As the European Union celebrates its 50th birthday this month marking half a century of peace, stability and prosperity, it now faces one of its biggest challenges which might well shape the course of its future – how to deal with its energy problems.
In 1955 in Messina, the EU founding fathers agreed to put more energy at a cheaper price and at the disposal of the European economies. On both occasions, in 1952 with the Coal and Steel Treaty and in 1957 with the Euratom Treaty, they acknowledged the need for a common approach to energy. Since then, however, the context has significantly changed so much so that energy is being considered as a security concern for the EU.
The European Commission acknowledged these market and geopolitical changes in a Communication to the European Council and the European Parliament on 10 January 2007, entitled “An Energy Policy for the EU”. This followed a Green Paper issued in June 2005 – “Doing more with less” – based on various studies which revealed that the EU could save at least 20 per cent of its present energy consumption, and an “Action Plan for Energy Efficiency: Realising the Potential” which included a number of priority measures and cost-effective energy efficiency initiatives on a number of sectors.
In its communication, the European Commission highlights three main problems namely sustainability, security of supply and competitiveness. It points out that energy accounts for 80 per cent of all greenhouse gas emissions in the EU, with all consequential detriments on climate change and most air pollution.
To this effect, the EU is committed to reduce EU and worldwide greenhouse gas emissions at a global level that would limit the global temperature increase to 2ºC compared to pre-industrial levels. The problem is that current energy and transport policies would mean that EU CO2 emissions would increase by around five per cent by 2030 and global emissions would rise by 55 per cent. Hence, the present energy policies within the EU are non-sustainable.
Additionally, Europe is becoming increasingly dependent on hydrocarbons. Currently, 29 per cent of its gas and 26 per cent of its oil comes from Russia, equivalent to almost one-third of the EU27 consumption. And reliance on imports of gas is expected to increase from 63 per cent to 84 per cent by 2030; that of oil from 82 per cent to 93 per cent. Such dangerous dependence makes the EU extremely volatile to price fluctuations. For instance, it is estimated that if by 2030 the oil price rose to $100/barrel, the EU27 energy total import bill would increase by around e170 billion annually, which is equivalent to an annual increase of e350 for every EU citizen.
Against this backdrop, on 27 and 28 February, the European Parliament Committee on Industry, Research and Energy held a public hearing in Brussels – “Towards a common European foreign policy on energy?”. During the first day of the hearing, three panels of experts and consultants from Europe’s most notable energy companies and organisations such as Vattenfall AB, the Hungarian Power Companies Ltd, the German Federal Network Agency, the Czech Energy Transmission Grid, the European Association of Craft, Small- and Medium-sized Enterprises (UEAPME), the European Alliance of Companies for Energy Efficiency in Buildings (EuroACE), Verbund and the Renewable Energy Council, chaired by German MEP Angelika Niebler and in the presence of Energy Commissioner Andris Piebalgs, debated the Commission’s proposals, with particular emphasis on the binding targets for the share of renewables in EU energy supplies, the building of an energy single market and measures to enhance energy efficiency.
They agreed on the problems currently hampering the distorted and dysfunctional energy market and welcomed the approach inherent in the Commission’s proposals to address Europe’s geopolitical vulnerability and the dominance of state institutions in energy markets and gas monopolies which, ultimately, diminish the rights of Europe’s consumers. But views were particularly different with regard to whether the targets should be binding and on the appropriate instruments for unbundling energy transmission from generation and supply, on nuclear energy and on the EU’s external energy policy.
Amid some controversy which erupted because of no Hungarian translators despite having keynote Hungarian speakers, the first panel debated the “New policies for a new reality: priorities, objectives and targets of a common energy policy.” On the one hand, there was the argument that the EU should avoid setting too many objectives and instead focus on what is important, which argument was echoed by Commissioner Piebalgs who reiterated that a binding target for renewables is the only way to proceed and that this would be the key issue in showing how serious we are – otherwise we face another Lisbon. Others argued that the EU should not set targets unilaterally, adding that these targets should be set at international level and there should not be binding targets for different industry areas. There was also a proposal for a Commission Directive to increase the share of renewable energies used for heat generation to 25 per cent in 2020.
The second panel of experts discussed ideas on how to make the internal energy market function, but here opinions differed on which instrument to choose to achieve a clear unbundling of the ownership of production and transmission facilities. On the one hand was the argument that liberalised markets should play an important role but cannot solve every problem while Commissioner Piebalgs favoured total ownership unbundling on arguments that it appears to be working well in those countries that had already taken this step. There was also a recommendation for price caps to prevent monopoly suppliers from exploiting small- and medium-sized enterprises.
On the other hand, views were expressed to the effect that competition on energy-supply grids can never be complete and that regulation is imperative.
The third panel debated efficiency and sustainability and all speakers agreed that energy efficiency is the key for tackling security of supply, sustainability and competitiveness. Hence the need to boost further the promotion of energy-efficient uses and energy forms as well as introducing special stimuli such as tax incentives.
And even with the existing tools, it is estimated that there could be 50 per cent energy savings, as long as everyone has the necessary ambition.
Mr Mizzi recently attended the European Parliament’s public hearing. His visit was made possible courtesy of the European Parliament Information Office in Valletta.
The second part of this article, to be published next Thursday, will focus on the second day of the European Parliament public hearing, during which another two panels discussed Europe’s external energy relations and ways to mainstream the security of energy supply into the CFSP. This will be tied to the outcome of the Berlin Spring Summit on 8 and 9 March, where the heads of states of the EU27 agreed on very important and ambitious targets to possibly address Europe’s energy problems.
More information is available from Forum Malta fl-Ewropa on telephone 2590-9101 or email: [email protected]
Ronald Mizzi is Research Analyst at Forum Malta fl-Ewropa
[email protected]