Energy sector: climate issues and decarbonization

Energy sector: climate issues and decarbonization

The energy sector remains the world's biggest emitter of greenhouse gases. Historically linked to economic development and essential to the smooth running of our societies, it is now in need of in-depth rethinking and transformation. This long-awaited energy revolution must necessarily involve not only changes in production methods, but also in the way we use energy.

Astrid Serre

Astrid Serre

Climate consultant

Update :

The energy sector is the biggest emitter, accounting for almost a quarter of direct greenhouse gas emissions in the European Union (WEF) and over three-quarters of indirect emissions(EEA). This sector covers energy production, transformation and distribution activities.

All economic activities depend on energy, and it's thanks to access to abundant, low-cost energy that we can easily move around, heat our homes and produce all kinds of goods.

Historically, the worldwide increase in energy consumption has been directly linked to the rise in greenhouse gas emissions: since the second industrial revolution, the growth of activities has been based on growing consumption of energy, most of it of fossil origin.

While the energy sector is absolutely essential to the functioning of society, what are the levers for decarbonizing this sector, which is the primary direct cause of anthropogenic greenhouse gas emissions?

Sector overview

The energy sector converts "primary" energy sources, available in nature (oil, wind, uranium deposits) into "final" energy, ready to be consumed (gasoline, electricity), and transports it so that it can be distributed to the point of consumption (gas pump, electrical outlet).

From the second industrial revolution onwards, the consumption of fossil fuels - coal, oil and gas - grew almost without interruption, enabling the advent of modern society on the one hand, but releasing an unprecedented quantity of greenhouse gases into the atmosphere on the other.

Energy can be categorized according to the energy sources used:

  • fossil fuels such as oil, coal and natural gas
  • fissile fuel for nuclear power
  • renewable sources such as solar and wind power.

In this respect, while energy consumption has increased 9.5-fold over the last century, this is largely due to the consumption of fossil fuels. Fossil fuels still account for over 70% of the EU's energy mix. The recent boom in renewable energies has not replaced fossil fuel consumption, but rather added to it.

Between 1900 and 2020, a 9.5-fold increase in primary energy consumption worldwide
Between 1900 and 2020, a 9.5-fold increase in primary energy consumption worldwide (Source: Our world in data).
Share of energy products in total final energy consumption
Share of energy products in total final energy consumption, 2020, EU, (based onEurostat data)

The main sources of emissions

Taking into account all energy-related emissions, i.e. direct emissions from energy production, but also emissions from other uses (transport, industry), energy-related emissions represent 73% of total global emissions, with 15% of total global emissions linked to transport, 13% to industry and construction, and 13% to electricity and heat production.

Annual global greenhouse gas emissions by sector
Source: Setting 1.5°C-aligned science-based targets:quick start guide for electric utilities (p.6) (from data provided by Ørsted, 2020).

As regards the production of electricity and heat, the emissions associated with the production of this final energy are highly dependent on the electricity mix: a coal-fired power plant produces much more carbon-intensive energy than a gas-fired plant, which itself is much more carbon-intensive than a nuclear power plant or electricity produced from renewable sources.

Thus, as shown in the graph below, if in 2021 coal accounted for only 17% of electricity and heat production in the EU, it would contribute 50% of GHG emissions.

Share of coal in emissions and electricity and heat production
Source: Georg ZACHMANN et al, Decarbonisation of Energy (2021) (p.33)

Decarbonizing the energy sector

The European Union has set itself ambitious targets for reducing greenhouse gas emissions, even aiming to achieve carbon neutrality by 2050. Since 1990, emissions from the energy sector have actually fallen by 657 MtCO2e (-40%), thanks in particular to changes in the energy mix(WEF).

To achieve its objectives, the European Union will have to pull out all the stops.

Acting on energy demand

We can never say it often enough: "the cleanest energy is the energy we don't consume". The best way to reduce energy-related emissions is to reduce energy consumption. There are a number of levers that can be used to achieve this: 


Reducing final energy consumption in all its forms is the first direct lever for reducing emissions. Efforts need to be made in both household and business consumption.

This issue has become all the more important since 2021, when high energy demand post-Covid, followed by the Russian-Ukrainian conflict, created major tensions on global energy supplies. This situation has prompted the European Union to take up the issue and seek the best solutions for reducing energy consumption on the continent.

Energy efficiency

Efficiency aims to achieve the same performance with lower energy consumption, thanks to technical and technological improvements or an optimized distribution circuit to reduce energy losses.

The electrification of uses

By replacing fuel-based energy with electricity for various uses, it is possible to drastically reduce the emissions associated with energy consumption (electrification of transport and industrial processes).

The use of new energy sources

In the same vein, another solution is to use new energy sources that emit less CO2 and generate the same final energy. Examples include geothermal energy for heat production, and hydrogen.

Final energy consumption by source
Final energy consumption by source (TWh)(Source: Georg ZACHMANN et al., Decarbonisation of Energy - 2021)

Developing energy production

Since the industrial era, our societies have developed mainly on the basis of energy production linked to the consumption of fossil fuels. These energy sources have a number of drawbacks: they are non-renewable and, above all, they emit high levels of greenhouse gases.

To meet our energy needs, we're going to have to change the way we produce energy in the short term.

