EPG Policy Papers

With stricter climate rules, industries that emit a lot of carbon face tighter deadlines to reduce emissions. To stay competitive, the cement and lime sectors must adopt new strategies and invest in low-carbon technologies. These changes will be costly and complex. While Romania lags behind other countries like Bulgaria and Poland in carbon capture projects, cement and lime will still be vital for Romania's growth. This is due to the country's planned infrastructure projects, such as new roads and buildings by 2030. Recommendations for the Next 5-10 Years To succeed, industries and the government must commit to using the best methods for cutting emissions. Here are key steps for the next 5 to 10 years: Deploy new renewable energy capacities: As the sector moves towards decarbonisation, energy demand is expected to rise, particularly due to carbon capture. Ensuring that this additional energy demand is clean will require substantial amounts of low-carbon energy and additional capacities to support both self-consumption and reducing the carbon intensity of Romania’s grid electricity supply. Accelerate CO2 transport and storage infrastructure development: Given the existing regulatory and permitting barriers and limited ambition for advancing CCS/CCUS technologies that have hindered progress on CO2 transport and storage infrastructure, public authorities must strengthen their commitment to advancing CCS solutions. Strengthen the cooperation between the cement and lime industries and hydrocarbon producers: Romania’s significant potential for geological CO2 storage capacities and its obligation to capture and store 9 Mt of CO2 annually until 2030, as outlined in the NZIA, requires an accelerated dialogue between the owners of depleted gas and oil fields and industries that will rely heavily on CCS (such as the production of cement, lime, fertilisers and oil refining). The dialogue is particularly relevant given the discussions around the adoption of a National Carbon Management Strategy. Speed up investments and the disbursement of public funding: CCS is a costly yet essential technology for decarbonising the cement and lime sectors. Both the disbursement of funds and private financing are essential for kickstarting deep decarbonisation investments. Design complementary funding mechanisms: In addition to issuing green bonds to raise funding, it is important to design new financial mechanisms such as Carbon Contracts for Difference, a flexible funding mechanism offering industrial operators a stable carbon price through a contract between the operator and the government. This can help finance operational costs based on actual emissions reductions. Adopt a clear, ambitious yet feasible Green Public Procurement Plan for construction products: Implementing a well-designed and ambitious GPP system is a complementary tool that can indirectly compensate decarbonisation costs and stimulate market creation for low-carbon cement, lime and other construction materials. In conclusion In conclusion, the pace and effectiveness of the cement and lime industries’ transition toward decarbonisation depend not only on the companies’ investment plans but also on robust policy support. Sabina Strîmbovschi, EPG Senior Researcher Sabina works as a Senior Researcher in industrial decarbonisation within the Clean Economy Programme of EPG. She holds a PhD in Political Science (International Relations) from the National University of Political Studies and Public Administration (SNSPA, Bucharest). Before joining EPG, Sabina worked for one of the largest business support organizations in Romania, where she coordinated the activities of the European and international organizations office. Over the last few years, she has been involved in two volunteer organizations. She served as an affiliated expert and board member at one of the most important think-tanks on European Affairs in Romania – the Center of European Expertise (Europuls). She is also a member of Future Energy Leaders Romania – the youth program of the Romanian National Committee of the World Energy Council. Contact: sabina.strimbovschi@enpg.ro

