Let’s get together - European Energy Review
Let’s get together
by Karel Beckman
Jacques Delors’ think tank Notre Europe has come up with an impressive plea for a European energy policy. ‘Europe faces several major crises: an energy crisis, an environmental crisis and an economic and financial crisis. It is dangerous and illusory to assume that these challenges can be addressed at state or regional level.’
Ten years ago Europe had the goal of becoming the most competitive economy in the world. Now we are facing a possible decline. If we continue to do things on a national basis, and if we remain divided, we will not be relevant anymore in ten years’ time.’ This is the firm belief of Sami Andoura, research fellow at the French think tank Notre Europe, founded by Jacques Delors.
Notre Europe is facing a herculean task. In the coming year it will be trying to get broad support in the European institutions and among member states to form a true “European energy community”. Or at the very least, to develop a common European energy policy – which does not exist at the moment.
Calls for a common EU energy policy have been heard before of course, but perhaps never as passionately and well-argued as in the new “policy proposal” put forward by Jacques Delors, former President of the European Commission, at the beginning of this month. And Delors’ proposal, which will be presented at the European Parliament in Brussels on the 5th of May, comes at a crucial juncture: in the midst of an economic and financial crisis, at a time when the EU is struggling to form a new identity after the adoption of the Lisbon Treaty.
|‘The Lisbon Treaty does not change anything with regard to energy competence’|
Andoura, who was one of the authors – with Leigh Hancher and Marc van der Woude – of the study underlying Delors’ policy proposal, says that the current ‘fragmented’ European energy policy impedes critically needed investments in green technologies and trans-European networks and thereby undermines Europe’s ability to innovate. It also undermines European security of energy supply. A common energy policy, he believes, is critical to the European economy, because, as the “policy proposal” states, ‘energy is not just any good’. It ‘is indispensable to all human or industrial activity. Demand is inelastic and supply often requires very large investments. Moreover, it is increasingly being transported and transmitted via international networks.’
The problem with the EU’s current energy policy, such as it is, is that it is pursued indirectly: through the market liberalisation process and through environmental legislation. The three goals of energy policy are: affordable access, sustainable development and security of supply. But these, says Delors’ think tank, cannot be reached merely by market integration and liberalisation and leaving all strategic dimensions of energy policy to the member states. ‘It is dangerous and illusory to assume that these challenges can be adressed at state or regial level’, says the report.
In current EU policy, argue Andoura and his fellow authors, the market liberalisation process ‘is viewed almost as an end in itself’. The problem with this is that ‘both users and suppliers may prefer long-term price stability over short-term price volatility’. At the same time, sustainability ‘is treated as a separate, environmental issue’, for instance through the emission trading scheme (ETS). But the ETS ‘is not designed to ensure long-lasting access to energy resources’. As to security of supply, this has ‘barely even been addressed at the European level’. Measures remain limited to coordination of stocks and the technical operation of grids.
The “policy proposal” summarises the structural deficiencies of European energy policy as follows:
- European energy policy is not consistent. It has no energy policy objectives as ends in themselves. There is the goal of market integration, but that is not an energy goal. Policies rely on market forces, and at the same time they show a distrust of the market, evidenced by complex market oversight rules.
- It has no external dimension. Member states guard their sovereignty jealously, including their right to conduct relations with third-country oil and gas suppliers. Thus, the EU is absent on the international energy scene. It is an easy target for divide-and-rule policies by third-party suppliers.
- The EU lacks the capabilities to develop a real energy policy. It cannot take direct action itself. It has no money to do so. ‘The Commission can make strategicy energy reviews, but they are just recommendations’, says Andoura. ‘The EU has very little money to invest in research and development, let alone to make significant investments in networks. Compare this to the investments the US and China are making.’
So what should be done? Continuing in the way we are now, with more market directives, is not going to solve the problem, says Andoura. According to the “policy proposal”, the EU must have the authority to set the right balance between the three energy policy objectives. It also needs to be equiped with the means to make investments in research and development, networks and green technologies. To this end, it needs to be able to raise levies and allocate resources. It must also be able to buy oil and gas collectively and to take price stabilisation measures if necessary. And its energy policy must be ‘compulsory’, as the report puts it.
How could these goals be accomplished? Andoura notes that the Lisbon Treaty has not brought the required change as far as energy policy is concerned. ‘We have discussed this with legal experts, and members of our Task Force, and we all agree that the Treaty does not change anything with regard to energy competence. For instance, it says that the EU will have to develop policy in a spirit of solidarity, but that does not mean much in actual practice.’
To modify the Lisbon Treaty again, however, is hardly a realistic option, Andoura realises. It was difficult enough to get the Lisbon Treaty adopted. The “policy proposal” therefore lists three alternative options. First, to make a separate Energy Treaty, which would establish a new “European Energy Community”. Second, to use the so-called “enhanced cooperation mechanisms” which article 20 of the Lisbon Treaty allows for. Third, to go by the way of ad hoc or transitional arrangements outside the EU's legal and institutional framework, as was done for example with the Schengen Agreements.
According to the “policy proposal”, the ‘optimal solution’ would be the creation of a new European Energy Community which would have full responsibility for all aspects of energy policy. However, since this goal is unlikely to be achieved soon, Notre Europe recommends the adoption of various forms of enhanced cooperation measures in the interim. It mentions three examples of such measures:
- - Strengthened cooperation with respect to energy networks
- - A common energy fund for financing new technologies
- - The establishment of gas purchasing groups either by private operators and/or by member states, which could ultimately form a Gas Purchasing Agency
The latter would of course fly in the face of current EU competition policy, Andoura concedes. ‘But this’, he says, ‘only shows how the exclusive emphasis on the market makes the objective of security of supply difficult to achieve. At least we should have a debate on it.’
|‘Energy is not just any good. It is indispensable to all human or industrial activity’|
An important point made in the “policy proposal” is that whatever course is adopted, it is not necessary for all member states to join immediately. An Energy Treaty or enhanced cooperation mechanisms could be adopted by a limited number of member states (in the case of enhanced cooperation mechanisms there must be at least 9 member states to participate). Other states could then join in later, just as was done with the monetary union.
Clearly what matters most now is to get a number of member states to join in developing a common energy policy. To this end, Andoura and his colleagues of Notre Europe will start touring the capitals of the member states after the report’s presentation in the European parliament. They will discuss their proposal with decision-makers and stakeholders in a series of closed sessions. Herman van Rompuy, the new President of the European Council, has already announced that there will be an Energy Summit In the spring of 2011. At this summit, Andoura hopes that Delors’ “policy proposal” for a European Energy Community will be addressed. ‘That is our target. We do not want any more compromises and fragmented initiatives. We hope the European energy policy will be tackled as a whole.’
The “policy proposal” by Jacques Delors, “Towards a European Energy Community”, as well as the study underlying it, can be found on the website of Notre Europe (www.delorsinstitute.eu). For anyone involved in European energy issues, it is definitely worth reading. The study was written by Sami Andoura, research fellow at Notre Europe, Leigh Hancher, professor of European law at the University of Tilburg and Marc van der Woude, Professor of Competition Law at the University of Rotterdam.