Clean Energy for All Europeans’ package 31 , and on the ten mobility proposals following the ‘Low-Emission Mobility Strategy’ 32 .

This comprehensive legislative framework forms a robust basis for the EU to deliver on its climate and energy policies for 2030 and beyond. This framework will allow us to deal with future challenges such as digitisation, the integration of renewables into the market, and an energy policy that is more consumer oriented. The legislation addresses both cross-cutting elements to promote climate and energy action, and specific provisions for sectoral action where needed. The EU has also sent a strong message to other countries around the world that it intends to continue to lead by example. It is doing this by taking concrete and ambitious steps to deliver on its commitments and adaptation goals under the Paris Agreement. The EU’s agreed framework also contains built-in review clauses and provisions to guarantee that these commitments will be met. This framework puts the EU on a good trajectory to a climate-neutral economy by 2050.

The updated legislative framework sets out quantified objectives and a clear ‘direction of travel’ to 2030 providing a stable, predictable environment for planning and investment. In particular, the EU has considerably raised its ambition by setting new targets for 2030, namely: to reduce greenhouse gas emissions domestically by at least 40 % compared to 1990 levels; to reach a share of at least 32 % in renewable energy 33 ; and to increase energy efficiency by at least 32.5 % 34 . The electricity interconnections target was set to improve security of supply by stepping up to 15 % in each Member State by 2030. Binding targets for 2030 were also set to reduce carbon emissions from cars by 37.5 % compared to 2021 levels 35 ; from vans by 31 % compared to 2021 levels 36 ; and from lorries by 30 % compared to 2019 levels.

The EU has strengthened its energy security. New rules 37 on security of gas supply and electricity risk preparedness have been adopted to organise operational cross-border regional cooperation to prevent and manage risk of gas disruptions, electricity shortage or black-out.

Significant progress has also been made in improving the design of electricity markets. There is now a more integrated set of rules on the design of the electricity market 38 . These rules are improving the efficiency of the electricity market through increased price convergence and cross-border exchanges. They also set a common framework for capacity mechanisms to ensure that these are compatible both with the internal market as well as with the EU’s decarbonisation objectives. There has been a thorough State aid sector enquiry on capacity mechanisms, 39 and State-aid control and antitrust rules 40 help ensure that our ambitious energy and climate targets are achieved at the lowest cost, and without undue distortions of competition. Overall, the European Commission’s efforts allow electricity to move more freely to where it is most needed, and facilitate the integration of renewable energy, demand response, and storage facilities to the market at least cost. It will also enhance digitisation across the sector and foster stronger consumer empowerment.

Progress has also been made in the gas market, notably with the agreement on the revision of the Gas Directive 41 , according to which gas pipelines entering or leaving the European internal gas market will now need to comply with EU rules. In addition, the European Commission can now ensure that Member States’ agreements with countries outside the EU comply with EU law 42 before they are concluded. These achievements will help increase the predictability of the single market for investors.

The regulatory framework for specific sectors has also been brought up to date. This was done to make buildings ‘smarter’ and more energy efficient 43 ; to set limits to carbon emissions from cars, vans 44 and lorries 45 ; to update rules on land use, land-use change and forestry 46 ; and to update rules on the eco-design of energy-related products 47 . This will ensure that all sectors contribute to the energy and climate transition, taking into account their specific needs.

The new governance framework will help to implement and further develop the Energy Union 48 . Member States’ integrated National Energy and Climate Plans will include national contributions to the collective EU targets (and the necessary policies and measures to achieve these contributions) for ten-year periods. Member States will develop their plans through a continuous, iterative dialogue with the European Commission. They will also ensure public participation and consult with other Member States in a spirit of regional cooperation. This will increase opportunities for cooperation between Member States, and provide greater regulatory certainty for stakeholders. The National Energy and Climate Plans will make it easier to identify areas of interest for future investments, and opportunities for economic development, job creation and social cohesion.

All Member States have now submitted their first draft National Energy and Climate Plans (covering the period 2021-2030). The European Commission is assessing these draft plans with a view to issuing potential recommendations to Member States by June 2019, to help Member States further improve their plans, and ensure that the EU can collectively deliver on its commitments. One key question of the assessment will be whether the Member States’ national contributions to the renewable energy and energy efficiency targets are sufficient to meet the EU’s collective level of ambition as a whole. Building on this process, Member States will continue to develop, and ultimately adopt, their national energy and climate plans in the second half of 2019.