Moving away from fossil fuel production

Moving away from fossil fuel production implies two things: 

  • Massive investment in low-carbon energy production
  • Do not invest in new fossil fuel projects.

The idea of phasing out existing fossil fuel extraction facilities before they reach the end of their useful life is also regularly raised.

It's a subject that remains topical as several oil and gas companies are still announcing the future exploitation of "climate bombs" or "carbon bombs", i.e. deposits where the extraction of fossil fuels would generate more than a gigatonne of CO2 each.

Developing new energies

Not all uses can be electrified. We therefore need to find alternative solutions to energy produced from fossil fuels, which are a major source of greenhouse gas emissions.

In this context, one solution is to develop the production of biomass fuels (biofuels, biogas), which complement the production of non-controllable electricity.

Reducing emissions at production sites

According to the World Bank, some 150 billion cubic meters of natural gas are destroyed every year by flaring during the fossil fuel extraction process.

This process not only destroys a valuable source of energy, but also releases huge quantities of CO2 (275 Mt in 2018, or 0.85% of global emissions) and methane, which has 28 times the global warming impact of CO2. Added to this is heavy air pollution near flaring sites, as well as pollution of nearby soil and water resources.

There are various ways of reducing the impact of flaring. These include reducing the production of gas associated with the extraction of fossil fuels, reinjecting it or storing it in the ground. This gas can also be stored in liquid form for marketing, or used close to where it was produced to generate energy.

Decarbonizing final energies

The third option is to decarbonize final energies. This requires us to rethink our energy production AND consumption models, and to invest massively in these new processes.

Decarbonizing electricity generation

Electrification is not a panacea. The level of emissions will depend on the source of electricity production.

For all-electricity to be viable, we need to produce electricity from decarbonized sources, and therefore develop the production of renewable energies and biomass...

Although its use is still the subject of debate, nuclear power is also a decarbonized source of energy that is used by many countries, led by France.

Share of electricity generation sources in each EU country in 2022
Share of electricity generation sources in each EU country in 2022 (Source: European Council / Eurostat)

Transitioning to a low-carbon supply for heat production

In France, heat production for the tertiary and residential sectors accounts for almost a fifth of greenhouse gas emissions. Half of these emissions still come from fossil fuels. This is therefore a major area for development to reduce our GHG emissions from the energy sector.

Breakdown of heating consumption in France by source
Source CEA

There are a number of ways to reduce the share of emissions linked to heat production: 

  • Focus production on new energies (geothermal, hydrogen), including the now famous heat pumps
  • Favoring a supply of carbon-free electricity
  • Use biomass of controlled origin

Coordinating efforts to maximize energy efficiency and ensure resilience

One example is the development of heat networks. This involves recovering the heat produced by certain industrial sites, known as waste heat, and transporting it to end-users.

These networks can also be used for many other sources of heat: geothermal, solar...

In parallel with the development of heating networks, infrastructures can be set up to store heat. This will help reduce dependence on fossil fuels.

Massive investment in R&D

According to a study by Nathaniel Bullard for Bloomberg, R&D investment in energy production by IEA (International Energy Agency) member states has evolved enormously in recent years, in line with the sector's need for decarbonization. IEA member countries now spend the largest R&D budgets ever spent on energy in the last 50 years.

While R&D spending on nuclear power and fossil fuels peaked in the 1980s, today it's spending on renewable energy and energy efficiency that is attracting more and more funding.

R&D spending on energy efficiency has risen from $2 billion in the early 2000s to $6 billion in 2021. It is now the main beneficiary of R&D spending by IEA member countries.

Combined energy R&D funding of IEA members by sector
Source: Bloomberg Green - International Energy Agency

This development underlines the importance of the energy issue in the current climate change context, which calls for high-speed decarbonization of this highly greenhouse gas-emitting sector. It's a race in which governments and companies alike have thrown themselves.

Some examples of good practice

ENGIE: decarbonizing the power generation mix

Engie has deployed a strategy aimed at achieving "Net Zero" by 2045, covering scopes 1, 2 and 3 of its emissions. This strategy is "aligned with the Group's vision and strategy". Their aim is to reduce all their emissions by 90% between 2017 and 2045, and then neutralize the remaining 10%.

In terms of scope 1, ENGIE has announced that it will cease coal-fired power generation as early as 2027, and that it will increase its installed renewable power capacity by a factor of 2.6 by 2030 compared with 2020. They also intend to invest in storage and develop the use of green gas.

Wishing to take action across their entire value chain, they have announced that they will not only be raising awareness among their consumers, but also supporting their suppliers in their transition by helping them to carry out their carbon footprints and integrate a decarbonization policy so that they can be SBTi aligned or certified.

Ørsted: pivoting the core business

Ørsted, formerly a major producer of fossil energy (gas and oil) in Denmark, pivoted to gradually withdraw from fossil activities, which it finally divested completely in 2018, and subsequently invested 26 billion euros in renewable energy production to become today the world leader in offshore wind. (Ørsted)

This complete change of production model has taken place in less than 15 years. Whereas in 2009, 85% of their production was based on fossil fuels, today 98% of their revenues come from renewable energy production.

Its objective is to achieve carbon neutrality on scopes 1 and 2 by 2025, and then to go carbon neutral on scope 3 by 2040.

Orsted's carbon neutral trajectory
Source : Ørsted

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