The EU’s Energy Transition: Strategies for a Sustainable Future

The EU’s Energy Transition: A Path Towards Sustainability

The European Union is navigating a pivotal moment, facing the intertwined crises of urgent climate change and escalating geopolitical tensions. The consequences of climate change are becoming increasingly apparent, while recent energy disruptions triggered by Russia’s invasion of Ukraine have exposed the EU’s vulnerabilities. In response, the European Green Deal—a commitment embraced by all member states—calls for a swift transition away from natural gas. This transition poses both significant challenges and remarkable opportunities for the region.

In the Baltic-Finland area, natural gas consumption differs notably among countries, with Finland utilizing 3%, Estonia 6%, Latvia 16%, and Lithuania 19% of their energy needs from this source. While these figures may seem relatively low, natural gas remains vital for heating and other essential services. The energy crisis of 2021, which led to extreme price fluctuations, underscored the risks associated with this dependency. While prices have since stabilized, the environmental and geopolitical threats persist, highlighting an urgent need for decarbonization.

‘No-regret’ Policies: A Crucial Element

In 2023 alone, the EU’s natural gas production resulted in an alarming 0.75 billion tonnes of CO2 emissions, emphasizing the need for robust decarbonization strategies. These strategies advocate for a shift from natural gas to renewable hydrogen and biomethane, alongside initiatives such as electrification and energy optimization. These transformative measures are essential for establishing a decarbonized and resilient gas system in the EU, ensuring stable prices and a dependable supply for consumers.

A recent report titled “Gas Decarbonisation Pathways for Estonia” outlines four potential routes to achieving carbon neutrality for the Baltic-Finland gas zone by 2050:

• Continuing with current policies
• Failing to achieve carbon neutrality by 2050 (business-as-usual scenario)
• Transitioning from natural gas to renewable hydrogen (renewable hydrogen scenario)
• Replacing natural gas with renewable methane/biomethane (renewable methane scenario)
• Integrating both renewable hydrogen and methane to phase out natural gas, while balancing decarbonization with cost-effectiveness (cost-minimal scenario)

Among these, the cost-minimal scenario stands out as the most feasible, with an estimated investment of €9.01 billion required by 2050 to develop the necessary infrastructure. This approach aims to reduce natural gas imports by 2040, thereby enhancing energy independence and security. Utilizing existing infrastructure, such as the Klaipeda LNG terminal, allows for efficient demand management, reducing the necessity for new, expensive projects.

This scenario prioritizes the deployment of biomethane and the establishment of rigorous emission reduction targets, aligning with broader environmental objectives. Projections indicate that CO2 emissions across all participating countries could plummet to less than 0.2 million tonnes by 2030, setting the stage for a carbon-neutral regional gas market.

Adaptation: Building on Current Infrastructure

Successfully navigating the energy transition requires comprehensive coordination between the gas and electricity sectors. This includes aligning the expansion of renewable energy infrastructure with enhancements to gas infrastructure. Adapting existing facilities, such as Latvia’s underground gas storage, to accommodate new gases and manage peak demand periods is essential. A thorough reassessment of gas network development plans will ensure the feasibility of supplying gas to smaller, remote areas.

The financial commitment required for gas sector decarbonization, while significant, is justified by the long-term environmental and economic benefits it promises. For instance, the average production costs of biomethane, projected to be the dominant fuel by 2050, are expected to be substantially lower than current natural gas prices, estimated at €52.5/MWh compared to €96/MWh. This transition not only promises increased economic output and job creation but also long-term reductions in energy costs and decreased reliance on imported fuels.

The costs of inaction are staggering, affecting not only economic stability but also human life and environmental health. The year 2023 has already been marked as the hottest on record, accompanied by unprecedented extreme temperatures and “once-in-a-century” storms that have led to widespread drought, disease, and resource conflicts. These adversities disproportionately affect the most vulnerable populations, exacerbating existing inequalities and threatening livelihoods.

A Transformative Opportunity Awaits

The Baltic-Finland common gas market presents a transformative opportunity to significantly reduce overall gas demand and import needs, thereby alleviating regional geopolitical risks. By advancing this transition, we can not only confront immediate environmental threats but also align with the EU’s broader sustainability goals, setting a benchmark for responsible energy practices.

The moment for decisive action is now. We are presented with a unique chance to secure a sustainable and equitable energy future for the Baltic-Finland region and beyond. Postponing these initiatives only magnifies risks and expenses, while prompt actions can pave the way for a resilient and prosperous future. It is imperative that policymakers capitalize on this moment to steer us toward a cleaner, greener energy landscape.

Gowtham Muthukumaran and Javad Keypour are energy experts at the Stockholm Environment Institute’s Tallinn Centre.
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