Fondul Social pentru Climă (FSC) se dorește a fi un instrument care sporește eficiența și atenuează impactul asupra bunăstării ca efect al extinderii tarifării emisiilor de carbon în sectoarele clădirilor și al transportului rutier prin introducerea sistemului de comercializare a certificatelor de emisii (ETS2). FSC va ajuta gospodăriile vulnerabile și utilizatorii de mijloace de transport să reacționeze la creșterea prețurilor la combustibilii fosili prin facilitarea investițiilor în soluții cu emisii reduse de carbon.  Acesta poate oferi, de asemenea, un sprijin direct temporar al veniturilor pentru a acoperi impactul inițial asupra grupurilor vulnerabile până când investițiile pe termen lung își produc efectele, dar acesta nu este principalul mecanism de sprijin. Important este ca intervențiile FSC să abordeze în primul rând potențialul impact legat de introducerea ETS2. Această limitare a domeniului de aplicare, precum și cea a bugetului, înseamnă că acest instrument nu poate aborda problemele generale de sărăcie energetică ale unei țări. Cu toate acestea, veniturile suplimentare din ETS2 (sau alte surse de finanțare) pot fi utilizate în mod semnificativ pentru atingerea unor obiective similare în afara domeniului de aplicare direct al FSC, inclusiv prin mecanisme de finanțare complementare.   În România, cea mai mare incidență a ETS2 va fi limitată la minoritatea gospodăriilor conectate la rețeaua de gaze naturale, care se află în general în afara celor mai mici categorii de venituri. Pentru o gospodărie cu un consum mediu lunar de gaze naturale de 100 de metri cubi, un preț al carbonului de 45 EUR/t are un impact lunar de aproximativ 8,2 EUR/lună. Deși nu intră direct în domeniul de aplicare al FSC, se preconizează că numeroasele gospodării rurale care utilizează biomasa lemnoasă pentru încălzire, deși nu sunt afectate în mod direct de ETS2, vor face tranziția către surse de încălzire mai convenabile - furnizarea de ajutor pentru ca acestea să treacă la soluții cu emisii reduse reprezintă o oportunitate. În zonele urbane, în ciuda declinului recent, încălzirea centralizată rămâne o opțiune relevantă care ar putea fi facilitată de FSC. Impactul va fi mai răspândit în rândul utilizatorilor din sectorul transporturilor, unde combustibilii fosili reglementați de ETS2 domină mixul de combustibili. Pentru un preț al carbonului de 45 EUR/t, creșterea simulată a prețului este de 0,12 EUR pe litru de motorină și de 0,10 EUR pe litru de benzină. Îmbunătățirea accesului, a calității și a performanțelor în materie de emisii ale transportului public și accesul la vehicule cu emisii reduse sunt opțiuni viabile pentru punerea în aplicare a FSC. În ansamblu, conformitatea cu FSC va necesita eforturi semnificative, colectarea de date, cartografierea programelor existente și justificări pentru măsuri și investiții suplimentare, precum și etape și obiective credibile. Cu toate acestea, acest proces vine, de asemenea, cu oportunități semnificative. Recomandări pentru decidenții din România Să profite de oportunitățile oferite de FSC pentru a aborda sărăcia energetică (și din perspectiva transporturilor) mai sistematic în România. Efortul necesar pentru colectarea datelor și conceperea PSC va fi substanțial și, cu ajutorul FSC sau al altor programe de asistență tehnică și de consolidare a capacităților finanțate de UE, ar putea fi utilizat în mod optim prin regândirea interacțiunilor dintre politicile climatice, energetice și sociale, prin colectarea și gestionarea mai multor date, reducerea erorii de excludere și abordarea surselor multiple și concomitente de vulnerabilitate. Să conceapă măsurile din PSC în sinergie cu alte instrumente de finanțare, existente sau potențiale. Există multe interacțiuni posibile între FSC și PNRR, Programul Regional, Programul de Dezvoltare Durabilă, Programul pentru Tranziție Justă și Administrația Fondului de Mediu. Atunci când intervențiile necesare nu se încadrează în domeniul de aplicare sau în bugetul FSC, acestea pot fi completate prin intermediul altor fonduri. Să permită o consultare cuprinzătoare și semnificativă pentru a se asigura că măsurile și investițiile sunt adaptate corect la nevoile grupurilor vulnerabile și sunt concepute într-o manieră incluzivă cu beneficiarii și autoritățile locale. Ana-Maria Niculicea, EPG Researcher Ana-Maria Niculicea is a Researcher at Energy Policy Group, in the Clean Economy programme. She coordinates research activities on climate governance with a focus on  enhancing national climate governance and the social acceptance of the transition to a low carbon economy. Additionally, she conducts research on social acceptance of CCUS technologies in the Horizon2020 ConsenCUS project.   She holds a MSc in Politics, Economics and Philosophy from University of Hamburg and a bachelor’s degree in Political Science from National University of Political Studies and Public Administration. Contact: ana.niculicea@enpg.ro

