Achieving a successful clean energy transition while retaining control over necessary critical resources cannot happen if EU Member States continue to avoid the inconvenient discussion on the importance of domestic production.
This week the European Commission is set to unveil the Critical Raw Materials (CRM) Act to provide a framework to tackle the issue of resource dependencies in pursuit of the Green Deal policy objectives. However, the success of this framework hinges on the willingness of Member States to move beyond quick fixes and to make hard choices on the trade-offs between security of critical resources and Europe’s long-term environmental agenda.
European policymakers have long been aware that action needs to be taken to ensure the stability of its domestic supply of CRMs. These resources, which include amongst others rare-earth elements (REEs), lithium, silicon, and zinc, are crucial for the development of green energy solutions, such as for solar PVs, and off-and-on-shore wind turbines, as well as electronic vehicles (Fig 1). However, the vast majority of CRMs are currently sourced from China, which holds a near monopoly over the refinement of REEs, and accounts for over half of the production of processed cobalt and lithium.
Table 1: Minerals used in clean energy technologies compared to other power generation sources
Source: International Energy Agency
Beyond its borders, the Asian country is investing heavily in the extraction of strategic resources, further cementing its leadership position. In the Democratic Republic of the Congo, which produces 70% of the global cobalt supply, Chinese companies own 15 out of the 17 mining operations. China’s dominance in the field of CRMs has facilitated its rise as a top producer of clean energy technology. For years, Beijing has aggressively subsidised its clean energy industry and manufacturing, resulting in a market share of 75% to 90% of every stage of the production process (Fig. 2). Not to mention the continuing use of Uyghur slave labour in the Xinjiang region, which is extremely rich in polysilicon supply.
Despite the existence of adequate deposits within the continent, the EU lacks any meaningful domestic production of CRMs. The economic bloc stands for less than 5% of global production while our industries require around 20% of global supply. This is not sustainable. Global consumption is set to increase substantially over the years, especially within the EU, which is investing heavily in sustainability. World Bank estimates show that demand for minerals such as graphite, lithium or cobalt will increase five-fold by 2050.
Fig. 2 Regional shares of manufacturing capacity for selected mass-manufactured clean energy and components, 2021
Source: International Energy Agency
The current EU strategy, focusing on strengthening the circular economy and diversifying supply chains, provides a good long-term framework to tackle the issue. However, Member States should take the lead in the discussion of how to operationalise this in the short to medium-term, as serious obstacles remain.
While efforts to strengthen the circular economy and recycling practices will undoubtedly aid the EU, this will be far from sufficient to ensure true strategic autonomy. Recycling CRMs outside of the production process is often economically unviable or downright impossible. The end-of-life recycling rate of silicon metal, germanium and REEs, all crucial in the development of clean energy technologies, remains extremely low, and will thus not solve the EU’s dependence on Chinese resources.
Diversifying the supply chain of CRMs can partially remedy the shortcomings of recycling and avoid the issues related to domestic production. While this option is promising and should be explored, it has a number of caveats. Exporting these industries to friendly nations abroad (i.e., friend-shoring) will not prevent the inherent risks attached to stretched-out global supply chains. Furthermore, research has highlighted the negative economic consequences related to friend-shoring practices, as well as the practical issues of reconfiguring global supply chains in the short to medium-term. Lastly, the environmental as well as ethical implications of moving mining operations to areas with often poorer environmental/labour standards should not be underestimated.
The issues related to recycling and friend-shoring show that true security of critical resources can only be attained in combination with an increased domestic supply of CRMs within Europe. Member States must resist the temptation to take the path of least resistance and instead address the issue head on. Many governments are nervous about openly supporting new mining projects given the potential local backlash or time restraints due to long permitting processes. However, the solution remains entirely in their hands as national governments are the ones to actually push for optimising these processes and increase domestic production in Europe. The length of the permit granting procedures must be curtailed so that we see actual progress by the end of this decade. An increase in domestic production and improved predictability of supply can also bring the EU closer towards the additional goal of improving its critical materials stockpile in the long run.
