Rhein on Energy and Climate

60 years after the project of European integration was begun, the outlines of a comprehensive energy policy are finally visible. The European Council Conclusions of February 4th have been a decisive corner stone on what is a very long and still incomplete march.

It has taken dramatic transformations in global energy and climate conditions to get to this point; and the Lisbon Treaty has laid the legal ground by conferring full legislative authority upon the EU. But without a President of the European Council and a full-time Commissioner, both committed to making decisive progress, it would not have been possible to reach a consensus on the broad lines of the European energy strategy to be implemented in the next decades.

The traditional patchwork approach will be progressively replaced by a coherent strategy encompassing internal market, energy security and external supply policy, energy efficiency, energy infrastructure and climate considerations.

Short- and medium-term policy decisions will need to be taken in the light of overarching long-term policy objectives for reducing green house gas emissions by 80-95 percent by 2050, as agreed by the European Council in October 2009. Achieving such an objective implies no less than a veritable energy revolution. But

Europe has no alternative if it wants to make its energy supply sustainable , as called for in article 194 of the Lisbon Treaty and continue to be the champion of global energy sustainability.

The Commission is in the process of elaborating a low carbon roadmap up to 2050, with intermediate targets. This exercise will help clarifying the policy options on which the European Council will deliberate in the coming months. It will be the first time any country defines its energy strategy for the next 40 years. The EU will thus play a pioneering role and set an example for countries like China or the USA confronted with the same challenge of revolutionising their energy systems.

The most urgent priority for the EU remains, however, the completion of the internal market.

It is unbelievable that, due to national opposition and the absence of a trans – European grid infrastructure, the EU still constitutes a patchwork of 27 separate gas and electricity markets. The European Council has therefore rightly called upon the Commission and member states to urgently put an end to such fragmentation. Within the next three years, national regulators will have to connect all member states to a European-wide grid, in line with Commission proposals. Financing should essentially come from private sources to be attracted by remunerative tariffs.

The completion of the internal gas and electricity market will enhance competition and, crucial for the development of renewable energies, enable wind energy from the north and solar energy from the south to combine in the network and guarantee quasi round the-clock renewable electricity supply.

Higher energy efficiency needs be the second pillar of the European energy revolution. On this track the EU is lacking behind implementation of its 2007 target of reducing energy consumption by 20 percent until 2020, essentially through higher energy efficiency.

Since 2007, the EU has relied essentially on tighter insulation standards for new buildings, but refrained from also imposing mandatory standards on existing buildings or embarking on large-scale programmes for energetic renovation of the building stock, partly to be financed from structural funds.

To make headway the EU seems to be discovering an untapped potential of energy saving in public buildings and transport. As of 2012 public authorities will have to take energy efficiency into account in their public procurement of goods and services. That is fine, but will cover only a fraction of the market. Without higher prices energy consumers will not find it sufficiently attractive to invest energy efficiency! But for political reasons member states are afraid of raising excise taxes on heating fuel, gasoline and gas!

Last not least, the EU is determined to develop a unified external energy policy in view of enhancing security of supply, especially for gas flows. Diversification of supplies remains key. The European Council has therefore given its backing to the southern gas corridors, which should make the EU a bit less dependent on Russian gas supplies. In view of putting more coherence and transparency into the external energy policy, member states will in future have to inform the Commission of all existing and new bilateral. This is an overdue decision. But one should not expect miracles from such initiatives.

The EU Commission will come up with proposals legislative and regulatory action in March emphasising the need for incentives. If these were to prove inadequate the EU will have little choice but to take mandatory action after another review of the situation in 2013.

In conclusion, the EU is preparing for big leap in unifying its energy policy and making it sustainable. But it will be long and very difficult haul to pass from the drawing board to the harsh political realities in 27 member states. The success will depend on the persistence from the Commission and a firm hand by the European Council.

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