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    Europe's Energy Needs Pragmatism, not Dogmatism: Bros

Summary

An Open letter to Mrs Ursula von der Leyen, president-elect of the European Commission.

by: Aurelie Bros, Thierry Bros

Posted in:

Complimentary, Natural Gas & LNG News, Europe, Security of Supply, Energy Transition, Corporate, Political, Regulation, News By Country, EU

Europe's Energy Needs Pragmatism, not Dogmatism: Bros

Madam President, be more visionary than your recent predecessors!

By closing the UK's coal mines in 1984, the prime minister Margaret Thatcher – unwittingly – did more good for the environment than many politicians have done since!

The 21st century began over a decade ago, yet European energy policy remains steeped in obsolete concepts. It has consisted of a perpetual updating of the so-called “inseparable trio”: security, competition and sustainability. In other words, (i) ensuring security of supply and infrastructure that enables transport; (ii) harmonising and liberalising the European internal energy market; and (iii) the greening of our energy mix as much as possible. Everything seems to have been designed so that every European citizen can access a reliable and cheap source of energy.

While this combination is attractive on paper, its application raises many challenges on a daily basis, if not inconsistencies. The reason is simple: the three objectives are incompatible, and it is de facto necessary to establish an order of preference, or even to exclude one of them.

It is clear that security has always had first place. The market has gone through significant ups and downs as a consequence of state intervention. Take, for example, the decision of Germany to arbitrarily stop its nuclear power production in 2011 without any consultation with the other EU member states.

As for sustainability, it has become a kind of third-class passenger which nobody cares seriously about; except for companies adept at greenwashing and for politicians who, for lack of serious solutions at hand now, take refuge in goals that lie far in the future.

When it comes to sustainability, we have to acknowledge that the 2008-2009 economic and financial crisis has been more effective in reducing greenhouse gas emissions than any EU stamped regulation. But at what cost? And, to tell the truth, the only solution proven by your recent predecessors to reduce greenhouse gas emissions is a perpetual economic recession! We are not sure that this will enchant European voters!

Is sustainability not an integral part of security? After all, would it not be the key to our long-term common good in the face of climate change and rising temperatures? The problem is that the definition of energy security used by Europe goes back to the eve of the First World War when Winston Churchill decided to abandon coal and fuel the Royal Navy with oil. Since then, energy security has become synonymous with a quest for:

  • access to the source (this has led to multiple interactions in the Middle East and Africa),
  • securing supplies and, consequently, the infrastructure that allows their transport,
  • and the diversification of these; which implies the construction of additional infrastructures which must themselves be secured.

In the aftermath of the Second World War, the armies of Europe had embraced the Churchillian emphasis on “total-oil”, and governments were driven solely by the fear of scarcity. Given poor geology, this feeling only increased in the aftermath of the 1971 and 1979 oil crises and the announcements of "peak oil" and "peak gas" shortly afterwards.

Europeans understood that they were dependent. Supplier countries – most of them rentier states – were also worried that supply would fall or even disappear. In order to secure the delivery of supplies on time, European states committed themselves to consuming the commodities produced by other countries. Very quickly, security of supply and security of demand became inseparable.

In the name of security, European energy companies, member states, the International Energy Agency (IEA), and the Energy Charter developed a contractual, economic and diplomatic system to ensure that oil, natural gas, uranium and coal arrived safely and on time. For example, the issue around sanctions against the Islamic Republic of Iran has always been to prevent the monetisation of their oil and gas deposits. Washington and Brussels imposed oil embargoes, limited access to technology and to the financial sector and so on in order to undermine a highly hydrocarbon-dependent economy. It is not just our armies that depend on oil but also our diplomacy.

Despite the convoluted turns of Brussels that aim to demonstrate the relevance of its strategy, the sacrosanct trio remain fundamentally unbalanced. What is more, our membership of multilateral organisations whose objective is to ensure the security of fossil fuels (IEA and Energy Charter) restricts our degrees of freedom in times of fast moving changes in the energy sector.

Today, this leads to terrible inconsistencies and has slowed the European energy transition. Sadly, the Nord Stream 2 case is a prime example.

Over the last few years, it seems that Germany has returned to the Alleingang (isolated action) in the name of its energy transition. While the motives are laudable, the results are nonetheless questionable. The Atomaustieg (exit from nuclear power) has led to an increase in coal consumption and, in fact, to rising greenhouse gas emissions. Recently, the government has lauded itself for having set a "big goal": the closure of all coal plants by 2038[1]. It is interesting to compare this rapidly written policy with the reality: the sharp drop in natural gas prices this year has resulted in a better result. CO2 emissions have fallen without any kind of political intervention. As a result, natural gas imports are predicted to grow. It should be remembered that German domestic gas production has itself been declining for years.

At the same time, Berlin has become infatuated with a new "strategy" aimed at concentrating gas supplies around a reduced number of corridors. Once Nord Stream 2 is completed, the Baltic Corridor will be the main entry point for gas into Germany.

Since Germany has concentrated its gas supplies, Belgium, Denmark, France, the Netherlands and Poland run the risk of having to reduce their industrial sector demand in order to supply gas to German residential customers in case of disruptions in supply. Is it acceptable that Germany, the EU's richest country, relies on other EU Member states to support the cost of its new supply strategy to ensure its own security? Since 2010, member states have mutual assistance obligations in the event of an incident (natural disasters, technical incidents, acts of terrorism, etc.). But the European Court of Justice, in the Opal case[2], ruled that, contrary to what the EC claims, the principle of energy solidarity cannot be limited to exceptional situations. It is up to you now to implement it.

