Energy and transport

The EU-Russia Summit, which took place in Khabarovsk on the 21st and 22nd of May, was an opportunity to discuss and tackle issues such as the economic crisis, climate change and last but not least energy security. The discussions between Russian President Dmitry Medvedev, President Jose Manuel Barroso, Benita Ferrero- Waldner (External Relations and European Neighborhood Policy), Baroness Catherine Ashton (Trade Commissioner) and Andris Piebalgs (Commissioner for Energy) did not go as expected. Moscow accused the EU of creating dividing lines by offering closer ties to six former Soviet republics (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine). Mr Medvedev highlighted in a press conference ‘We would not want the Eastern Partnership to turn into partnership against Russia. There are various examples. I would simply not want this partnership to consolidate certain individual states, which are of an anti-Russian bent, with other European states’.

Concerning the domain of energy, the Russian president questioned Ukraine’s ability to pay its gas stocks, proposing that it borrow from his country and the EU. In contrast, Mr Barroso stated ‘We are open to discussing new proposals, but we should rely on existing agreements. We should not question the present energy security system in Europe’.

Image: European Commission Audiovisual Service

While Georgia’s President was present, the Presidents of France, Italy, Spain, UK, Austria, Portugal, Luxembourg, Malta and Cyprus were notably absent. Only Germany was the ‘bug Western player’ to support the event. The summit’s main goal was to “gather leaders from the EU Member States, EU institutions and Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova and Ukraine to launch this new framework of reinforced bilateral and multilateral cooperation” in order to “lead to deepening of political and economic relations, more energy security, increased mobility and will give an additional boost to pro-democratic and market oriented reforms in partner countries.”

Source: European Commission Audiovisual Service

This is the amount EU leaders have just pledged to spend on energy and broadband internet infrastructure. In late January, the Commission proposed to redistributed €5 billion of unspent agricultural funding from the previous year. Member states criticized the reallocation as initially proposed, disagreeing over which projects deserved funding. The initial proposal had set aside a smaller amount for energy projects, but pressure and more projects increased the amount. The plan still needs to be approved by the European Parliament.

Image: www.flickr.com /jepoirrier

Climate change and energy concerns have been at the top of the agenda in 2008. The French presidency brought together the European Council for a summit on this topic on December 11th and 12th . After a long debate, France succeeded in reaching a compromise between the 27 heads of states on the combat against climate change. Three goals have been reiterated: The reduction of CO2 emissions by 20 percent, the reduction of energy use by 20 percent and the increase in the use of renewable energies by 20 percent by the year 2020. However, facing a severe economic crisis, most governments only agreed through diverging and opaque concessions regarding the technical details. One concern was to avoid further charges for the car industry. However if Europe wants to play its role as leader on climate change during the upcoming post-Kyoto conference in Copenhagen in 2009, it has to define its climate goals as narrowly as possible – especially in times of an economic downturn.

Photo: www.flickr.com/ Davipt

Those were the words of Russian President Dmitry Medvedev On Friday 27 at a summit in Siberia. Russia and the EU ended 18 months of setbacks when the two parties initiated the long-delayed negotiations over a number of issue to be included in a bilateral treaty. European leaders praised Mr. Medvedev with Commission President Barroso calling his counterpart “relaxed and open”. In spite of the newfound good spirit tensions still exist on notably trade and energy issues with Russia warning the EU not to politicise the already much debated German-Russian Baltic Sea gas-pipeline. The project has seen heavy criticism from central and eastern European countries, fearful that the pipeline will serve to impose higher prices on them.

In 2007 European leaders agreed that 10 percent of all transport fuel should come form renewable sources such as biofuels by 2020. Recently the biofuels target has come under heavy criticism. Biofuels have been singled out as a main source of rising food prices with one World bank study claiming that biofules have contributed to 65% of of the price rise. Until now the Commission has refused to revise its policies over fears of making itself vulnerable to similar claims concerning the EU’s other targets. Now, the political atmosphere could be changing with French ecology minister Nathalie Kosciusko-Morizet stating that the EU had proposed things the wrong way round: environmental and social criteria for the production of biofuels should have been developed and fixed first and then any target should have been drafted to match that.

A new study performed by Clean Edge, a clean-tech research and publishing firm, and green-economy non-profit Co-op America brings good news to the table. In a time, when carbon free energy sources are much needed the study predicts that one of the renewable energy sources with the biggest potential is about to become more commercially attractive. The study predicts that the cost of energy produced from solar photovoltaic cells will decline from today’s average of $6 per peak watt to an average of just $1.5 in 2025. As the price of fossil fuels such as gas, oil and coal comes up, solar energy becomes more attractive. Solar energy could be on its way to become one of the keys to solving global warming.

It is not only French President Nikolas Sarkozy who finds himself under popular pressure due to the high oil-prices. From Portugal to Scandinavia interest groups and consumers are calling for less taxes on oil. Tax deductions, subventions and alike are begin considered by Europe’s politicians to alleviate the upset voters. Measures which are totally contradictory to the low-carbon energy goal that most European governments have set for their country. We now seem to have the answer to how the Europeans would react when the going got tough and the price of combating climate change was to be paid. The result does not come as a big surprise. In the first big test the Europeans opted for security of supply at affordable prices rather than accepting that high oil prices is the push that is needed to accelerate the shift to a low carbon economy.

No. This week’s number is not the soaring oil prices. But it is related. While everybody is looking with disbelieve at oil prices that are now traded at more than 125 dollars the barrel, something similar is happening to an equally important fossil fuel; coal. But this shouldn’t come as a shock. The once abundant and reliable source of energy is in short supply and under high demand – especially due to the growing economies of China and India. The last five months coal-prices have risen by 50% and if you think that was bad just wait. It’ll get worse. India alone is expecting for its current annual demand of 460 million metric tons to quadruple by 2031. Very soon, concerns over security of supply could become a serious competitor to climate change concerns.