The Social Climate Fund (SCF) is meant to be a tool that increases the effectiveness and mitigates the welfare impact of the expansion of carbon pricing to buildings and road transport through the introduction of the Emissions Trading System 2 (ETS2). The SCF will help vulnerable households and transport users respond to higher fossil fuel prices by enabling investments into low-carbon solutions.  It can also provide temporary direct income support to cover the initial impacts on vulnerable groups until the long-lasting investments take effect, but this is not the main support mechanism. Importantly, the SCF interventions need to primarily address potential impacts related to the introduction of ETS2. This limitation of scope, as well as that of budget, mean that this instrument cannot address the overall energy poverty problems of a country. However, additional ETS2 revenues (or other funding sources) can be used meaningfully toward similar aims outside the direct scope of SCF, including through complementary financing mechanisms.   In Romania, the highest incidence of ETS2 will be limited to the minority of households connected to the natural gas grid, who are generally outside the lowest income brackets. For a household with an average monthly consumption of natural gas of 100 cubic meters, a carbon price of 45€/t results in a monthly impact of around €8.2/month. While outside the direct scope of the SCF, the numerous rural households who use woody biomass for heating, while not directly affected by ETS2, are expected to transition to more convenient heating sources - providing help for them to leapfrog to low-emissions solutions represents an opportunity. In urban areas, despite the recent decline, district heating remains a relevant option that could be enabled by the SCF. The impact will be more widespread on transport users, where fossil fuels covered by ETS2 dominate the fuel mix. For a carbon price of 45€/t, the simulated price increase is 0.12€ per liter of diesel and 0.10€ pe liter of gasoline. Improving access, quality and emissions performance of public transport and access to low-emissions vehicles are viable options for the implementation of the SCF. All in all, compliance with the SCF will require significant efforts, data collection, mapping of existing programmes, and justifications for additional measures and investments, as well as credible milestones and targets. However, this process also comes with significant opportunities. Recommendations for Romanian decision makers Seize the opportunity of the SCF to tackle energy (and transport) poverty more systematically in Romania. The effort needed for collecting data and designing the SCPs will be substantial and could, with the help of SCF or other EU-funded technical assistance and capacity building programmes, be used optimally by rethinking the climate-energy-social policy interactions, by acquiring and managing more data, reducing the exclusion error, and tackling the multiple and concurring sources of vulnerability. Design SCP interventions in synergy with other funding instruments, either existing or potential. There are many possible interactions between SCF and the NRRP, Regional Programme, Sustainable Development Programme, the Just Transition Programme, and the Environmental Fund Administration. When needed interventions do not fit within the scope or budget of the SCF, they can be complemented through other funds. Enable wide and meaningful consultation to ensure the measures and investments are correctly tailored to the needs of vulnerable groups and are designed in an inclusive manner with beneficiaries and local authorities. Ana-Maria Niculicea, EPG Researcher Ana-Maria Niculicea is a Researcher at Energy Policy Group, in the Clean Economy programme. She coordinates research activities on climate governance with a focus on  enhancing national climate governance and the social acceptance of the transition to a low carbon economy. Additionally, she conducts research on social acceptance of CCUS technologies in the Horizon2020 ConsenCUS project.   She holds a MSc in Politics, Economics and Philosophy from University of Hamburg and a bachelor’s degree in Political Science from National University of Political Studies and Public Administration. Contact: ana.niculicea@enpg.ro

The revised Energy Performance of Buildings Directive (EPBD) demands EU member states to introduce measures addressing the whole-life carbon (WLC) impact of buildings, encompassing both operational emissions and embodied emissions across the production, construction, renovation, and end-of-life stages. Implementing these measures requires extensive structural transformations, posing challenges for countries that are institutionally unfamiliar with the concept, such as Romania. An effective implementation of WLC requires a multidisciplinary and integrated approach to building decarbonisation, combining technology innovation, economic strategy, and adapted legislation. Likewise, it requires collaboration and coordination between a variety of actors in the buildings sector that play key roles in the stages of the building lifecycle and the wider ecosystem of sustainable construction. Barriers that may impede the effective application of the WLC approach in Romania’s construction sector, along with proposed solutions to each, are categorised as technological, economic, legislative and regulatory, and cultural and public perception-based, with each set of barriers and solutions distributed across different stages of the building lifecycle. Some of the most salient recommendations to accelerate the adoption of sustainable practices in the building sector are: establishing a strong regulatory framework and standards for sustainable, local construction materials as well as secondary, recycled materials, alongside expanding the recycling infrastructure. driving investment and demand in sustainable constructions through instruments such as tax reductions. prioritising renovation over new builds. strengthening building stock databases. conducting awareness and education campaigns to raise awareness of the WLC principles and the significance of addressing life-cycle emissions in buildings Radu Dudău, EPG Co-founder & President Radu Dudău is President and co-founder of EPG. He was, from 2007 to 2023, an Associate Professor at the Bucharest University. From 2006 to 2010 he was Deputy Director at the Romanian Diplomatic Institute (Ministry of Foreign Affairs). He graduated in Physics and Philosophy from the University of Iași. He holds a Dr. Phil. degree in Philosophy (magna cum laude) from Konstanz University (Germany) and a PhD in Political Science (International Relations) (summa cum laude) from the National School of Political and Administrative Studies (SNSPA, Bucharest). He was a Fulbright Fellow with the National Security Program at Harvard Kennedy School of Government (2011), a New Europe College Fellow at the Danish Institute of International Relations (Copenhagen, 2006) and an OSI/FCO-Chevening scholar at Oxford University (1999-2000). His work focuses on energy policy, energy technology, and energy markets. Contact: radu.dudau@enpg.ro