Box: towards an EU long-term strategy for a prosperous, modern, competitive and climate-neutral economy by 2050

In November 2018, the European Commission published a strategic long-term vision 49 for a prosperous, modern, competitive and climate-neutral economy by 2050. This document (drafted following requests from the European Council 50 and the European Parliament 51 and as called for as part of the agreed governance framework 52 ) was the Commission’s contribution to the EU’s long-term low greenhouse gas emission development strategy, which should be adopted and communicated by 2020 to the United Nations Framework Convention on Climate Change, in accordance with the Paris Agreement. In parallel, each Member State will also need to prepare its national long-term strategy.

The European Commission presented a vision not only to keep the global increase in temperature well below 2 °C compared to pre-industrial levels, but also to pursue efforts to limit this increase to 1.5 °C by achieving net-zero greenhouse gas emissions by 2050.

The strategy demonstrates how Europe can lead the way to climate neutrality by investing in realistic technological solutions, empowering citizens, and aligning action in key areas such as industrial policy, finance, or research – while simultaneously ensuring social fairness for a just transition and not leaving behind any region nor any population group.

The European Commission’s strategy shows that transforming the economy in this way is both possible and beneficial. It is an investment in the modernisation of the EU’s economy to better face forthcoming challenges. To achieve this transition, the EU will need to make progress on seven strategic building blocks 53 . These building blocks build on the five dimensions of the Energy Union. They also set the direction of travel for EU climate and energy policy to achieve the temperature objectives in the Paris Agreement.

IV.    AN ENABLING FRAMEWORK SUPPORTING THE ENERGY TRANSITION

Over the past five years, in addition to strengthening the legislative system, the European Commission has delivered a framework of actions to support the energy and climate transition. This framework is about creating the conditions for Member States, and all stakeholders, to deliver on the EU’s objectives.

1.A future-proof infrastructure ensuring the EU’s security of supply and enabling the green transition

Europe enjoys one of the world’s most comprehensive and reliable networks for electricity and gas. The prime objective of the European Commission has been to strengthen this network where necessary to address remaining security of supply issues, connect energy islands, and address challenges resulting from the ongoing transition to a low-carbon economy.

A key priority of the Energy Union has been to end the energy isolation of disconnected regions. Significant progress has been achieved in the Baltic states. While these states were once an energy ‘island’ in the EU, they are now well interconnected with the rest of the EU, with 23.7 % cross-border interconnection. This has been made possible by new interconnectors with Sweden, Finland and Poland. Work is now concentrating on synchronising the Baltic states’ power system with the continental European network by 2025 at the latest 54 . Greater integration of the Iberian peninsula is also being promoted by the support by the European Commission for the INELFE 55 project and for a power line crossing the Bay of Biscay. These efforts will double the exchange capacity between France and Spain by 2025, bringing Spain closer to the 10 % interconnection target, and progressively integrating the whole Iberian peninsula into the internal electricity market. The European Commission also supports further efforts to integrate the gas market of the Iberian Peninsula and the rest of Europe. These efforts, which show the value of European solidarity and regional unity, have been discussed in regular summit level meetings between France, Portugal and Spain with the European Commission 56 .

The efforts of the European Commission to ensure diversification of gas supply are also delivering concrete results. These efforts are ending dependency on a single supplier in certain Member States, increasing the resilience of the Member States’ energy systems, enhancing competition, and decreasing prices. As a result, all Member States but one have access to two independent sources of gas, and if all ongoing projects are implemented on schedule, all Member States except for Malta and Cyprus will have access to three sources of gas by 2022, and 23 Member States will have access to the global liquefied natural gas market. Ongoing diversification initiatives based on liquefied natural gas and the Southern Gas Corridor are of particular importance to the eastern Baltic sea region and central south-eastern Europe. These areas were historically dependent on a single gas supplier. If the necessary commitment is maintained, and there are no delays in implementing key projects, Europe should achieve a well-interconnected and fully shock-resilient gas grid by 2020 or shortly thereafter.

