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The Central Asia and Caspian region is a geographical area facing the harsh effects of climate change, such as rapid temperature rise, water body desiccation, and biodiversity losses. Nevertheless, national climate policies in the region have not demonstrated the necessary ambition. A first glance primarily points to the abundance and exploitation of fossil fuels. Taking a closer look at the national and regional context, we identify a diversity of infrastructural, economic, and social challenges to the region’s sustainable development. To further examine the relationship between sustainable development and climate change, our study carries out a stakeholder-driven multiple-criteria group decision and consensus analysis. This exercise aimed at capturing the importance of different sustainability dimensions, using the UN’s Sustainable Development Goals as reference points, from the regional stakeholders’ perspective. A diverse pool of stakeholders helped prioritise each Goal, yielding overall agreement that clean energy, urban sustainability, effective waste management, and biodiversity preservation should be prioritized. Issues related with waste management and responsible consumption were ranked as the most important for climate action. Conversely, the analysis showed that social sustainability – including eliminating poverty, hunger, and inequalities – is of less urgency due to recent progress, especially when considered within the confines of climate action.

Europe's energy system faces unprecedented physical and institutional stress. The policy response so far has been excessively nationally focussed and could undermine the goals of calming energy markets over the next 18 months and achieving ambitious decarbonisation targets. At the basis of the crisis is a post-COVID-19 global energy imbalance. While demand bounced back quickly as economies re-opened, supply did not. A particular challenge is that the reducing supply of fossil fuels in line with climate targets has not been matched by a com- mensurate reduction of fossil-fuel demand. Russian manipulation of European natural gas markets since summer 2021, exploiting its significant market power, has deepened the crisis. Finally, events including weak French nuclear output and the ongoing drought, which has cut hydropower generation, have further escalated the situation. In response to high and volatile prices and forced demand reduction, European governments have tended to opt for narrow and uncoordinated measures that prioritise national security of supply and affordability over an integrated European approach. Subsidising energy consumption instead of demand reduction has been a common and misguided approach. Governments run the risk that energy consumption subsidies become unsustainable, eroding trust in energy mar- kets, slowing action in sanctioning Russia and increasing the cost of the net-zero transition. An integrated European approach and a coordinated plan is essential to address the crisis. European Union leaders must strike a grand energy bargain based on four broad principles: (i) all countries bringing forward every available supply-side flexibility, (ii) all countries making comprehensive efforts to reduce demand, (iii) a political commitment to maintain energy markets and cross-border flows, (iv) compensation for the most vulnerable consumers. This grand bargain can be the first step on a new course towards united energy policy at EU level.

Die Umstellung des europäischen Energiesystems auf einen geringeren Ausstoß von Treibhausgasen wird einen grundsätzlichen Wandel der Art und Weise erfordern, wie Energie bereitgestellt, transportiert und genutzt wird. Als hauptsächliche Energieträger kommen Strom, Wasserstoff und synthetisches Gas in Frage. Die kostengünstigste Option ist die weitgehende Elektrifizierung aller Wirtschaftssektoren. Unabhängig von der genauen Ausgestaltung des zukünftigen europäischen Energiesystems gibt es einige Politikmaßnahmen, die notwendig sind, um das Ziel der Klimaneutralität bis 2050 zu erreichen: Ein umfangreicher Ausbau der Erzeugungskapazitäten erneuerbarer Energien, das möglichst schnelle Ende der Nutzung der fossilen Energieträger Kohle und Erdgas, sowie eine stärkere Nutzung von Elektrizität als Energieträger. Die zukünftige Rolle von neuen Energieträgern wie Wasserstoff und synthetischem Gas ist jedoch noch unklar., DIW Wochenbericht