Biogas and biomethane will play an important role in achieving a cleaner energy mix and safeguarding the EU from external energy price fluctuations. Current projections estimate fossil gas to make up only between 2.5-6.6% of Romania’s energy demand in buildings by2050 (Energy Policy Group, 2022). Achieving the European Union’s net-zero target by 2050 requires reducing natural gas usage, and decarbonising gas where reductions are not possible. Biogas and biomethane have the technical potential to replace natural gas to a significant extent as a fuel of choice, especially for industry. The use of biogas and biomethane incurs several advantages. Notably: Biogas and biomethane can also build on the circular economy by improving waste management strategies and overall resource efficiency Biogas and biomethane offer the same system-level benefits as natural gas (seasonal storage, flexibility on the power market, heating, and ability to transport efficiently over distances). Anaerobic digestion uses the same methane from decomposing organic matter which would otherwise be released into the atmosphere. Biomethane has the technical ability to use the current gas grid, in theory avoiding some stranded assets. However, realising this benefit’s full potential requires high economies of scale, which are not yet foreseen. Biogas and biomethane can also build on the circular economy by improving waste management strategies and overall resource efficiency Nonetheless, there are some limitations to what can be achieved through these alternative fuels. Despite their high technical potential, projections of future biogas and biomethane production do not always properly consider sustainability criteria, resulting in exaggerated figures. Therefore, given the value of these resources and limitations in feedstock availability, the Romanian energy sector could benefit from a regulatory framework to incentivise the production of biogas and biomethane and ensure they are targeted where they can have the greatest decarbonisation benefits. This paper gives an overview of Romania’s biogas and biomethane strategic targets and examines the existing Romanian production potentials in the context of the sustainability criteria specified in the new Renewable Energy Directive (RED III, 2023) to illustrate the gap. The paper will then outline lessons learned from EU countries that have successfully increased their production and examine trade-offs which must be considered in any future biogas and biomethane strategy in Romania. Nadia Maki, EPG Senior Researcher Nadia Maki is a Senior Researcher within the Energy Systems Programme of EPG. She is an energy policy researcher focused on renewable energy financing, green technology and innovation and emerging economies. Before joining EPG, Nadia worked as an independent evaluator for renewable energy financing schemes for the UK Department of Energy Security and Net Zero, evaluating schemes such as the Contracts for Difference scheme and the Capacity Market scheme. Nadia has extensive experience using theory-based evaluation methods. She has also contributed to projects for DG CLIMA, DG Environment, the Research Council of Norway, UN Women, the World Health Organization and ActionAid. Nadia holds an MSc in Climate Change, Development and Policy from the Science Policy Research Unit and the Institute of Development Studies at the University of Sussex and a Bachelors of Arts degree from Queen’s University in Canada.  Contact: nadia.maki@enpg.ro

Key Findings: Carbon capture and storage (CCS) will be an essential component of Romania’s decarbonisation efforts, particularly for the cement and chemicals sectors. To enable CCS projects that contribute to Romania’s climate mitigation efforts in a cost-effective way, ambitions must be increased in national strategies, hard-to-abate sectors must be prioritised for CO2 capture, and the potential for negative emissions through carbon removal projects should be explored Under Romania’s obligations under the Net-Zero Industry Act (NZIA), most captured CO2 will be stored, with less of the gas destined for utilisation. According to the ADP model, even under a more relaxed deadline for its NZIA obligations, Romania would need to develop 10 Mt of annual injection-ready CO2 storage capacity by 2035, and 15 Mt by 2050, to meet the emissions targets outlined in Long-Term Strategy for climate neutrality. Given its geological storage potential, Romania is well-positioned to become a CCS hub for Central and Eastern Europe and create new economic opportunities To enable CCS projects that contribute to Romania’s climate mitigation efforts in a cost-effective way, ambitions must be increased in national strategies, hard-to-abate sectors must be prioritised for CO2 capture, and the potential for negative emissions through carbon removal projects should be explored Luciana Miu, EPG Head of Clean Economy Luciana Miu is the Head of Clean Economy at Energy Policy Group. She holds a Master’s degree in Sustainable Energy Systems from the University of Edinburgh and a PhD in Energy Efficiency of Residential Buildings from the Imperial College London. Before joining EPG, Luciana worked for the UK Parliament and for the British Government’s Department of Business, Energy and Industrial Strategy (BEIS), as well as a consultant for Climate-KIC and London City Hall. She is passionate about volunteer work, being one of the founding members of European Youth Energy Network and a professional speaker for conferences dedicated to the role of youth in energy transition. Contact: luciana.miu@enpg.ro

