Cost-optimal vs. policy-driven scenarios for a decarbonised European energy system

Abstract The European Union’s (EU) climate strategy, anchored in the European Green Deal, the Fit-for-55 package, and the updated National Energy and Climate Plans (NECPs), requires a rapid transformation of the energy system to meet the legally binding target of net-zero greenhouse gas emissions by 2050 and a 55% reduction by 2030 relative to 1990 levels. Yet, how national plans align with EU-wide ambition, alongside the implications for investment, infrastructure, and power-system operation, remain insufficiently assessed. We address this gap by linking an EU-specific implementation of a prominent integrated assessment model with Member State-level disaggregation (GCAM-Europe) with a higher-resolution European electricity system model (EXPANSE). This modelling framework captures national heterogeneity, sectoral detail, and spatiotemporal variability in electricity demand, renewable supply, and storage, enabling the assessment of grid investments and infrastructure. We analyse four scenarios representing EU-wide (Fit-for-55) or national (NECP) targets, implemented through explicit policies ( POLICY ) or cost-optimal carbon caps ( COST_OPTIMAL ). Results show all scenarios achieve the −55% fossil CO 2 reduction by 2030, with the electricity sector driving the largest chunk. Renewable energy nearly doubles, with POLICY scenarios accelerating electrification and heat pump deployment, while COST_OPTIMAL scenarios leaning more on biofuels. Efficiency targets are partially met, with POLICY scenarios distributing savings more evenly across Member States compared to concentrated reductions of COST_OPTIMAL scenarios. By 2035, power system transformation diverges strongly: COST_OPTIMAL scenarios expand ~1250 GW of new capacity, concentrated in few resource-rich regions, while POLICY scenarios reach ~1750 GW with broader spatial distribution, requiring higher investments in renewables and grids. Average wholesale electricity prices are higher and more heterogeneous under POLICY scenarios, reflecting carbon costs, transmission bottlenecks, and reliance on fossil backup. Results highlight trade-offs between economic efficiency and equitable burden-sharing, underscoring the importance of coordinated EU governance, infrastructure planning, and complementary policies to balance cost-effectiveness with political feasibility and social acceptance.