Three quarters of the European Union's greenhouse gas emissions stem from burning coal, oil and natural gas to produce energy services, including heating for buildings, transportation and operation of machinery. The transition to climate neutrality means these services must be provided without associated emissions. It is not possible today to determine tomorrow's optimal clean energy system, largely because the cost, limitations and capability developments of competing technologies cannot be predicted. Energy systems with widely diverging shares of "green fuels", in the form of electricity, hydrogen and synthetic hydrocarbons, remain conceivable. We find the overall cost of these systems to be of the same order of magnitude, but they involve larger investments at different stages of value chains. A large share of synthetic hydrocarbons would require more investment outside the EU, but less in domestic infrastructure and demand-side appliances, while electrification requires large investment in domestic infrastructure and appliances. Current projections show an overall cost advantage for direct electrification, but projections will evolve and critical players may push hard for alternative fuels. Policy will thus play a major role in shaping this balance. Political decisions should, first, push out carbon-emitting technology, primarily through carbon pricing. The more credible and predictable this strategy is over the coming decades, the smoother will be both divestment from brown technologies and investment in green technologies. Second, policy needs to help ensure that enough climate-neutral alternatives are available in time. Clear public support should be given to three system decisions about which we are sufficiently confident: the massive roll-out of renewable electricity generation; the electrification of significant shares of final energy consumption; and rapid phase-out of coal from electricity generation. For energy services where no dominant system has yet emerged, policy should forcefully explore different solutions by supporting technological and regulatory experimentation. Given the size and urgency of the transition, the current knowledge infrastructure in Europe is insufficient. Data on the current and projected state of the energy system remains inconsistent, either published in different places or not at all. This impedes the societal discussion. The transition to climate neutrality in Europe and elsewhere will be unnecessarily expensive without a knowledge infrastructure that allows society to learn which technologies, systems, and polices work best under which circumstances.

Ein Ende der Gaslieferungen aus Russland ist in letzter Zeit deutlich wahrscheinlicher geworden. Die russischen Liefermengen wurden bereits substantiell reduziert, und die Unsicherheit über künftige Lieferungen und die Versorgungslage im Winter ist groß. In dieser Studie fragen wir, was die ökonomischen Folgen eines kompletten Stopps russischer Gasimporte zum jetzigen Zeitpunkt (August 2022) wären. Seit unserer ersten Studie "Was wäre wenn" (Bachmann et al., 2022) zu den ökonomischen Effekten eines Importstopps für russische Energieträger aus dem März 2022 sind fast fünf Monate vergangen. Die durch die Studie ausgelöste Debatte hat den Blick für die Fragen und Annahmen geschärft, die für eine Einschätzung der wirtschaftlichen Kosten eines Importstopps russischer Energie entscheidend sind. In dieser Studie aktualisieren wir die Ergebnisse auf der Grundlage der Situation im August 2022.1 (i) Wir schätzen die notwendige Nachfragereduktion, die sich im Fall eines Stopps von russischen Gasimporten ab August 2022 ergeben würde und diskutieren wirtschaftspolitische Strategien, um diese Anpassung zu erreichen. (ii) Wir aktualisieren unsere Schätzung der zu erwartenden ökonomischen Kosten und diskutieren praktische Beispiele für Substitutionsmöglichkeiten im industriellen Bereich. (iii) Wir bewerten die wirtschaftspolitische Strategie der Bundesregierung, insbesondere die Entscheidung mit fortgesetzten Gasimporten aus Russland seit März 2022 die Speicherstände zu erhöhen, aber auf Maßnahmen zu einer frühzeitigen Reduzierung des Gasverbrauchs in der Stromerzeugung, in der Industrie und bei Haushalten und Gewerbe weitgehend zu verzichten. An end to gas supplies from Russia has recently become much more likely. Russian supply volumes have already been substantially reduced, and uncertainty about future supplies and the winter supply situation is high. In this study, we ask what the economic consequences would be of a complete halt to Russian gas imports at present (August 2022). Almost five months have passed since our first study, "What if" (Bachmann et al., 2022), on the economic effects of a March 2022 Russian energy import freeze. The debate sparked by the study has sharpened the focus on the issues and assumptions that are critical to estimating the economic costs of a Russian energy import freeze. In this study, we update the results based on the situation in August 2022. (i) We estimate the necessary demand reduction that would result if Russian gas imports were halted from August 2022 and discuss economic policy strategies to achieve this adjustment. (ii) We update our estimated expected economic costs and discuss practical examples of substitution options in the industrial sector. (iii) We evaluate the federal government's economic policy, in particular its decision to increase storage levels with continued gas imports from Russia since March 2022, but to largely forego measures to reduce gas demand in power generation, industry, and residential and commercial sectors. The key findings of the study can be summarized as follows: In the event of a complete loss of Russian gas supplies in the next few weeks, Germany will have to reduce its gas demand by around 25% (equivalent to 210 TWh) by the end of the coming heating period (April 2023), even if the planned liquefied natural gas terminals come on stream as planned in the winter. When factoring in the savings in gas demand that can be achieved through alternative energy sources in power generation, this leaves an adjustment of about 20% of gas consumption that must be borne by industry, households, businesses, and the public sector. Such a reduction is feasible in a collective effort if measures are taken quickly to save gas. The good news from our study is that Germany can get through the winter without Russian gas. Panic mongering is out of place. Nevertheless, it should be clear to everyone that the Russian invasion of Ukraine has made Germany permanently poorer. The days of cheap energy are over and collective efforts are needed to make the economy crisis-proof. Reducing gas consumption is feasible, but it comes at an economic cost. In particular, there is much less time now to substitute gas in the industrial sector and power generation than in the spring. It is difficult to estimate how many companies have made the sometimes costly investments in alternatives even without the appropriate political framework. However, it has become clear that the view that gas substitution was not possible at all within six months was wrong. There are now numerous examples of substantial substitution possibilities, including in the chemical and glass production industries. The bottom line is that the economic costs of adjusting to an import freeze are likely to remain similar to those of committing to an import freeze already in the spring. This is because the gas gap is smaller than in the spring, but the remaining adjustment period is shorter. In this respect, the costs remain substantial, but manageable with appropriate economic policy measures. There is no threat of mass poverty or popular uprisings in the event of a halt to Russian gas imports. The economy will face production losses of a magnitude that Germany has already managed in the past when it had to face economic shocks. It is also important to interpret the effects of a gas import stop relative to a scenario without an import stop. For example, Germany could fall into recession even without an import freeze. The assessment of the German government's strategy of not enforcing an early demand adjustment and continuing gas imports from Russia despite the war of aggression on Ukraine is ambivalent. Although a good 100 TWh of gas was stored from April to July, without Russian supplies the need for adjustment on the demand side remains substantial at 25% until the end of the next heating period. In a counterfactual scenario, in which Germany would have had to manage without Russian gas imports as early as from April onwards, demand would have had to be reduced by 31%, a good 6 percentage points more. Yet in return, there would have been more time to prepare the appropriate adjustments for the winter heating period. Even if the storage facilities were filled to 100% in the fall, Germany would remain dependent on Russian imports for normal winter consumption and would thus remain vulnerable to blackmail from Moscow. This is because the storage facilities only have a total capacity of below 250 TWh, which is roughly equivalent to the consumption of two winter months. In this respect, the focus on storage levels and the neglect of adaptation measures was not suitable to end Germany's dependence on Russia and its political blackmail ability completely and quickly. While closer cooperation with European partners could have mitigated the necessary reduction in gas demand in Germany, there is still a risk that national go-it-alone efforts will undermine essential European energy solidarity. In any case, the BMWK's efforts to build LNG terminals and diversify gas supplies through imports from third countries are positive. However, this could have been done even with an import freeze or tariff solutions in March.

