Will the Iran war threaten the EU’s green transition?

Rising energy prices and the threat of supply disruptions are forcing the European Union to strike a delicate balance between maintaining its trajectory towards climate neutrality and ensuring affordable energy for households and businesses across the region.

The EU’s plans to cut carbon emissions and achieve climate neutrality by 2050 are facing increasing pressure as capitals grapple with rising energy costs and inflation. Some member states are considering a return to coal to ease the burden on consumers.

Energy prices in Europe are expected to continue rising as long as tensions in the Middle East continue to rise, including the closure of the Strait of Hormuz, a key barrier through which about a quarter to a third of global oil shipments and about a fifth of liquefied natural gas (LNG) flow.

Since the US and Israel launched military strikes against Iran on February 28, gasoline prices in the EU have increased by about 70% and crude oil prices by about 60%. Analysts have warned that prices are likely to remain high for some time after the conflict ends.

Despite the pressure, the EU insists it will stay on course for a green transition, arguing that its dependence on fossil fuels exposes the region to repeated external shocks.

“We are doing everything we can to ensure that this never happens again. We must further strengthen our path to energy independence,” Energy Commissioner Dan Jorgensen told MPs in the European Parliament on March 25.

From pricing to supply issues

Energy Commissioner Dan Jorgensen continues to press the case for a green transition following an emergency meeting of EU energy ministers on March 31, even as the crisis shifts from issues of prices to potential supply shortages.

He told a news conference that clean energy, electrification, modern interconnections and improved energy efficiency in the country are “the only way forward.”

While EU countries are still free to determine their own energy mix, they are bound by bloc-wide rules to achieve climate neutrality by 2050, requiring steady reductions in greenhouse gas emissions.

Moves to reduce investment in clean power and electrification, or to rely on fossil fuels as a short-term solution to the worsening energy crisis, risk colliding with the EU’s long-term climate goals.

German Energy Minister Katerina Reich recently called for the EU27 to consider relaxing climate laws. He also suggested a temporary return to coal to make up for natural gas shortages and lower electricity costs. The proposal was echoed by Chancellor Friedrich Merz, who said at an event in Frankfurt on March 27 that “it may be necessary to keep coal-fired power plants open for a longer period of time.”

Meanwhile, the Italian government announced a postponement of the coal phase-out, pushing the deadline to 2038, describing the move as a “safety measure” against possible gas shortages and price hikes.

But Luca Bergamaschi, executive director of environmental think tank ECCO, said a return to coal would be “unlikely”.

“Italy’s coal-fired power plants are aging and barely operational with little recent investment. The plants have been idle for years, and restarting them will require new environmental permits, costly technical upgrades and lengthy regulatory procedures,” he said.

Germany and Italy’s new reliance on coal is largely framed as a last resort to avoid the worst of the crisis, while Berlin and Rome maintain long-term commitments to clean energy.

Berlin has recently stepped up investment in wind power, similar to Britain, in response to the disruption. Meanwhile, Italy has received approval from the European Commission to spend 6 billion euros in public funds to expand renewable hydrogen production.

Despite geopolitical tensions, the EU remains adamant about reopening the door to Russian fossil fuels as a temporary solution, an idea recently floated by Belgian Prime Minister Bart de Wever.

On March 30, the European Union warned member states to prepare for “prolonged disruption” and called on capitals to accelerate efforts to reduce oil and gas consumption.

EU green road

Domestic wind and solar power remains significantly cheaper than imported natural gas and oil. According to EU data, renewable energy will cost around 24 euros per megawatt hour in 2025, while gas will cost around 100 euros per megawatt hour. However, since the outbreak of the Iran war, these costs have risen sharply.

Since the energy shock caused by Russia’s invasion of Ukraine in 2022, the EU has consistently argued that large-scale investments in renewable energy are key to increasing energy independence.

Still, there is still a long way to go before the region can become completely energy independent.

Upgrading Europe’s electricity grid infrastructure is seen as a key step to help optimize the flow of renewable power while easing congestion and limiting electricity supply constraints.

On March 25, Jorgensen urged MPs to support a “rapid and ambitious agreement” on the European Commission’s plans to modernize Europe’s electricity grid and accelerate infrastructure construction and “much-needed” interconnections.

Simone Tagliapietra, a senior researcher at the Bruegel think tank, advised EU leaders not to delay the low-carbon transition. He argues that the conflict in the Middle East shows that the introduction of clean, domestic energy sources should be accelerated.

“Only by reducing its structural dependence on oil and LNG imports can Europe permanently protect its economy from recurring external shocks,” Tagliapietra said.

In the face of rising energy prices, the French government is moving to accelerate the electrification of the economy and phase out dependence on fossil fuels, Prime Minister Sébastien Lecornu said on Wednesday.

“It’s no longer just a climate issue, it’s now a national interest issue,” Lecorne said.

The government aims to reduce France’s dependence on fossil fuels from 60% to 40% by 2030 through the electrification of transport and buildings, including the widespread use of electric cars and heat pumps.

Spain and Portugal will be protected from price increases

Spain and Portugal have been hailed as great examples of how investing in renewable energy can pay off in the long term in energy security.

Madrid and Lisbon were least affected by the supply shock, as they are highly dependent on wind, solar and hydro energy, and electricity prices remained much lower than in major European countries during the crisis.

Although Iberian countries did not experience significant price increases immediately, they are still exposed to global price fluctuations, but the abundance of clean power in their energy mix protects them from astronomical electricity bills.

This scenario gives EU leaders further impetus to encourage member states to further pursue renewable energy, energy efficiency and electrification.

As part of an effort to accelerate the adoption of clean energy, Energy Commissioner Dan Jorgensen on March 27 met with representatives from the bioenergy sector, which includes wind, geothermal, biomass energy and crop-based energy, as they explore ways to rapidly expand renewable energy for heating and cooling while strengthening industrial competitiveness.

The European Commission is expected to publish a revised energy security plan in the coming weeks, alongside an electrification action plan and a dedicated heating and cooling strategy.

“Bioenergy is already part of solutions across households, industry and district heating. Its practical contribution should not be overlooked as the EU develops its next policy steps,” said a statement from industry association BioEnergy Europe.

Aneta Stefanczyk, industry expert at the European Climate Neutrality Watch and public policy analyst at the Institute for Reform, said expanding electrification and clean energy while reducing dependence on imported fossil fuels should be the cornerstone of Europe’s long-term strategy.

“The current crisis in the Middle East further highlights the importance of this approach, as rising oil and gas prices once again highlight the risks of continued dependence on fossil fuels,” she said.