Tightening EU ETS targets in line with the European Green Deal: Impacts on the decarbonization of the EU power sector

The EU Green Deal calls for climate neutrality by 2050 and 2030 emission reductions of 50-55% vs. 1990. Achieving these reductions requires a substantial tightening of the EU emissions trading system (EU-ETS). This paper explores how the power sector would have to change in reaction to a tighter EU ETS target, and analyses the technological and economic implications. To cover the major ETS sectors, we combine a detailed power sector model with a marginal-abatement cost curve representation of industry emission abatement. We find that tightening the target would speed up the transformation by 3-15 years for different parts of the electricity system, with renewables contributing two-thirds of the electricity in 2030, EU-wide coal use almost completely phased-out by 2035 instead of 2050, and zero electricity generation emissions reached by 2050. Carbon prices within the EU ETS would more than double to 60€/tCO2 in 2030, reducing cumulated power sector emissions from 2020-2055 by 45% compared to a scenario with the current target. This transformation would come at limited costs: total discounted power system costs would only increase by 5%. We test our findings against a number of sensitivities: increased electricity demand, which might arise from sector coupling, increases deployment of wind and solar and prolongs gas usage. Not allowing transmission expansion beyond 2020 levels shifts investments from wind to PV, hydrogen and batteries, and increases total system costs by 3%. Finally, unavailability of fossil carbon capture and storage (CCS) or further nuclear investments does not impact results, while unavailability of bioenergy-based CCS (BECCS) has a small impact (3%) on emissions.