Solar energy is crucial for Romania to meet its decarbonisation goals and to contribute to the European Union’s 2050 climate neutrality trajectory. The REPowerEU initiative sets ambitious targets, aiming for over 320 GW of installed solar photovoltaic (PV) capacity by 2025 and nearly 600 GW by 2030. Romania, with 1.8 GW of installed PV capacity in 2022, has experienced limited growth compared to countries like Hungary (4.2 GW) and Poland (12.2 GW). The solar power development in Romania has been constrained by several factors, such as legislative unpredictability, delays in the approving connection to the grid, and other bureaucratic hurdles. These challenges have affected the pace of deployment, with most of the capacity added between 2010 and 2016, driven by the green certificate support scheme. The recent Energy Strategy outlines Romania's commitment to expanding solar capacity, targeting 8.2 GW by 2030, 21.1 GW by 2040, and 33.3 GW by 2050. Recent initiatives include a €3 billion Contracts for Difference (CfDs) scheme launched in 2024, designed to support solar and onshore wind projects. This scheme aims to install 5 GW of new capacities through two auctions: 1.5 GW in 2024 and 3.5 GW in 2025. Additionally, public and private financial sources, including the MF, the National Recovery and Resilience Plan (NRRP), the Just Transition Fund (JTF), and various schemes financed by the Environmental Fund Agency (AFM) allocate approximately €2 billion to solar energy. This is distributed as follows: €430 million for utility-scale PV, €1.4 billion for rooftop PV, and €104 million for manufacturing. By the end of 2023, Romania's installed capacities of rooftop PV reached approximately 1.4 GW, with expectations to surpass 2 GW by the end of 2024. For Bucharest, with power demand for households exceeding 1.5 TWh in 2023, solar panels with a total capacity of 1.23 GW would be needed to meet demand. However, because of the intermittent nature of solar energy production, integrating effective storage solutions is increasingly important. We estimate a needed storage capacity of 2,911 MWh, which is equivalent to the battery capacity of 50,600 Tesla Model Y EVs. Besides, alternative storage technologies, such as seasonal storage of green hydrogen, should be considered in the medium to long term to optimise electricity consumption throughout the year. Despite recent advances, challenges persist in deploying solar energy. The most pressing issues include grid capacity constraints and imbalances experienced by prosumers, along with a lack of predictability in the EU funds implementation calendar and delays in the transposition of EU legislation. Addressing these challenges is decisive for accelerating solar energy adoption. To fully leverage the potential of solar energy and ensure a robust and sustainable energy future, we recommend the following: (1) align RES targets with the EU climate objectives, (2) prioritise energy storage, (3) ensure legislative predictability, (4) develop and adhere to a clear and transparent schedule for upcoming solar energy financing calls, and (5) attract investment in the PV value chain. Mihai Constantin, EPG Researcher Mihai Constantin works as a Researcher at EPG. In this position, he is contributing to the activities of the Energy Systems Programme. Mihai has a Master Degree in European Economics at Bucharest University of Economic Studies. He has expertise on public policies in the fields of energy, climate change and economics. Before joining EPG, he worked for WWF Romania as Climate & Energy Manager and as Advisor on Public Policies in the Romanian Parliament. Contact: mihai.constantin@enpg.ro

