Impact of the EU Energy and Climate Package on the Belgian energy system and economy [ Article 2009030204 - 02/03/2009]

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In order to prepare for the negotiations on the EU Energy and Climate Package (E/C Package), the Federal Planning Bureau was asked by the Belgian federal and regional authorities to conduct a study on the impact of the European Commission's proposal of January 2008. In the course of the study, various scenarios and sensitivity analyses were run. Next to a baseline, two main alternative scenarios were scrutinized: the 20/20 and 30/20 target scenarios, standing for an EU reduction of, respectively, 20% and 30% of greenhouse gas (GHG) emissions in the year 2020 compared to the level of 1990, and a mandatory 20% EU-wide share for renewable energy sources (RES) in Gross Final Energy Demand in 2020. The report then includes an analysis of the impact of both scenarios on the Belgian energy system and economy as well as on GHG emissions.

The study uses four models to scrutinize the impact that the E/C Package, proposed by the European Commission in January 2008 and adopted by the European Parliament in December 2008, may have on the Belgian energy system and its economy and sectors. The models used are the PRIMES model developed by ICCS/NTUA(energy system and CO2), the GAINS model of IIASA(non-CO2 GHG), the FPB's HERMES model (macroeconomic impact) and the NEMESIS model (effects on the Belgian export market and on import and export prices).

Regarding the impact on the Belgian energy system, the main conclusions are that the energy system will respond to the twin targets by implementing energy savings and by developing RES. In the 20/20 target scenario, a decrease in gross inland consumption of 5.3% and in final energy demand of 5.7% can be noted compared to the baseline, in which no specific efforts or additional policies to constrain damaging greenhouse gases or develop renewables other than those already implemented by the end of 2006 are planned. The share of RES in Belgian gross final energy demand, stipulated at 13% in the E/C Package, should reach 12.3%, leaving room for a 0.7% deficit to be filled by flexible mechanisms. In terms of GHG emissions, this scenario will lead to a domestic reduction of 0.5% in 2020 compared to 2005 emissions. Compared to the baseline, however, GHG emissions in Belgium are expected to decrease by 12%.

These changes in the energy system and the reductions in non-energy-related GHG emissions will give rise to economic costs. The evaluation of these economic costs involves two complementary approaches. The first approach relies on the assessment of the direct cost, which encompasses the additional (compared to the baseline) energy equipment costs, fuel purchase costs, 'disutility' costs and non-CO2 GHG mitigation costs, as well as the costs related to flexibility and to distribution of auctioning rights in ETS (Emission Trading System). This direct cost is estimated to be EUR 3.5bn in 2020. The second approach takes the feedback effects on the Belgian economy and its sectors into account. The results depend on the way the new potential public revenues are recycled in the economy. The macroeconomic impact lies in a range between 0.45% and 0.07% for real GDP reduction, translating into an employment impact ranging from a loss of about 16 000 jobs to a gain of approximately 25 000 jobs in 2020.