Europe’s energy policy: Running out of fuel?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

EU gas imports will stay stable for at least the next two decades. [James Crisp/Flickr]

Energy security continues to top Europe’s agenda, as proved by the sustainable energy security package unveiled by the Commission in February. Although a step in the right direction, it falls short of ensuring true solidarity in case of supply disruptions, writes Zdzisław Krasnodębski.

Professor Zdzisław Krasnodębski is a Polish MEP and ECR group coordinator in the ITRE committee and EP rapporteur for IGA (Intergovernmental Agreement) decision.

The main component of a successful energy policy is access to secure, sustainable and competitively priced energy for all Europeans. Let us take them one by one and see how they are addressed in the Commission’s proposal.

Energy security definition is nowhere to be found

As far as security is concerned, the Commission proposes that commercial gas contracts or non-binding instruments, such as joint declarations between EU member states and third countries, be subject to a review after they have been signed. This is in stark contradiction with intergovernmental energy agreements which are to be examined before the fact. Documents of that kind shall all be subject to an assessment by the Commission before they are allowed to go ahead. This would bring in not only necessary legal certainty for capital-intensive investments but also address the problem of the lack of a definition for “energy security” which, unfortunately, is nowhere to be found in EU law. Since the term is extremely hard to pinpoint legally, the Commission needs to be able to intervene if legitimate energy security concerns arise. This is what the package is primarily about. The exact scope of the Commission’s involvement can be further discussed to tailor it specifically to the needs of member states suffering from the dominance of one supplier that refuses to play by the common market rules. Other EU countries must show solidarity in this respect with less privileged members of the bloc. Equal scrutiny of commercial and intergovernmental contracts, as well as non-binding instruments, will also prevent temptation by the parties to play “regulatory jugglery” and pursue negotiations based on a less rigorous cooperation model.

Europe needs more fair competition

This leads us straight on to competitiveness. Up-front regulatory check-up would ensure a well-functioning internal market without fragmentation and encourage more fair competition. Under the current IGA decision, the Commission established that 17 intergovernmental agreements were not compliant with EU law. This represents roughly one third of the most relevant deals that were analysed, i.e. those related to infrastructure projects or energy supply. Having detected the irregularities, the Commission decided not to launch an infringement procedure against any of the member states concerned. This proved to be difficult for political and legal reasons. But the fact remains that these agreements skew the functioning of the common market and harm its competitiveness. It also undermines trust among EU countries that see some members of the club sign such deals irrespective of the interest of the Union as a whole. Fortunately enough, the Commission managed to block South Stream – the most controversial agreement of this kind. Had it gone ahead it would have threatened Europe’s diversification efforts including the Southern Gas Corridor (one of its key investments in this respect) and forced out potential suppliers other than Russia. The fact that the Commission could only examine the South Stream case based on its results created a difficult situation for the parties involved, since deals had already been signed and certain investments already been made. This is yet another argument for more transparency in energy negotiations which, if applied by all member states, would eliminate investment risks and direct funds into projects fully compliant with EU law and energy security objectives.

Sustainability: there is more to come

Some opinions have been expressed that the sustainability issue has not been properly addressed in the Commission’s proposal. Given the EU’s efforts to increase its energy efficiency, the argument goes, the Commission risks overestimating gas demand. This is flawed reasoning. The heating and cooling strategy is an important element of the package focusing exclusively on moderating Europe’s demand. Concrete EU legislative actions are also expected later this year. For now, it is important to concentrate on the supply side of the energy equation. In this context, one has to remember that gas is a necessary transition fuel towards a low-carbon future. If we are to import any fossil fuel it would better be gas, which is the least dirty. Yet those who think that Europe should increase its energy imports are missing the point. This proposal is not only about Europe’s gas consumption but, perhaps more importantly, its import dependency. In 2013 (the latest figures available from Eurostat) the latter stood at about 65%, increasing from roughly 43% in 1995. Demand for imported gas is likely to remain stable at least over the next two decades since domestic EU production is set to decline by 60% by 2035 according to ENTSOG. The conclusion is that in the years to come, Europe will get a lot of its gas from abroad, which is why our diversification efforts need to be maximised.

Energy policy at a crossroads

The EU is in desperate need of a success. Torn apart between migratory and eurozone crises, it needs a new integration narrative that will prove Europe can successfully move forward. Energy is one of the fields where the EU’s potential has remained largely untapped. This can be changed by applying the basic principles on which the integration project was founded, i.e. solidarity and trust among member states, to future European energy endeavours. The package will test the bloc’s unity in light of emerging energy security challenges, the most important one being Nord Stream 2. In front of us, there is a unique opportunity to put a game-changing piece of legislation in place. This would send a strong signal to Moscow that Europe stands united. If we fail, one more key policy area, instead of being at the core of European integration, will make member states drift further apart.

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