The revised Energy Performance of Buildings Directive (EPBD) brings new provisions on accounting and managing whole-lifecycle carbon dioxide emissions in buildings. This approach, which implies addressing emissions along a building’s entire value chain (fromthe production of construction materials to demolition and post-demolition phases) can help increase coordination and grow low-carbon construction industries and had already been applied in several EU Member States before the revision of the EPBD. For countries yet institutionally unfamiliar with the concept of whole-life carbon (WLC), such as Romania, implementing the EPBD provisions on lifecycle emissions will imply a major regulatory overhaul. In Romania, the major barrier to implementation of a WLC approach to buildings is the diversity and siloed application of existing legislation. Responsibilities are fragmented between multiple competent authorities, with insufficient coordination, as well as a lack of appropriate updating of policies. Existing or new policies could serve as umbrella frameworks, increasing coherence between the regulations, standards and specifications governing the materials production, construction, refurbishment, and demolition phases of buildings. Specific points of entry could be national construction laws, public procurement frameworks, or the transpositions of EU directives on sustainable materials, such as the Ecodesign for Sustainable Products Regulation. To implement WLC and launch a low-emissions construction industry, Romania must overcome other barriers, including the high cost of producing low-carbon construction products, a lack of accessible funding and market creation instruments, low institutional capacity for implementation and cultural barriers including resistance to change driven by a lack of clarity in the benefits associated with green buildings. If these barriers are addressed, Romania’s construction sector, already an important employer and economic contributor, can create additional value by entering the green construction market, which is growing across the EU. Overcoming these barriers will also ensure compliance with the revised EPBD and aligning Romania’s construction legislation with the EU-wide transition to a low-carbon economy. Luciana Miu, EPG Head of Clean Economy Luciana Miu is the Head of Clean Economy at Energy Policy Group. She holds a Master’s degree in Sustainable Energy Systems from the University of Edinburgh and a PhD in Energy Efficiency of Residential Buildings from the Imperial College London. Before joining EPG, Luciana worked for the UK Parliament and for the British Government’s Department of Business, Energy and Industrial Strategy (BEIS), as well as a consultant for Climate-KIC and London City Hall. She is passionate about volunteer work, being one of the founding members of European Youth Energy Network and a professional speaker for conferences dedicated to the role of youth in energy transition. Contact: luciana.miu@enpg.ro

Revizuirea Planului Național Integrat privind Energia și Schimbările Climatice (PNIESC) reprezintă o oportunitate de a explora opțiunile României pentru reducerea cu 99% a emisiilor de gaze cu efect de seră (GES) până în 2050 și cu 78% până în 2030, ținte stabilite în Strategia pe Termen Lung (STL) și incluse în forma draft a PNIESC.

Romania has one of the lowest targets under the revised Effort Sharing Regulation (-12.7% GHG emissions by 2030 compared to 2005) but given the relative neglect of the covered sectors over the past years, there will be distinct challenges for implementation, particularly in the buildings and transport sectors. At the very least, Romania should achieve its goal without overusing the available flexibility tools.

Romania’s industry will need to transform fundamentally to align with climate commitments and remain competitive in a low-carbon world. With increasing pressure from EU policy and a race to decarbonise industrial production in EU Member States, there are progressively fewer windows of opportunity for implementing the new processes and technologies required for greening heavy industry. A fragmented national policy framework and a narrow fiscal space mean that Romania will face significant difficulties in keeping its industry competitive. However, it also has key advantages it can capitalise on to become a low-carbon industry leader. To achieve economy-wide net zero emissions by 2050, the main pathways for industrial decarbonisation are electrification, continuous improvements in energy and resource efficiency, the uptake of renewable hydrogen and other low-carbon fuels, and carbon capture, utilisation, and storage. Romania’s primary steel, cement, and chemicals production (particularly fertilisers) require the deepest transformation to enable industrial emissions reductions. The technologies needed to achieve these changes are costly, have long lead times, and in some cases imply new materials and supply chains. Furthermore, industrial transformation is not just technological – concerted action will be needed to safeguard the rights of workers in industrialised regions and prepare them for meaningful employment in Romania’s decarbonised industries and in those new industries which may emerge. To decarbonise Romania’s industry sustainably and justly, three main areas of action must be addressed: industrial policy, funding and market creation, and infrastructure development. Firstly, Romania needs a cornerstone industrial strategy anchored in long-term climate commitments and driven by selective support rather than across-the-board crisis management. This industrial strategy must clearly assign responsibilities to competent authorities, commit to funding and financing instruments, and address socio-economic impact, supply chain management, and research, development, and innovation. Romania’s wider domestic policy framework, as well as its positioning in EU negotiations, must also be consistent with the commitments and goals of its industrial policy. Secondly, industrial transformation in Romania will require a massive mobilisation of funding and the stimulation of new markets for green industrial products. As a country with a comparatively low fiscal space, Romania cannot rely excessively on state aid granted to industrial producers, as done in countries such as Germany and France. Instead, eventual state aid schemes targeted at competitive industries should be complemented by the use of EU funding opportunities, including the Modernisation Fund and the Innovation Fund, the unlocking private financing, and the implementation of green public procurement to stimulate a reliable lead market for products such as low-carbon steel and concrete. There are significant opportunities in this space, given Romania’s massive planned spending on large-scale infrastructure projects. Finally, decarbonising Romania’s industry will require huge infrastructure for enabling renewable electricity, hydrogen transport, and carbon dioxide (CO2) transport and storage. The scale of the challenge is significant: electricity consumption will increase and its geographical distribution will change, straining an unprepared transmission grid; new pipelines will be needed for hydrogen and CO2 transport; and CO2 storage capacities must be developed very rapidly. Romania must thus invest significantly in the expansion and strengthening of the electricity transmission grid, and in essence start from scratch in developing a network of hydrogen and CO2 pipelines, as well as CO2 storage. These key actions for decarbonising Romania’s industry will not be easy. They will require massive investment, coordination within the state apparatus and with industry, and significantly more political engagement on the subject. However, the benefits are undeniable: increased industrial competitiveness, a well-prepared workforce, reliable infrastructure, and a significant contribution to Romania’s climate ambitions. Reaping these benefits will depend first and foremost on understanding the magnitude of the challenge, and subsequently on internalizing it in concrete policy, funding, and infrastructure measures to enable decarbonisation at the required scale and pace. Luciana Miu, EPG Head of Clean Economy Luciana Miu is the Head of Clean Economy at Energy Policy Group. She holds a Master’s degree in Sustainable Energy Systems from the University of Edinburgh and a PhD in Energy Efficiency of Residential Buildings from the Imperial College London. Before joining EPG, Luciana worked for the UK Parliament and for the British Government’s Department of Business, Energy and Industrial Strategy (BEIS), as well as a consultant for Climate-KIC and London City Hall. Contact: luciana.miu@enpg.ro

