Modern EU energy policy: challenges and solutions

European several decade’s energy policy included hundreds of regulations, directives and decisions aimed at optimal use and development of energy resources and networks. During last decade the Union’s energy policy has experienced dramatic changes reflecting global and European challenges. The energy-related triangle: energy, climate changes and environment protection has become a focal point in the basic orientation for national governance in active policy transformation, which also includes the EU’s political guidance on sustainability, circular society and digital economy…

Energy issues have been always at the center of European integration: even from the start, i.e. the initial six-states’ coal and steel “community”, as well as EURATOM treaty in 1952, at least partly dealt with energy resources and its nuclear component. Then, in 1957 the EEC Treaty included among about a dozen political directions “measures in the energy sector” mostly as part of the “common market” integration and coordination (art. 95, the EEC Treaty) concerning the member states “approximation of rules” for the optimal market functioning. Besides, the EEC’s chapter on trans-European networks (arts. 154-156) unconditionally mentioned the necessity of energy infrastructures’ development.

Energy policy: legal requirements

During last sixty years of EU’s socio-economic integration the EU’s energy policy was based on certain basic principles. The Lisbon Treaty – presently the EU’s basic law (adopted in 2008) – proclaims the energy policy as a “shared competence” in energy and trans-European networks, TEN-T between the EU institutions and the member states. Thus, two aspects in the energy sector are presently dealt with in the EU basic law:

= First, the whole Treaty’s Title XVI on trans-European networks underlines the achievement the internal market objectives, as well as economic, social and territorial cohesion (referred to correspondingly in arts. 26 and 174) to enable citizens of the Union, economic operators and regional and local communities to derive full benefits the area without internal frontiers. Thus, the EU bodies shall contribute to the establishment and development of trans-European networks in the areas of transport, telecommunications and energy infrastructures.

Of particular importance is legal requirement to create a “system of open and competitive markets”, where the EU actions “shall aim at promoting the interconnection and interoperability of national networks as well as access to such networks” (art. 170, TFEU).

= Second, specifically on complex energy issues (Treaty’s Title XXI) requiring that the energy policy shall be seen “in the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment”. With this the EU’s policy on energy “shall aim, in a spirit of solidarity among the member states, to: a) ensure the functioning of the energy market; b) ensure security of energy supply in the Union; c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and d) promote the interconnection of energy networks (art.194, TFEU).

On the economic side, there is still an important issue of a EU-wide single energy market issues*); the EU is eager to remove still existing (through fewer) technical and regulatory barriers so that energy can flow across national borders and energy providers can compete throughout the EU.

*) See “market and consumers” at: https://ec.europa.eu/energy/topics/markets-and-consumers_en?redir=1.

 

Modern transformations in European energy policy

New approaches to states’ energy policies reflect fundamental changes in the general approaches to national political and economic governance impacted by the modern challenges. Thus, for example, European targets for 2030 climate and energy framework include cutting greenhouse gas emissions, increasing the share of renewables in the energy mix and issues of energy efficiency. As to the energy-environmental connections, the targets include decarbonising the member states energy use to reach the 2030 climate objectives; the latter aimed at making Europe a carbon neutral continent by 2050.

Source: https://ec.europa.eu/info/energy-climate-change-environment/implementation-eu-countries/energy-and-climate-governance-and-reporting_en.

The role of the national governance is great: thus, the member states have to prepare their national 10-year “energy and climate plans” (so-called NECPs) for 2021-2030, together with their national long-term strategies to implement the Paris Agreement commitments; the member states were obliged to submit final NECPs by the end of 2019. More on NECPs in:

https://ec.europa.eu/info/energy-climate-change-environment/implementation-eu-countries/energy-and-climate-governance-and-reporting/national-energy-and-climate-plans_en.

The national NECPs for 2021-30 can be seen in the mentioned link.

Main transformations towards the EU-wide-2030 climate and energy framework are including the following targets and policy objectives:

= Preventing all sorts of pollution as part of the European Green Deal: the Commission proposed in September 2020 to raise the 2030 greenhouse gas emission reduction target, including emissions and removals, to at least 55% compared to 1990; this guideline was dabbed “55-goal”.

