War in Ukraine: The options for Europe's energy supply

Abstract

Europe is likely to remain reliant on Russian gas in the short term. In the absence of this gas supply, the continent is likely to experience shortages and associated inflation. Immediate solutions include diversification of Europe's natural gas supply and the use of alternative fossil fuels, such as coal, but the latter would come with significant climate costs. Over a longer period, there is more scope for reshaping Europe's energy policy and diversifying its energy supply, but these would come at a cost. Expanding renewable energy capacity within Europe is critical. Fine-tuning policy to balance climate objectives against the security of the energy supply will be difficult. To ensure energy security and emerge from this conflict greener, the answer may be renewable energy produced in Europe. Investment in renewables in developing countries, particularly in the continent's trading partners, also holds promise, as it would allow more natural gas imports into Europe while contributing to Europe's climate commitments.