An end to gas supplies from Russia has recently become much more likely. Russian supply volumes have already been substantially reduced, and uncertainty about future supplies and the winter supply situation is high. In this study, we ask what the economic consequences would be of a complete halt to Russian gas imports at present (August 2022). Almost five months have passed since our first study, "What if" (Bachmann et al., 2022), on the economic effects of a March 2022 Russian energy import freeze. The debate sparked by the study has sharpened the focus on the issues and assumptions that are critical to estimating the economic costs of a Russian energy import freeze. In this study, we update the results based on the situation in August 2022. (i) We estimate the necessary demand reduction that would result if Russian gas imports were halted from August 2022 and discuss economic policy strategies to achieve this adjustment. (ii) We update our estimated expected economic costs and discuss practical examples of substitution options in the industrial sector. (iii) We evaluate the federal government's economic policy, in particular its decision to increase storage levels with continued gas imports from Russia since March 2022, but to largely forego measures to reduce gas demand in power generation, industry, and residential and commercial sectors. The key findings of the study can be summarized as follows: In the event of a complete loss of Russian gas supplies in the next few weeks, Germany will have to reduce its gas demand by around 25% (equivalent to 210 TWh) by the end of the coming heating period (April 2023), even if the planned liquefied natural gas terminals come on stream as planned in the winter. When factoring in the savings in gas demand that can be achieved through alternative energy sources in power generation, this leaves an adjustment of about 20% of gas consumption that must be borne by industry, households, businesses, and the public sector. Such a reduction is feasible in a collective effort if measures are taken quickly to save gas. The good news from our study is that Germany can get through the winter without Russian gas. Panic mongering is out of place. Nevertheless, it should be clear to everyone that the Russian invasion of Ukraine has made Germany permanently poorer. The days of cheap energy are over and collective efforts are needed to make the economy crisis-proof. Reducing gas consumption is feasible, but it comes at an economic cost. In particular, there is much less time now to substitute gas in the industrial sector and power generation than in the spring. It is difficult to estimate how many companies have made the sometimes costly investments in alternatives even without the appropriate political framework. However, it has become clear that the view that gas substitution was not possible at all within six months was wrong. There are now numerous examples of substantial substitution possibilities, including in the chemical and glass production industries. The bottom line is that the economic costs of adjusting to an import freeze are likely to remain similar to those of committing to an import freeze already in the spring. This is because the gas gap is smaller than in the spring, but the remaining adjustment period is shorter. In this respect, the costs remain substantial, but manageable with appropriate economic policy measures. There is no threat of mass poverty or popular uprisings in the event of a halt to Russian gas imports. The economy will face production losses of a magnitude that Germany has already managed in the past when it had to face economic shocks. It is also important to interpret the effects of a gas import stop relative to a scenario without an import stop. For example, Germany could fall into recession even without an import freeze. The assessment of the German government's strategy of not enforcing an early demand adjustment and continuing gas imports from Russia despite the war of aggression on Ukraine is ambivalent. Although a good 100 TWh of gas was stored from April to July, without Russian supplies the need for adjustment on the demand side remains substantial at 25% until the end of the next heating period. In a counterfactual scenario, in which Germany would have had to manage without Russian gas imports as early as from April onwards, demand would have had to be reduced by 31%, a good 6 percentage points more. Yet in return, there would have been more time to prepare the appropriate adjustments for the winter heating period. Even if the storage facilities were filled to 100% in the fall, Germany would remain dependent on Russian imports for normal winter consumption and would thus remain vulnerable to blackmail from Moscow. This is because the storage facilities only have a total capacity of below 250 TWh, which is roughly equivalent to the consumption of two winter months. In this respect, the focus on storage levels and the neglect of adaptation measures was not suitable to end Germany's dependence on Russia and its political blackmail ability completely and quickly. While closer cooperation with European partners could have mitigated the necessary reduction in gas demand in Germany, there is still a risk that national go-it-alone efforts will undermine essential European energy solidarity. In any case, the BMWK's efforts to build LNG terminals and diversify gas supplies through imports from third countries are positive. However, this could have been done even with an import freeze or tariff solutions in March.