The European Commission has been also supporting projects to improve the EU’s electricity grid and to allow for greater uptake of renewable generation. Despite the progress, investments on a much larger scale are needed in electricity grids (both transmission and distribution). The level of investment needed for electricity transmission is estimated at more than EUR 150 billion for the period 2021-2030 57 . These new investments should be bundled with further digitisation and ‘smartening’ of the grids, as well as the deployment of new storage facilities.

The EU’s trans-European networks (TEN-E) policy has been instrumental in upgrading the EU’s infrastructure. The TEN-E policy promoted a focused approach to identify and implement the Projects of Common Interest (PCIs) critical to building well-connected networks across Europe. So far, over 30 PCIs have been implemented, and some 75 PCIs should be in place by 2022. The creation of four high-level regional groups 58 under the leadership of the European Commission has helped to accelerate the implementation of the PCIs. PCIs have also benefited from EU financial support, which has leveraged private investment. Since 2014, 91 PCIs have received EUR 3.2 billion in support from the Connecting Europe Facility (CEF) programme and EUR 1.3 billion in support from the European Fund for Strategic Investment (EFSI). This has leveraged total investments of around EUR 50 billion. Additionally, EU cohesion policy has contributed with EUR 2.8 billion in natural gas and electricity infrastructure projects that were selected by end 2018.

Level of funding per sector under the Connecting Europe Facility (CEF)

Stronger and better-interconnected grids in the Member States have allowed for more effective application of the internal energy market’s rules. This has resulted in greater competitiveness, reduced costs and better security. So far, 26 countries accounting for over 90 % of European electricity consumption and more than 400 million people have coupled their day-ahead electricity markets. Over the past 7 years, day-ahead market coupling alone has rendered a benefit of approximately EUR 1 billion per year to European consumers 59 . There have also been significant welfare gains from the integration of intraday markets and the balancing of cross-border markets, which has led to several billion euro in savings per year. Market coupling has also promoted price convergence in various regions in recent years (e.g. by 80 % and 41 % price convergence in the Baltic and central-western Europe regions respectively). In addition, the European Commission has supported the establishment of regional cooperation centres to help the integration of cross-border power flows and variable power flows across the European power system. The digitisation of power infrastructure will require increased attention on improving cybersecurity and protecting critical infrastructure.

Investments have been made to enable sector integration. However, more needs to be done to bring together the power generation and end-use sectors. This is necessary to integrate the rising share of variable renewable energy; heating and cooling; and electric vehicles in the energy system. Since the end of 2016, close to EUR 400 million in Connecting Europe Facility (CEF) grants have been made available to over 50 projects to deploy alternative fuels, mobilising total investments exceeding EUR 3 billion. The aim is to make available an additional EUR 350 million through the CEF blending facility in 2019. This will be a key area of attention for the future. Future demand for electrical vehicles will vary across EU regions, and be dependent on a number of factors, including the development of alternative fuels infrastructure. Furthermore, EU cohesion policy remains an important source of EU co-funding for the deployment of clean transport, e.g. with about EUR 12 billion planned for sustainable urban mobility.

2.Piloting ways to ensure social fairness of the transition

The energy and climate transition is already benefiting the economy and fostering job creation, and it has the potential to do more. Between 2000 and 2014, employment in the environmental sectors of the economy grew considerably faster (+49 %) than employment in the economy as a whole (+6 %) 60 . Today, there are 4 million ‘green jobs’ in the EU. This includes around 1.4 million jobs in the energy sector related to renewable technologies 61 and 900 000 jobs related to energy efficiency activities 62 . These figures are expected to increase with further energy and climate action, as investments in Europe replace imports of fossil fuels, European industries gain competitiveness from the early-mover advantage, and adaptation to climate change protects jobs and job opportunities. 

While this transition benefits the vast majority of people and regions, it also brings social challenges in some cases. For example, regulatory or fiscal measures can have unintended regressive effects which can exacerbate energy poverty. The benefits of the transition also risk to be unevenly distributed. Most sectors, regions and population groups will enjoy significant growth as a result of this transition, while others may need support to deal with the adjustment. Also as regards energy poverty, although decreasing to pre-crisis levels, important differences 63 among Member States remain. There are many policies to address these challenges on the national level, particularly education and training as well as social and fiscal policies. Important and sustained human capital investments are essential to equip future generations with the skills required by a changing economy