EU seeks strategy to reduce gas dependency

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The first debate by European Union leaders on the proposed new framework for energy and climate policy to 2030 – which took place during the European Council meeting in Brussels last month – was rather overshadowed by the Ukraine crisis. This was not surprising, given that Russia had annexed Crimea just days before. But it was unfortunate, given the importance of deciding new policy in the run-up to the UN climate talks in Paris next year.

Instead, the headlines about the energy conclusions of the meeting were dominated by a call for the EU to explore ways of reducing its dependence on natural gas . This was prompted largely by concerns that Russia accounts for around one-third of EU gas imports and that much of this gas passes through Ukraine.

This was bad news not just for Russia – which now faces pressure for its gas exports to the European market to be reduced over the long term – but also for the natural gas industry as a whole and, indeed, for the EU’s efforts to combat climate change.

Boosting energy efficiency and promoting the share of renewables in the fuel mix appear to be laudable aims – depending on the mechanisms used to achieve these objectives – but most energy analysts accept that we live in a world that will remain heavily dependent on fossil fuels for at least several decades. And, for reasons of chemistry and physics, the fossil fuel that has the least impact on the environment is natural gas.

Europe has already seen a sharp fall in gas demand, partly because of competition from cheap coal (displaced from the US power generation fuel mix by cheap shale gas) but also because of massive subsidies for renewables.

In-depth study due in June: In the conclusions document published after the meeting on the 21st and 22nd of March, the European Council said: “Efforts to reduce Europe's high gas energy dependency rates should be intensified, especially for the most dependent member states. Moderating energy demand through enhanced energy efficiency should be the first step, which will also contribute to other energy and climate objectives.”

The European Council called on the European Commission to “conduct an in-depth study of EU energy security and to present by June 2014 a comprehensive plan for the reduction of EU energy dependence”.

It went on to say that the plan should reflect the EU’s need “to accelerate further diversification of energy supply, increase its bargaining power and energy efficiency, continue to develop renewable and other indigenous energy sources, and coordinate the development of the infrastructure to support this diversification in a sustainable manner, including through the development of interconnections”.

More specifically, the European Council called for further action to support the development of the gas pipelines that make up the Southern Corridor and to examine ways to facilitate natural gas exports from North America to the EU.

Again, these appear to be laudable objectives, but both are potential long-term solutions rather than a practical response to the immediate political crisis. In the case of North American LNG exports, it is far from clear what governments could do to have much impact – beyond what they are already doing.

Energy and climate policy: So what did the European Council have to say about the proposed new energy and climate policy?

The conclusions document says:  "Taking into account the timeline agreed in Warsaw for the conclusion of a global climate agreement at the 21st session of the Conference of the Parties in Paris in 2015, the European Council confirms that the EU will submit its contribution at the latest by the first quarter of 2015.”

The European Council calls for the framework to be based on the following principles:

  • “to further improve coherence between greenhouse gas emissions reduction, energy efficiency and the use of renewables and deliver the objectives for 2030 in a cost-effective manner, with a reformed Emissions Trading System (ETS) playing a central role in this regard”;
  •  “to develop a supportive EU framework for advancing renewable energies and ensure international competitiveness”;
  •  “to ensure security of energy supply for households and businesses at affordable and competitive prices”; and
  • “to provide flexibility for the member states as to how they deliver their commitments in order to reflect national circumstances and respect their freedom to determine their energy mix”.

It goes on to “invite” the Council and the European Commission to carry out further analysis to examine the implications for member states of the proposals put forward by the Commission and “to develop measures to prevent potential carbon leakage . . . to ensure the competitiveness of Europe’s energy-intensive industries”.

Final decision by October: The European Council now plans to consult with member states, and to take stock of progress on the work it has asked for at its next meeting in June. The objective is to take “a final decision on the new policy framework as quickly as possible and no later than October 2014”.

The emphasis on reform of the ETS is welcome. However, other than that, the conclusions from last month’s EU summit were long on laudable aims but short on detail.

The objective of climate change mitigation policy is to reduce GHG emissions. Policy targets should reflect that. In the proposals adopted for 2020 back in 2008, targets were set at 20% for greenhouse gas emissions, energy efficiency and renewable energy sources. The consequences were severe market distortions that have often worked against, instead of for, the primary objective.

What Europe should do is set an ambitious target for greenhouse gas emissions reduction for 2030 – the Commission has proposed 40% – and let the various technologies, including energy efficiency technologies and renewables, fight it out on a level playing field.

By Alex Forbes