Simply put, the EU cannot afford to repeat the same mistake it made on Russian energy imports with critical materials supply. If Europe wants to weave a convincing narrative about strategic autonomy, perhaps it would be best if it worked towards genuinely improving its self-sufficiency in key areas.Dimitar Lilkov Rick Slootweg Energy European Union Green Deal
True Strategic Autonomy Requires Improved Domestic Supply
17 Mar 2023
In light of European efforts to find alternatives to natural gas supplies from Russia, one major potential alternative source is often overlooked in policy debates. Namely, indigenous natural gas production from offshore fields.
In recent years, many EU member states have snubbed offshore gas production development, driven mostly by climate concerns. Many Western European nations have either introduced a legal ban on offshore drilling, or de facto ceased licensing offshore activities. However, the current crisis leaves Europe with little choice but to reconsider that approach.
Yes, resuming offshore natural gas development presents a painful deviation from the general policy pattern of ending reliance on fossil fuels and achieving decarbonisation goals. However, it is not nearly as bad as resuming coal-fired power generation, and it offers future opportunities for convergence with the green energy transition, as offshore wind installations can replace the natural gas production platforms after gas production is terminated.
Countries like Romania or Turkey have greatly benefited from pursuing policies aimed at increasing offshore gas exploration and production. In 2022, Romania received the first quantities of natural gas produced from the Midia Gas Development (Ana and Doina gas fields in the Black Sea). This is the first new offshore gas development in the country in more than three decades and will produce up to 1 bcm of gas at peak. Romania, with its relaxed approach to offshore gas drilling, is not only set to become fully energy independent, but also the biggest natural gas producer in the EU. Currently, Romania holds estimated untapped Black Sea gas reserves of between 170 and 200 bcm – these figures can increase with further exploration.
Turkey has also enjoyed success in this domain, and recently began construction of the underwater pipeline network that will connect the offshore Sakarya gas field with the onshore gas processing facility in the northern Black Sea province of Zonguldak. Gas production is expected to begin in the first quarter of 2023, with peak production over 3,5 bcm per year.
Their shared neighbour of Bulgaria, on the other hand, has been comparatively much slower in licensing its offshore gas reserves for exploration, although it has been picking up the speed recently.
Unleashing the Black Sea’s offshore gas potential may help create a sizeable natural gas production hub that would resolve the problem of vulnerability experienced by South Eastern European nations; who, until recently, were the most dependent on Russian gas – Bulgaria, Hungary, Greece, and the Western Balkan nations. This could also have profound implications for achieving the energy independence of Moldova, which can benefit from access to this rapidly developing Black Sea gas production hub – and even Ukraine. Ukraine has its own untapped Black Sea offshore gas production potential, and realising it will be quite helpful for the country’s post-war reconstruction. Moreover, Ukraine can also contribute to a potential Black Sea gas market hub.
Further linking this potential regional gas hub with new centres of gas production in the Eastern Mediterranean – Cyprus, Israel, Turkey, Lebanon, Egypt – may create a powerful South Eastern European gas hub, which will be a net exporter of gas further to the rest of Europe, and will eliminate the region’s need for gas dependence on Russia once and for all. As mentioned above, this would be a very important step towards achieving energy independence for Moldova, and decoupling the country from Russian energy supplies.
Other countries in Southern Europe which have been moving towards drilling offshore gas to enhance security of energy supply are Greece and Italy. Before Putin’s war against Ukraine, these countries were some of the most dependent on Russian gas supplies – but now they are making steps towards achieving a greater extent of energy independence by tapping their offshore gas reserves potential. Greek Prime Minister Kyriakos Mitsotakis has promised to expand the country’s gas exploration program in response to rising oil and gas prices.