The French president has found the miracle solution to alleviate the costs of rising fuels prices for the European consumers: just getting rid of to VAT on petrol and diesel at European level! Unfortunately for him, this seemingly brilliant solution has been welcome with little enthusiasm by the European Commission. Spokespeople for the Commission have explained that such a move would give a very bad sign to producing countries which will keep boosting oil prices and in the long run the net effect would only be a loss of revenue for the States. The Member states who were counting on this miraculous solution to end protests by fishers and truckers will have to be a bit more imaginative… especially given the fact that all 27 would have to agree to changes the rules on VAT.

Those are the words of Commission president Jose Manuel Barroso addressing the future of nuclear energy in Europe. Recently the UK has announced plans to cooperate with France on a nuclear program and Italy has put an end to a 20 year moratorium on the construction of new plants. This is part of a larger trend that has been described as a “nuclear renaissance” mainly fuelled by the skyrocketing price of crude oil and the increasing public scrutiny of CO2 emissions. It is reassuring that climate change is prompting reaction from European governments but investing nuclear energy will not be the easy way out. A truly green policy must take into account its implications especially the long term ones, Berlusconi, Brown and Barroso aren’t exactly keen on explaining what will be done with the nuclear waste produced by these brand new plants…

The EU’s own environmental experts advise the EU to suspend its target of a 10% share of biofuels in transport until a comprehensive study has assessed the environmental risks. The Copenhagen-based European Environment Agency says that biofuels made out of food and feed crops are not optimal with regards to fossil energy saving and to greenhouse gas reduction. The EEA argues that biofuels are much more efficient for producing power and heating. At the same time the agency demands a strategy for energy efficiency improvements to acompany the increased use of biofuels. Also, the report points towards the accelerated destruction of rain forests in developing countries, which is the consequence of the EU’s biofuels policy. It is good news that the EU’s own agency is now finally speaking up on the unintended consequences that the EU’s policy on biofuels is producing. A policy on biofuels is required but it needs an appropriate regulatory framework.

Only ten years ago trade in greenhouse gasses was an abstract thought in the mind of the policy-makers of the world. Today, greenhouse gas trading has become a commodity market in its own right. The value of the global carbon market increased by staggering 80 % in 2007 and CO2 credits worth the value of 40.4 billion euro changed hands. With the Commission set to tighten the EU Emissions Trading Scheme from 2012 by including more sectors in the scheme, CO2 trade seems set to boom over the next years. In addition, more than 13 climate change bills are being discussed at the moment in the US Congress. The introduction of some sort of market based mechanism in the US within the next couple of years seems inevitable. In short there is a growing enthusiasm for the carbon trading system among politicians, companies and investors. That is good news when contemplating the latest warnings from climate change scientists.

The Commission seems to be fond of launching large energy policy packages in January. Last January the ‘Energy for a Changing World’ package was published, pointing out the direction of EU energy policy. This year, 23 January will see the Commission publish its much debated draft directive on how to raise EU renewable energy consumption to 20% in 2020. Not surprisingly, the debate evolves around how the overall target should be divided between the member states. As if that was not enough the Commission is internally divided over a related topic: its draft directive for a post-Kyoto emissions trading scheme, due to be published the same day. In order to reduce EU greenhouse gas emissions by 20% in 2020 the most “green” members of the Commission wish to include new sectors in the trading scheme, such as the aluminium sector. More industry friendly Commissioners are afraid that this move would be the deathblow to a number of European energy intensive industries. Indeed, January 23 will be energy day.

Nuclear power is making a remarkable comeback in European energy policy. On Thursday 10 January the British government approved plans to set up new nuclear plants. French EDF has already made its plans to publish four nuclear plants in the UK by 2017. The government pointed out that the new nuclear plans aim to help the UK meet its climate change objectives along with “other low-carbon technologies”. The UK-decision is another sign of the comeback of an energy technology that only a few years ago was the black sheep of the energy technology family. Concerns over security of supply and climate change and the notion that wind power and other renewables at present cannot replace carbon, has led policy makers to reincarnate nuclear technology.

You would not have thought so only five years ago. Nuclear energy is back in town. Of course, in member states like France and Finland it was always there. But governments have mainly been displaying a “keep it on the down low” approach to the controversial energy technology. During these days of concern over the security of supply of energy and climate change, European leaders look for alternatives. One of which is renewable energy technology that many fear will not be able to make up a reliable electricity base load in the European energy system. While the EU cannot dictate member states’ nuclear energy policy, the Commission can influence their decisions. It did so Monday 26 November when Commission president Barroso inaugurated The European Nuclear Energy Forum with the quote above. The Forum is to meet twice a year and discuss the use of nuclear energy. While it remains a relatively low-key policy initiative, it reflects that it is becoming increasingly more legitimate to think about nuclear energy as a real alternative to fossil fuels.

This is the percentage of national GDP that France spends on research in low-carbon technologies, making France the European leader. Here European leaders could really make a difference and Thursday the European Commission announced its plan on how to step up the development of low-carbon technologies. Not surprisingly, the Commission talked of more research investments. Only problem is that the Commission lacks funds to walk the walk and increase the much needed investments that perhaps one day would allow Mr. Verhofstadt, Mr. Balkenende and Mr. Juncker to plane-pool in a CO2 free aircraft to visit their old friend Barroso, and reminisce the long-gone days when Europe still spent billions on agricultural subsidies and global warming was a problem. Instead the Commission can do nothing more than to coordinate and to collect and disseminate information. A real development of low-carbon technologies will only happen when the member states walk the walk and increase their research funding.