Hydrogen is seen as a means to decarbonise sectors with greenhouse gas emissions that are hard to reduce, as a medium for energy storage, and as a fallback in case halted fossil-fuel imports lead to energy shortages. Hydrogen is likely to play at least some role in the European Union's achievement by 2050 of a net-zero greenhouse gas emissions target. However, production of hydrogen in the EU is currently emissions intensive. Hydrogen supply could be decarbonised if produced via electrolysis based on electricity from renewable sources, or produced from natural gas with carbon, capture, and storage. The theoretical production potential of low-carbon hydrogen is virtually unlimited and production volumes will thus depend only on demand and supply cost. Estimates of final hydrogen demand in 2050 range from levels similar to today's in a low-demand scenario, to ten times today's level in a high-demand scenario. Hydrogen is used as either a chemical feedstock or an energy source. A base level of 2050 demand can be derived from looking at sectors that already consume hydrogen and others that are likely to adopt hydrogen. The use of hydrogen in many sectors has been demonstrated. Whether use will increase depends on the complex interplay between competing energy supplies, public policy, technological and systems innovation, and consumer preferences. Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions. Certain key principles can be followed without regret: driving down supply costs of low-carbon hydrogen production; accelerating initial deployment with public support to test the economic viability and enable learning; and continued strengthening of climate policies such as the EU emissions trading system to stimulate the growth of hydrogen-based solutions in the areas for which hydrogen is most suitable.

