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The purpose of this paper is to quantify the possible interactions among the three European objectives in the horizon of 2020: the reduction of 20 per cent of greenhouse gas emissions (GHG); the saving of 20 per cent of the European energy consumption; and a share of 20 per cent of renewable energies in the overall energy consumption. Particular focus is, however, placed on the influence of the CO₂ emission reduction targets and on their consequences on the carbon price in 2020.

In order to explore the interactions among the three European objectives and their induced effects, a number of scenarios are tested within a combination of two modeling tools: the POLES world energy model and ASPEN, an auxiliary model dedicated to the analysis of quota trading systems. With reasonable assumptions for the burden sharing among the member states, the energy efficiency objectives and the renewable energy targets are achieved using national quota systems in each European country (white and green certificate systems and their implicit prices), while the CO₂ emission reduction is carried out within the European Emissions Trading Scheme (ETS) in line with the objective of 20 per cent emission reduction.

The paper shows, in particular, that the two quota policies (white certificates and green certificates) decrease significantly the European marginal emission reduction cost and consequently, the compliance costs for ETS participants. The high‐renewable target compliance cost could be reduced significantly if carbon price signal and energy saving policies are in place. The paper also shows that the sole carbon price signal has a limited influence for stimulating renewable energies and energy savings and thus concludes on the need for specific policies targeting these two areas.

This paper is a first attempt to comprehensively deal with the economic fundamentals of the 3D regulatory system proposed by the Commission for Energy and Climate and is of value in proposing a comprehensive approach of the economics of the “20/20/20” European policy.

This paper aims to quantify the potentials for the development of combined heat and power (CHP) in Europe.

To this end, it uses the TIMES-EU energy-economic model and assesses the impact of key policy options and targets in the area of CO₂ emissions reduction, renewable energies and energy efficiency improvements. The results are also compared with the cogeneration potentials as reported by the Member States in their national reports.

The paper shows that CHP output could be more than doubled and that important CHP penetration potential exists in expanding the European district heating systems. This result is even more pronounced with the far-reaching CO₂ emissions reduction necessary in order to meet a long-term 2 degree target. Nevertheless, the paper also shows that strong CO₂ emission reductions in the energy sector might limit the CHP potential due to increased competition for biomass with the transport sector.

Given the proven socio-economic benefits of using CHP, the paper identifies the areas for future research in order to better exploit the potential of this technology such as the combination of CHP and district cooling or country- and industry-specific options to generate process heat.