Preventing pollution required national governance actions across all socio-economic sectors including increased energy efficiency, renewable energy and sustainability. The states were obliged to make detailed legislative proposals by July 2021 to implement and achieve the EU’s political goals. This member states’ trajectories would enable them to move towards a climate-neutral economy and implement national contributions to the Paris climate agreement.

= Implementing a dual governance perspective: i.e. the EU-wide-2030 climate and energy framework with the following three ambitious targets: a) at least 40% cuts in greenhouse gas emissions (from 1990 levels); b) at least 32% share for renewable energy; and c) at least 32.5% improvement in energy efficiency.

Thus, e.g. the 40% greenhouse gas reduction target shall be implemented through such measures as the EU Emissions Trading System, the “effort sharing regulation” with the states’ emissions reduction targets and the land use change and forestry regulation: in this way, all economy’s sectors will contribute to the achievement of the 40% target by reducing emissions and increasing removal’s efficiency.

Besides, the “price of climate legislation” will be updated with a view to implement the present proposal of at least 55% net greenhouse gas emissions reduction target; the Commission has already prepared an implementing proposal in July 2021.

= The governance system in nergy: under the Regulation on the “Governance of the Energy Union and Climate Action”, the EU has adopted integrated rules to ensure planning, monitoring and reporting of progress towards 2030 climate and energy targets and its international commitments under the Paris Climate Agreement.

On the Regulation see: https://ec.europa.eu/clima/policies/strategies/progress/governance_en.

Based on the EU’s better regulation principles, the governance process involves consultations with citizens and stakeholders. More in: https://ec.europa.eu/clima/policies/strategies/2030_en.

The Regulation on the governance of the energy union and climate action 2018/1999 entered into force on 24 December 2018 as part of the “Clean energy for all” package.

The regulation emphasizes the importance of meeting the EU’s 2030 energy and climate targets and sets out how EU countries and the Commission should work together, and how individual countries should cooperate, to achieve the energy union’s goals. It takes into account the fact that different countries can contribute to the energy union in different ways.

The goals of the regulation are:

  • to implement strategies and measures which ensure that the objectives of the energy union, in particular the EU’s 2030 energy and climate targets, and the long-term EU greenhouse gas emissions commitments are consistent with the Paris climate agreement;
  • to stimulate cooperation among the EU states in order to achieve the objectives and targets of the energy union;
  • to promote long-term certainty and predictability for investors across the EU and foster jobs, growth and social cohesion in the energy union;
  • to reduce administrative burdens, in line with the EU principle of better regulation; this will be done by integrating and streamlining most of the current energy and climate planning and reporting requirements of the EU states, as well as Commission’s monitoring obligations;
  • to ensure consistent reporting by the EU and the member states under the UN Framework Convention on Climate Change and the Paris climate agreement, replacing the existing monitoring and reporting system from 2021 onwards.

Thus, the governance mechanism is based on integrated national energy and climate plans (NECPs) covering ten-year periods starting from 2021 to 2030, EU and national long-term strategies, as well as integrated reporting, monitoring and data publication. The transparency of the governance mechanism is ensured by consulting wide public on the NECPs.

The states’ national plans for energy policies shall cover the following EU’s energy priorities: – decarbonisation (greenhouse gas reduction and renewables), – energy security and energy efficiency, – internal energy market, as well as – research, innovation and competitiveness issues. The EU states were obliged to submit their 2021-2030 draft plans by the end of 2018 and the final plans by the end of 2019, followed by the Commission’s assessment and final approval.

 

Recent accounts on the “EU energy union”

The fifth and the latest EU-2020 state of the energy union report was published in October 2020 and revealed the conditions of the states’ contribution to the Union’s long-term climate goals and the progress made in the energy union dimensions. It also highlighted the NextGenerationEU recovery plan’s support for the EU states through a number of EU funding programmes. The report is accompanied by a wide range of reports and annexes, including the individual assessments of the national climate and energy plans (NECPs), analysing the contribution each country is committed to make to the EU 2030 energy and climate targets. More in: https://ec.europa.eu/energy/topics/energy-strategy/energy-union/fifth-report-state-energy-union_en.

