eu4journalists

Transport - Energy

2. Energy

Issues

• Internal energy market vs. fossil fuel dependency
• Energy market liberalisation and pan-European integration
• Shift to low-carbon, renewable, diversified energy market
• Safety issues and the comeback of nuclear energy
• Energy efficiency and conservation
• Importance of international energy treaties

The EU's “post-industrial revolution” or the Energy for a Changing World proposal package is comprised of three pillars:

1.Creation of a true Internal Energy Market
2.Accelerating the shift to low-carbon energy
3.Increasing energy efficiency

1. Creation of a true Internal Energy Market

The European Union imports 82% of its oil and 57% of its natural gas, making it the world's largest importer of both. There is a real possibility that if relations with a particular country(s) deteriorated the EU could suffer an energy crisis, as Russia's block on gas deliveries to Ukraine in 2006 illustrates. The EU's proposed common energy policy encourages a greater diversity of suppliers and supply routes and greater use of renewable energy sources produced within EU borders. Moreover, the policy would coordinate a unified, EU position when bargaining for energy supplies and in developing a strategy for stocking adequate reserves to deal with supply crises. Additionally, the EU seeks to develop its internal energy market through liberalisation, primary by generating competition through the separation of energy production and energy distribution.

Not only will developing an internal market remove some of the insecurity of imported fossil fuels, but it will also have benefits in the development of a single European market, generating both energy innovation through competition and standardisation of international infrastructure and methods. While the investment costs involved in market liberalisation are often significant, the main barrier is the power of incumbents, with former state energy monopolies keen to retain the upper hand as competitors enter the market. At the wholesale level, there are widespread complaints that companies which are benefiting from protected markets are making use of their position of strength to establish further strongholds in countries with open markets, whereas the latter have no such reciprocal opportunities.

At present the energy market is regulated according to the Internal Market in Electricity Directive which promotes energy market liberalisation. The market should be fully open to competition by 1 July 2007. Priority projects are mostly aimed at closing missing links in the electricity and gas supply networks. A key aspect is the need to develop connections for bringing electricity from new, renewable resources into the network. Wind and wave power tend to deliver the most energy in remote coastal and rural areas, where energy consumption is normally very low. The challenge for energy companies is to find cost-effective ways to implement new power sources at prices which are competitive with existing sources without causing environmental damage.

2. Accelerating the shift to low-carbon energy

In spring 2007, the EU set itself the ambitious and legally binding target of 20% renewable energy by 2020. Member states will participate in fulfilling this goal by setting themselves national targets, according to their level of technological advancement. The move will entail a gradual switch from gas, oil and coal to wind, solar, hydro and bio power and a major investment in energy-saving technology.

The European Union Emission Trading Scheme, which sets a cap on greenhouse-gas emissions, commenced in January 2005 and allows industries to buy and sell emission credits. The first phase of the Scheme ends in 2007, and the second phase (2008-2012) will significantly expand its scope to include regulation of all types of greenhouse gases and inclusion of emissions from the aviation industry. Switzerland, Liechtenstein, Norway and Iceland are expected to participate.

The ambitious goals of the second pillar are geared towards limiting global warming to not more than 2 degrees centigrade above pre-industrial levels by 2020 and include several key emission targets pegged to 1990 levels, including...

• 20% cut in CO2 emissions by 2020 and a 50% all carbon emissions from primary energy sources by 2050.
• Replacement of at least 10% of fossil fuels with biofuels by 2020
• An international agreement for an energy regime to succeed the Kyoto protocols
• A liberalisation of the energy industry, including an increase in competition by separating companies from their distribution networks.
• Binding target of 20% of overall energy production sourced from renewables by 2020
• A reduction of overall energy use by 20% by 2020
• European Strategic Energy Technology Plan for developing renewable energy resources including conservation, low-energy buildings, clean coal, carbon-capture technology and 4th generation nuclear.

Accordingly, these goals require massive growth in three renewable energy sectors: electricity, biofuels and heating and cooling. The Commission will seek legislation to promote markets for biofuels and heating and cooling technology and R&D in low-carbon technologies by the creation of a “European Energy Technology Plan and by increasing annual EU spending on energy research by 50% over the next seven years.

Currently, nuclear electricity makes up 14% of EU energy consumption and 30% of EU electricity. The European Atomic Energy Community Treaty (EURATOM) was signed in 1957. At the time, nuclear power was seen as the energy of the future, with plans to build reactors over the whole continent. EURATOM was designed primarily to ensure that all member-states could obtain nuclear fuel for power generation and that supplies would not be used for weapons programmes, with the exception of France and the United Kingdom.

Nuclear power use varies between member-states, and the Commission proposals leave each member-state to decide whether or not to use nuclear power and how much, though it recommends that where nuclear programs are abandoned the power generation be offset by low-carbon energy production. At negotiations during the 2007 Spring summit, some member-states, namely France, fought to include nuclear power as a renewable energy resource, but the wording was rejected, mostly through the efforts of anti-nuclear states like Austria.

Today there are few new nuclear facilities, though some countries may increase their capability. Existing installations need to be managed safely and their eventual decommissioning needs to be undertaken correctly. The arrival of the new member-states from central and eastern Europe has brought a number of Soviet-era reactors fully into the EU sphere, and ensuring these are brought up to equivalent safety standards (or closed down) is a key part of EU policy in the field.

3. Energy Efficiency

Energy conservation is a key part of saving 20% of primary energy consumption by 2020. If achieved, this goal would reduce total EU energy usage by 13% and save an estimated 100 billion Euro and 780 million tonnes of CO2 per year. Along with more fuel efficient vehicles and comprehensive transit policy, the Commission also proposed programs to address the efficiency of appliances, better heat and electricity generation, improved energy performance in buildings and an international agreement on energy efficiency.

The EU has already introduced energy labels for consumer goods, namely appliances and light bulbs, which offer a rating from A to G, with A being the most energy-efficient. It also aims to change traditional light-bulbs to energy-efficient ones across the Union by 2009, a small step that would save between €5-8 billion and 20-million tonnes of carbon emission per year. The greatest potential for energy conservation, though, lies in the manner buildings are constructed and managed. Buildings currently account for 40% of energy usage within the EU. It is estimated that one-fifth of present energy consumption might be saved by 2010 simply by applying energy conservation standards to new and refurbished buildings.

The EU offered to set a legally-binding target of 30% reduction in greenhouse-gas emissions if other developed nations would follow suit, but this eventuality remains to be negotiated. Other efforts at energy diplomacy include strengthening relations with the European Neighbourhood countries (especially Russia) and efforts at developing a European/African energy partnership, including a plan to help Africa “leap-frog” to low-carbon technology. The EU is also a participant in a number of international treaties and agreements aimed at energy efficiency, energy cooperation and environmental conservation. Among these are...

• Energy Charter Treaty – An agreement to integrate the energy sectors of former Soviet Union and Eastern Europe.
• Kyoto Protocol – An amendment to the international agreement on climate change, which assigned mandatory greenhouse gas reductions on 160 signatories. The EU will negotiate a post-Kyoto regime.
• Energy Community Treaty Southeast Europe Treaty – (aka Energy Community Treaty) - An agreement between the EU and south-eastern European countries which effectively established a European Energy Community. Covering sectors of electricity, natural gas and petroleum, the treaty ensures that signatories adopt the energy regulations of the EU single-market.
• Baku Initiative – Policy of dialogue between EU and littoral states of the Black Sea and the Caspian Sea to create a predictable and transparent energy market and encourage investment and energy supply.