11 June 2014 — A new report by professional services firm Ernst & Young has busted the myth that climate action and economic growth are incompatible.

The report, Macro-Economic impacts of the low-carbon transition, looks at the European market and concludes that decarbonisation would be an effective driver of economic recovery as well as a powerful tool to reduce Europe’s dependence on energy imports, something of increasing importance in light of the energy crisis posed by Ukraine.

In the synthesis report EY assessed the economic implications of decarbonising for the European economy compared with the challenges presented under a business-as-usual scenario, looking at trends and forecasts of the four most relevant sectors: energy, buildings, transport and industry. The economic features analysed included investment costs, energy prices, industrial competitiveness, GDP and employment.

The report found that, irrespective of the choices made on decarbonisation, the EU was set to face major economic challenges over the coming years.

According to the European Commission’s Energy Roadmap 2050, these include the increase in investments needed to maintain and replace the region’s existing energy infrastructure from the current €800 billion per a year to up to €1000 billion a year from 2040-2050, which would add 40 per cent to the average electricity bill 2030.

The report also determined buildings to be a issue, regardless of paths taken.

While buildings account for 40 of total energy consumption in the EU, according to the Buildings Performance Institute Europe, the average annual renovation rate of building stock is one per cent, and the demolition rate 0.1 per cent. And with energy costs set to keep rising, EY said there would be a strong motivation to maximise existing building stock energy efficiency.

Alexis Gazzo, head of cleantech and sustainability at EY, France, said: “While growing competition from emerging economies is widely accepted as a key risk to European industrial sectors under any scenario, energy prices and costs associated with Europe’s aging energy infrastructure and building stock tend to be considered under a low-carbon trajectory only.

“This analysis reminds policy-makers that even under a business-as-usual scenario energy prices and pressures to invest in infrastructure would increase significantly.”

The energy security implications of decarbonising were of particular importance with the ongoing crisis in Ukraine and the risk it could pose to gas and oil imports, with the report stating that Russian gas currently accounted for close 39 per cent of EU natural gas imports and 27 per cent of EU gas consumption.

Under a BAU scenario, Europe’s import dependency for oil will go up to almost 90 per cent in 2050 compared with 74 per cent in 2010.

However, with a strong decarbonisation pathway, the EU could reduce its total fuel import bill between €518 and €550 billion annually, enabling European motorists to reduce their annual fuel bills by up to €180 billion in 2050 and households to save up to €474 billion on energy costs over the next forty years.

Tom Brookes, managing director of the Energy Strategy Centre at the European Climate Foundation, which commissioned the report, said: “This synthesis of expert research makes clear the unparalleled opportunity energy efficiency and renewable energies offer to reduce Europe’s dependency on imported fuels. European consumers and European industry are looking to policy-makers to consider this opportunity when deciding on the level of ambition of the EU’s climate and energy package for 2030.”

Read the full report.