Reflecting on the EU-2020 “State of the Energy Union” report, the Commission executive vice-president for the European Green Deal, F. Timmermans underlined that the European energy sector played an important role in cutting emissions and delivering the European Green Deal. Thus, the “State of the Energy Union Report-2020” showed the progress the states made as well as the challenges and opportunities ahead: e.g. approved investments and reforms during last years were aimed at driving the green recovery and put Europe on the right track for becoming climate-neutral by 2050. Besides, Commissioner for energy, Kadri Simson, said that the National Energy and Climate Plans have been essential for the states’ governance work in planning energy policies and investments aimed for a green and climate transitions. The years of 2020-21 are the time to turn these plans into reality and use them to lead the states out of the Covid-19 crisis with new jobs and a more competitive European energy union. Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1837/ Published in October 2020.

 

European energy: through political economy

On the common EU-wide political side, there are actually the following main energy issues: a) energy supply, b) renewable energy, c) energy efficiency, d) single energy market and e) nuclear energy as well as energy infrastructures; more on the issue in the Commission’s web-site at: https://ec.europa.eu/info/topics/energy_en.

For example, nuclear energy is still a vital component in energy policy’s in some EU states (e.g. in France); in the complexity of energy security issues as, for instance, in diversification of energy sources and efficiency the important role of nuclear power in the energy mix presently and in perspective is rather feasible potentially for heat and hydrogen production. However, several issues have to considered: i.e. challenges in reconciliation with the introduction of intermittent renewable energy sources and the build-up of the perspective electricity grids (including available and future renewables), as well as the complexity of financing in the nuclear energy sector. More in:  https://ec.europa.eu/jrc/en/event/energy-security-and-role-nuclear-energy-europe-7943.

Internationally, the SDG-7 “Affordable and clean energy” aims at ensuring universal access to affordable, reliable, and modern energy services and substantially increasing the share of renewable energy in the global energy mix by 2030. According to the UN, energy accounts for about 60 percent of the total global greenhouse gas emissions, which make it the main factor of climate change. Thus, more than 2.7 billion of people in the world still rely on wood, charcoal or animal waste for cooking and heating, and biomass-induced air pollution causes about 1.3 million deaths each year (mainly women and children). Additionally, about 1.2 billion people don’t have access to electricity, mainly in rural areas, and about half of them are concentrated in Africa.

Gas: important part in the states’ energy mix  

Natural gas comes in many different forms, that all have distinct and shifting qualities. As a result, different types of natural gas are used in the EU, rather than one type of gas with one specific quality.

This can cause problems in an integrated energy market, as suppliers in one country risk having their gas rejected by transmission system operators in another because the gas does not have the right quality. This difference in gas qualities can moreover affect whether household and industrial products are used in a safe manner.

By introducing quality standards in gas, the EU helps ensure a safe and secure delivery of gas that can be used across Europe. The EU is collaborating with the European Association for the Streamlining of Energy Exchange to carry out the work.

https://ec.europa.eu/energy/topics/markets-and-consumers/wholesale-market/gas-quality-harmonisation_en.

Renewables in the national level of the energy mix are having a priority: the task is reaching a share of at least 32% for renewable sources in the EU’s energy mix, in general, and increasing energy efficiency by at least 32.5%.