Finally, Nord Stream 2 feeds the worst debates between pro/anti-US, pro/anti-Russia, pro/anti-Nato, pro/anti-Ukraine, and so on. Everyone seems to be ready to make their contribution to what should be a gas transit contract and secure supplies. Remember that in a liberalised market, the best safeguard remains the market. Let competition do its work. EU energy companies must stop asking for political and state support for projects that may have no future (a point that French President Emmanuel Macron seems to have understood by accepting a new version of the gas directive in February 2019).

Madam President, free your Directorate General for Energy from the annual style exercises that are the winter packages[3]. Either the industry will do its job – thanks to the market – to ensure security of gas supplies, or gas will leave our energy mix sooner than expected!

In short, energy does not unify the old continent, or at least not anymore. This is certainly where the problem lies, since Europe managed to be reborn from the ashes after the signature of the Coal and Steel Community in 1951. Robert Schuman understood that the union of Europe must be done with pragmatism and not with dogmatism. In order to avoid a disunity of energy, your commission will have to get rid of the old strategies.

The latest energy revolutions such as unconventional production of gas and oil, renewable energies, energy efficiency and on-going research on energy storage are game changers. This allows the European energy market, which is becoming more transparent, to function well and to ensure a price signal determined by the balance between supply and demand. The resources are there and so the fear of a shortage is irrational.

Moreover, it will be necessary to involve our armies in the energy transition, since our dependence took off with, or because of, them. Remember that they are also large oil consumers and therefore large emitters of greenhouse gases. Thereupon, we must redefine the overall concept of security. As long as our armies are dependent on hydrocarbons, Europe will have an Achilles heel. This will impact our own defence and our military interventions outside of the European territory.

Frau von der Leyen, forget the marriage between security of supply and security of demand. Get rid of this impossible trio. The European energy strategy must be based on two concepts: security and justice.

Security must be thought of in the long term, which makes it inseparable from sustainability. The common goal is to keep our planet habitable. To do so, the energy transition must be both civilian and military. We cannot blame every European citizen for wanting to fly, at a time when a Leclerc tank takes 12 hours to drain its 1,300 litre tank of diesel. Furthermore, transparency needs to be strengthened since it is a prerequisite for the proper functioning of the energy market. As already mentioned, the market is the safest and most politically neutral safeguard.

Justice must be part of the democratization process in Europe. Energy poverty is not an urban legend. This means that the energy transition must not mean either a permanent burden on the taxpayer or blackouts. And if that is the case, it will only increase social disparities, fuel populism and lead to growing tensions. The gilets jaunes crisis is an example. In addition, justice must be established between member states. The way a project like Nord Stream 2 is orchestrated should not happen again in Europe. In this connection, the European Court has just reminded your predecessor of the importance of solidarity.

At the same time, Member States should keep in mind that investment in research is imperative. The world needs technological breakthroughs as soon as possible. On the one hand, it is necessary to reduce greenhouse gas emissions and, on the other hand, to remove carbon from the atmosphere. Instead of perpetuating internal wars between research centers, it has become necessary to create a scientific framework that will allow the best European researchers to collaborate with each other. And eventually work with their American, Chinese and Russian colleagues.

As the German saying goes: In der Kürze liegt die Würze (brevity is mother of wisdom). The EU needs two concepts to move forward: security and justice. No more, no less. As long as Europe remains stuck on its current definition of energy security, the future we are going to offer our children will not be sustainable.

Madam President, be visionary by taking today the courageous decisions that will bear fruit much faster than you think. Take the EU out of international organizations that limit the freedom necessary for the energy transition, let the market orchestrate our security, focus on the new concept of justice and invest heavily in research and development. Finally, ask yourself: "Which source of energy should we avoid using in the future? " If the EU wants to show the world that the Paris Agreement was not limited to empty discussions and pretty photos posted on the internet, and to keep temperatures below the predicted 2°C rise, we will have to answer this question as soon as possible. It is up to you now to put in place a fast and fair energy transition that leaves no European, neither today nor tomorrow, on the side of the road. We wish you, Madam President, every success.

Aurélie Bros, Lecture and Senior Fellow at Harvard University

Thierry Bros, Senior Research Fellow at Oxford Institute for Energy Studies

  

This letter was first published in French by Le Monde on October 16, 2019, and Le Monde de l’énergie on October 17, 2019

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.


 

[1] Klimaschutzprogramm 2030, approuvé par le Bundestag le 26 septembre 2019

https://www.bundesregierung.de/breg-de/themen/klimaschutz/klimaschutzprogramm-2030-1673578

 

 

[2] Judgment in Case T-883/16 Poland v Commission, September 10, 2019

https://curia.europa.eu/jcms/upload/docs/application/pdf/2019-09/cp190107en.pdf

 

 

[3] Against the background of the situation in Ukraine and the possible related risk of a disruption in gas supplies to the EU, the European Energy Security Strategy encompasses measures to be taken in order to increase the EU's resilience to a major gas disruption each upcoming winter.