[Key Findings] The Fit for 55 package foresees a significant speeding up of European decarbonisation. This requires many new and upgraded policy frameworks. The European Commission has already proposed extensive reforms to the EU's energy and climate policy framework, and more are forthcoming before the end of 2021. The purpose of this report is to provide insight into the rationale behind these revisions. Spe-cifically, this is done by informing policymakers about the implications of different fuel mixes in a decarbonised EU in 2050. We explore three scenarios with differing demand assumptions for electricity, hydrogen and alternative green gases.

Many of the technologies that can help the European Union become a net-zero emissions economy by 2050 have been shown to work but are not yet commercially competitive with incumbent fossil-fuel technologies. There is not enough private investment to drive the deployment of new low-carbon alternatives. This is primarily because carbon prices are neither high enough nor stable. There are a number of benefits from the deployment of low-carbon technologies that private firms do not factor in. These include the benefits of decreasing industry-wide costs over time, and the global climate benefits from the development of low-carbon technologies within the EU that can subsequently be exported. The result is an investment level below the socially optimal value in the EU. Commercialisation contracts could be implemented as a temporary measure to remove the risk associated with uncertain carbon prices for ambitious low-carbon projects. The aim of the contracts would be to increase private investment to the socially optimal level. Contracts would be allocated through auctions in which fixed prices for abated emissions over a fixed duration would be agreed on a project-by-project basis. On an annual basis, public subsidies amounting to the difference between the agreed carbon price and the actual EU carbon price would be provided to investors, depending on the total carbon emissions abated. As long as EU carbon prices are low, investors would receive larger subsidies to ensure their competitiveness. Contracts would be auctioned at EU level. This would generate increased competition compared to national auctions, leading to more efficient outcomes and preventing fragmentation of the single market. From about €3 billion to €6 billion would be provided to the main industrial emitting sectors annually, with the amount reducing as the EU carbon price rises and low-carbon technologies become competitive without subsidy.

The European Green Deal has set a target of reducing European Union carbon emissions by about 40 percent over the next ten years. Reaching this target is likely to involve a significant increase in carbon prices. Theoretically, higher carbon prices can lead to carbon leakage, or the relocation of industrial activity and its accompanying emissions out of economies with high carbon prices and into economies with low carbon prices. To address this perceived threat, the European Commission will consider the inclusion of a carbon border adjustment mechanism within the European Green Deal. This will apply a charge on goods imported into the EU, based on the emissions emitted during their production. The European Commission should not make the implementation of a carbon border adjustment mechanism into a must-have element of its climate policy. There is little in the way of strong empirical evidence that would justify a carbon-adjustment measure. Assessments of current carbon pricing schemes typically find no leakage, while ex-ante modelling tends to find limited leakage, with results highly sensitive to underlying assumptions. Energy price differentials - a proxy for carbon prices do not necessarily result in a relocation of energy-intensive production. Furthermore, significant logistical, legal and political challenges will arise during the design of a carbon border mechanism. Choices would have to be made between more efficient but highly complex and politically risky approaches, and mainly symbolic but more easily implementable solutions. To simplify the design of a carbon border mechanism whilst maximising its benefits, the Commission has proposed focusing only on carbon-intensive and trade-exposed sectors. But it will be difficult to draw a strict line between covered and non-covered sectors. Trade deviation will potentially lead to lobbying and the temptation for "cascading protectionism", with tariffs extended to industries further along value chains. A strategy of tying future climate policy to the implementation of a border adjustment mechanism might therefore hinder rather than help EU climate policy. The EU should instead focus upon the implementation of measures to trigger the development of a competitive low-carbon industry in Europe.

Current technological improvements are yet to put the world on track to net-zero, which will require the uptake of transformative low-carbon innovations to supplement mitigation efforts. However, the role of such innovations is not yet fully understood; some of these ‘miracles’ are considered indispensable to Paris Agreement-compliant mitigation, but their limitations, availability, and potential remain a source of debate. This paper evaluates such potentially game-changing innovations from the experts' perspective, aiming to support the design of realistic decarbonisation scenarios and better-informed net-zero policy strategies. In a worldwide survey, 260 climate and energy experts assessed transformative innovations against their mitigation potential, at-scale availability and/or widescale adoption, and risk of delayed diffusion.