Specifically important is “green recovery”: the EU’s “green strategy” is aimed to support the development and integration of offshore sources in the member states’ energy mix, and to support 2030 and 2050 climate ambitions. It will outline a new approach for exploiting Europe’s offshore renewable energy potential in a sustainable and inclusive way, and will help to overcome existing barriers. This is a crucial part of the European Green Deal and the NextGenerationEU recovery packages, as it will help to create jobs and boost investments as we deploy clean new technologies across the EU. Enhancing domestic energy production will help to provide affordable energy to our citizens, and will boost Europe’s resilience and security of supply. Commissioner for Energy, Kadri Simson argued recently that in order to achieve climate neutrality by 2050, the member states need to increase EU’s offshore energy production twenty times. This means making it easier to build large-scale offshore wind parks in an environmentally sustainable way. Besides, the states also have to use the potential of other renewable sources such as offshore solar energy as well as new opportunities of tidal and ocean energy.

Research and innovation is important as well: for example, the Horizon 2020 has been the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (2014 to 2020) – in addition to the private investment that this money will attract. It promises more breakthroughs, discoveries and world-firsts by taking great ideas from the lab to the market. See more in: https://ec.europa.eu/programmes/horizon2020/en/news/energy-mix-models-make-case-more-ambitious-renewable-targets.

And so is the new EU’s research policy for 2020-24, which is a key driver for the Commission’s six political priority developmental directions in the years to come. More in:

https://ec.europa.eu/info/research-and-innovation/strategy/strategy-2020-2024_en

 

There are close links between economic growth and energy consumption: the two issues are closely related and are at the core of the states’ energy political economy: i.e. increasing share of renewable energy in the energy mix can help meet the ever growing demand for energy while influencing economic development. Besides, reducing the environmental impact associated with fossil fuels, renewable energy sources can increase diversity of energy sources and, potentially, contribute to energy security and to the long-term availability of energy supply. Renewable energy sources can also promote regional development as they can be used in less developed areas without conventional energy sources, and could reduce costs associated with climate change. The researchers have been already exploring relationships between energy consumption and economic growth in the EU during 1990-2010. The researchers tracked GDP per capita representing economic growth; energy consumption came from coal, oil, natural gas and renewable sources (the latter included biomass, hydropower, geothermal energy, wind and solar energy).

Results from the analysis reveal that during this time, the share of renewable energies in the energy mix has been steadily increasing both in Romania and Spain, but also in the whole of the EU. For Romania, energy consumption, which is based on natural gas, petroleum products and renewables, is likely in the long-term to stimulate economic growth. For Spain, energy consumption, which is based on natural gas and petroleum products, is also likely in the long-term, to stimulate economic growth. For the EU-27, in the long-term, energy consumption based on renewables and petroleum products are likely to stimulate economic development.

In the short-term, increasing energy consumption, including that from renewable sources stimulates economic growth for Romania. Similarly, energy consumption, based primarily on natural gas, promotes economic growth in Spain in the short-term. But for the whole of the EU, in the short-term, there was no clear relationship between economic growth and energy consumption.

Renewables are seen to play a significant role in economic growth: e.g. in Spain, development of renewable energy is taking place at twice the rate of Romania, even though, for example, renewables accounted for about 7% of its overall energy consumption, compared with about 12% of energy consumption in Romania. Thus, research suggests that increasing exploitation of renewable energies would be beneficial to the Romanian economy.

Being aware of the marked influence of renewable energy on growth helps decision makers to define specific measures for developing the infrastructure needed to produce green energy. At the same time, decision makers are able to design aid schemes for promoting renewable energy and attracting investors. Reference to: https://ec.europa.eu/environment/integration/research/newsalert/pdf/312na6rss_en.pdf.

For example, in Malta the energy mix with 97 % use of petroleum and products; the energy mix of energy primary products in Malta differs strongly from the average energy mix in the EU. The increase of renewable production and construction of the gas-fired plants have further diversified Malta’s energy mix.

More on LNG in the EU in: https://ec.europa.eu/energy/topics/oil-gas-and-coal/liquefied-natural-gas-lng_en; besides, there is a new publication on the issue: The Future of Energy Consumption, Security and Natural Gas. LNG in the Baltic Sea region. – Springer Publ. Palgrave Macmillan. – 2022. Liuhto, Kari (ed.); ISBN 978-3-030-80367-4. E-book version in: https://www.springer.com/in/book/9783030803667.

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