Carbon taxes with revenue redistribution represent a promising policy option for reducing emissions and energy poverty at the same time. A carbon tax increases the prices of goods in proportion to their embedded emissions and creates incentives for consumers and producers to shift to lower-carbon alternatives. The revenues collected can be directed at lower-income households both for income support and emissions-reducing interventions, such as energy efficiency, distributed renewable energy, electric heating and transport. At the same time, carbon taxes are politically sensitive. Increasing the price of emission-intensive goods, particularly energy, may reduce economic output in the short run and increase the cost-of-living for households, particularly for the ones affected by poverty. To add to the body of evidence on this relationship, we conduct a simulation of the effects of a generalized carbon tax on all consumption goods with revenue redistribution on GDP growth, employment, household welfare and energy poverty levels. The carbon tax is determined though an economic model at the levels required for a 40% reduction in emissions by 2032 compared to 2021. In absolute terms this means going below 70 Mt CO2 eq. of GHG emissions, almost a quarter of the 1990 level. The tax ranges between 2.95$/ tonne of CO2 in 2022 and 15.17$ in 2032, coming on top of the existing carbon price imposed through the EU Emissions Trading Scheme on power producers and heavy industry. The results show minimal negative effects on GDP growth (-0.12%) and employment (-0.02%) in 2032 compared to the baseline. Regarding the impact on households, the tax would generate a welfare loss between 0.8% for the highest income decile and 1.3% for the lowest decile, confirming the potential regressive effects. However, when revenue redistribution is designed as a lump-sum transfer, or price subsidy for lower-income households, the policy becomes progressive, and these households experience a welfare gain. This is also reflected in the energy poverty rates, which become lower with carbon taxes and redistribution than the baseline. ETS2 și Fondul Social Pentru Climă Constantin Postoiu, Head of Data Analytics Constantin is the Head of Data Analytics at EPG. He holds a PhD in Regional Development and a Master Degree in European Economics, both from Bucharest University of Economic Studies. From 2015 to 2017 he worked as advisor to the Chancellery of Prime Minister Dacian Ciolos where he led data driven policies and advised on education, poverty and public administration reform. Prior, he was a trainee at the EU Committee of the Regions, Europe 2020 Monitoring Platform. Co-founder of CivicNet organisation, Constantin was the initiator and coordinator of the web application meserii.ro. He is passionate about data analysis, data visualisation and data-based policies. Contact: constantin.postoiu@enpg.ro

arbon capture, utilisation, and storage (CCUS) is increasingly in focus as a key contributor to reaching the EU’s net zero emissions target. However, major barriers such as lack of regulation and financing, low availability of CO2 transport and storage infrastructure, and low public awareness continue to pose challenges to the widespread deployment of CCUS technologies.

