Interview: Higher energy prices ‘inevitable’, says Piebalgs

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Speaking exclusively to EURACTIV, Energy Commissioner Andris Piebalgs says that new energy and climate-change proposals should lead to higher prices for consumers. But paying 5% more now will avoid much steeper price hikes in the future, he argues.

The merits of market integration are beyond doubt for the EU’s energy chief. “We know that markets bring the best prices and the best service,” said Piebalgs in an interview with EURACTIV, one week after the Commission tabled new energy and climate-change proposals (EURACTIV 11/01/07).

And he says that the EU’s fledgling CO2 market should be at the heart of the Commission’s strategy. “What is an energy policy?” he asks. “It is a common energy market that works under some particular investment conditions.”

“Then, what is the common incentive to invest inside the Union? It is the carbon price. I could favour some technologies, such as renewables, but it will never work on a broad scale if carbon does not have a price.”

Climate change has climbed up the Brussels agenda as reducing greenhouse-gas emissions is seen as holding long-term benefits in terms of energy-supply security, industrial competitiveness and environmental protection.

A sign of this came with subtle changes in terminology. Just days before publication, the Commission’s eagerly awaited ‘energy package’ was renamed ‘energy and climate-change package’. And the centrepiece of the Commission’s proposal came in the form of a 20% cut in EU greenhouse gas emissions by 2020, an objective that Brussels wants Europe to pursue “unilaterally”, even if negotiations with the US and other large emitters on an international agreement post-Kyoto were to collapse.

However, Piebalgs is adamant that Brussels has not given up on its plans for a common European energy policy along the way. “The objective for me was always to base energy policy on climate-change objectives,” he says, arguing that further greenhouse-gas cuts were “envisaged at all times”.

But he also warns that the Commission’s proposals for a new energy “industrial revolution” will be painful for governments and consumers if these objectives are to be met.

“What we have calculated is a 5% increase in prices,” Piebalgs said.

Asked whether this would not run into opposition from citizens who worry about rising energy prices, Piebalgs retorts that future price hikes are “inevitable”.

“If we do not pay this 5% now, we will pay later 20 or 50% more because of the oil prices going up. It is quite clear that given the current rate of consumption and reserves, it cannot be that in five years time we will have oil prices at $60 per barrel, forget about it! For gas prices, it is the same.”

But he does not rule out specific support measures for poorer citizens. “At the same time, we are saying that support is needed for specific people, with a universal public- service obligation.” 

“For private consumers, you can make particular rules, but you should not play against the basic market rules because then the investment is inefficient.”

And he says that competition “is the best way to spend as little money as possible for new generation capacity,” pointing out that some €900 billion needs to be invested in Europe over the next 25 years.

“Where will you get this money from? It will come in the prices, inevitably!”

Click here to read the full interview with Piebalgs and learn about the Commission’s views on nuclear, renewables, energy efficiency, carbon capture and storage and more.

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