In a workshop hosted by the Energy Community Secretariat today and attended by over 80 participants, E3-Modelling presented the findings of its modelling work on how the introduction (or absence) of carbon pricing may affect the power and districting heating sectors of the Energy Community Contracting Parties.

E3-Modelling outlined the projections of five scenarios including a Baseline and four alternative scenarios. A variant of the Baseline scenario assuming that a carbon tax applies on exports from non-EU to EU countries in proportion to their CO2 intensity was also delivered. This is particularly timely considering the recent announcements by the European Commission on the possible adoption of a carbon border adjustment mechanism.

Two critical aspects inform the design of the scenarios: one is the pace and timeframe of introducing carbon pricing; and the other is whether CPs integrate their power and gas markets or these remain fragmented. The main conclusion drawn from the presentation points to the fact that market integration represents a key enabling condition for the introduction of carbon pricing in the Energy Community, and more so for the those CPs whose systems exhibit strong dependence on solids (coal, lignite) and are thus less resilient to carbon pricing. This is because market integration is poised to accelerate the low-carbon transition in the region by facilitating cross-border balancing and reserve resource sharing, as catalyst for RES deployment, and by helping attract much needed restructuring investment.

For more information on the analysis, please access the presentation 3d Workshop_Component C