The steel, cement and chemicals manufacturing sectors are central to Romania’s economy. Operational facilities in these sectors consume significant amounts of electricity, natural gas, and water, as well as specific feedstocks such as coking coal, steel scrap, and limestone. The production landscape is dynamic, with some facilities closing and others reopening or planning to increase their production. Against this background, the challenge of decarbonisation is significant: for national emissions to reach net zero by 2050, Romania’s industry will need to reduce its energy consumption in half, undergo massive electrification and a switch to hydrogen and biomass, improve material efficiency, and implement carbon capture and storage.

Though this paper, we examine the literature for evidence on the effectiveness and economic and welfare impact of carbon pricing with revenue redistribution. We find that emissions reduction is moderate, unless carbon prices are high, while the economic and welfare impacts depend on the redistribution mechanism. With targeted redistribution, the policy tends to be progressive, helping reduce energy poverty and emissions at the same time. To add to the evidence base, we also present a modelling exercise of a theoretical carbon tax levied on all consumption goods.

Interest in renewable investments in Romania is back. It is now clear that renewable energy is the key to solving two of the main challenges currently faced throughout Europe: ensuring energy security and reducing greenhouse gas emissions. As a net electricity importer and having faced stubbornly high electricity prices even compared to other EU countries, Romania stands to benefit greatly from further tapping into its renewable potential.

Propunerea Comisiei Europene de Regulament din 14 septembrie privind prețurile energiei în UE se bazează pe un efort de reducere coordonată a cererii de electricitate la orele de vârf cu 5%, pe plafonarea veniturilor așa-numiților generatori inframarginali de electricitate și pe impozitarea profiturilor suplimentare ale companiilor de combustibili fosili.

Acest policy brief rezumă foaia de parcurs pentru avansarea captării și stocării carbonului (CCS) în România, dezvoltat de EPG în cadrul proiectului CCS4CEE. În această foaie de parcurs, EPG prezintă o serie de acțiuni concrete care trebuie implementate de către guvern, operatori economici și alți actori, pentru a realiza proiecte CCS și a contribui la atingerea țintelor de decarbonizare ale României.

This policy brief summarizes EPG’s roadmap for advancing CCS in Romania, written as part of the CCS4CEE project. In this roadmap, EPG presents a list of actions for implementation by government, economic operators and other actors, to make CCS projects a reality and contribute to Romania’s industrial decarbonization targets.

Captarea și stocarea dioxidului de carbon (CCS) poate avea o contribuție importantă la decarbonarea economiei europene și române.

The post COVID-19 economic recovery represents a unique opportunity for setting Romania on a path of sustainable economic growth and for ensuring its competitiveness in a future decarbonised EU economy.

This policy brief argues that Romania’s lack of ambitiousness, especially in sectors that are not part of the Emissions Trading System, such as transport, buildings and agriculture, may both undermine the country’s ability to reach climate neutrality by 2050 and could put the Romanian economy at a comparative disadvantage compared to early movers.

The dip in carbon prices, also a result of lower energy demand, shows the adversarial impact that the coronavirus crisis can have on the European Green Deal. In Romania, a drop in energy prices threatens further investments in the sector, while potentially ill-conceived governmental interventions risk creating lasting and unforeseen imbalances

One important conclusion from the workshop has been that there is a need for a dialogue between the Ministry of Energy and private and public stakeholders to discuss objectives and priorities in line with the long-term objectives of Romania and the EU.

The post COVID-19 economic recovery represents a unique opportunity for setting Romania on a path of sustainable economic growth and for ensuring its competitiveness in a future decarbonised EU economy.

The policy paper presents the main legislative provisions and European strategic objectives regarding low emission mobility and several recommendations for the transposition of European provisions in Romanian legislation.

Romanian Government’s new approach to the oil and gas fiscal regime has all the features of a rigid framework, with meager chances of remaining stable on the long term. But how should a flexible and stable fiscal framework for upstream O&G look like?

The investment cycle of an oil project is long-term – typically 25-30 years, or longer for offshore projects. In addition, offshore projects in particular require large upfront exploration capital investments. Also, the investment risk for offshore exploration activities is high, and the cost recovery timeframe can be over a decade.

Energy Policy Group, in partnership with the law firm Pachiu & Associates and PricewaterhouseCoopers (PwC), organized the roundtable discussion - Is it necessary to revise the Romanian oil & gas legislation?