The new Italian government plans to double its national gas production to 6 billion cubic meters (bcm) per year from the current 3 bcm, as per Minister of Economic Development Adolfo Urso. Earlier this year, several gas prospects off the Sicilian coast were identified under the exploration license granted to ADX Energy.
Even Germany has reversed years of scepticism towards offshore gas drilling in light of the Russian war against Ukraine, granting a permit for exploration of gas reserves near the Wadden island of Borkum in Lower Saxony. However, certain Western European countries – France, Spain, Portugal, the Netherlands – remain sceptical towards offshore drilling as part of a general policy approach aimed at ending the use of fossil fuels. In some of these countries, there are legislative or governmental bans on offshore drilling in place (Spain, France, Portugal). In the Netherlands, the licensing and development of offshore gas exploration and production has de facto stopped.
These policies may have seemed adequate before the war and the current confrontation with Russia, but now, a reversal is clearly needed. Taking into account all the understandable scepticism about developing fossil fuels, producing more offshore gas is a much better solution to meet Europe’s energy needs, compared to the revival of coal or heavy fuel oil power and heat generation.
Those opposed to offshore gas drilling due to climate concerns should remember that Europe had previously contracted the purchase of Russian gas for decades to come – much longer than the anticipated lifespan of small EU offshore gas fields. This would have generated much more carbon emissions. New EU offshore gas drilling is simply a better alternative to the previous reliance on Russian gas, from a climate standpoint.
Yet another important factor related to the green transition is that offshore gas platforms at small fields can be later transformed into offshore wind platforms, after their lifespan is expired. For instance, in Croatia, oil and gas company INA is planning to install offshore wind farms in the northern part of the Adriatic Sea after closing its natural gas platforms in 2025.
WindEurope reports that the European Union is severely underperforming on its plans to develop offshore wind, not least due to bureaucratic permitting bottlenecks. According to the Global Wind Energy Council, offshore wind capacity in Europe has reached 18 GW in 2021, but it is simply not enough volume, considering that the EU needs 32 GW of new wind capacity each year until 2030 to reach its carbon neutrality target by 2050.
According to WindEurope, in 2021, new offshore wind installations in Europe amounted to just 3,4 GW, while at the same time the continent would need to install more than 8 GW of offshore wind capacity on average per year over the period of 2023-2026 to reach its energy and climate targets.
Drilling more offshore gas and later transforming the gas platforms into offshore wind farms after the gas fields become depleted is a potentially rewarding plan for securing Europe’s independence from the Russian gas, security of energy supply, and minimising the damage caused by Russia’s war against Ukraine to Europe’s energy transition and its climate and decarbonisation goals. If the EU can reach peak levels of production for its currently frozen and under-explored offshore natural gas fields at the level of at least 20-30 bcm per year, that would be a significant contribution to the EU’s energy security. It is possible that the actual offshore gas potential is much larger – on that, more exploration is needed.
In the extraordinary circumstances when the EU is forced to solve many challenging tasks at once – decoupling from dependence on Russian energy while still moving ahead with decarbonisation goals – realising Europe’s offshore gas potential may be an important step for enhancing security of energy supply, while at the same time providing a way forward for the development of offshore wind, in which the EU is clearly lagging behind the announced goals. Swift EU-capital decisions are needed, specifically aimed at relaxing the rules for the licensing of offshore natural gas exploration and production, as well as cutting the red tape and easing procedures to receive permits for offshore wind installations at decommissioned gas platforms.Vladimir Milov Energy Environment EU Member States EU-Russia
Tapping Europe’s Offshore Energy Potential: A Way to Enhance Security of Supply
08 Dec 2022
It is easy to get lost in all the recent developments on the energy front. After a full month of formal, informal, and emergency meetings, EU leaders have adopted a set of measures that address some challenges, while remaining divided on other thorny issues.
Taxes and Caps
What has been agreed so far is the introduction of a ‘windfall tax’ on energy companies’ excessive profits and a collective push (albeit voluntary) from all countries to reduce their electricity consumption. The additional levy on the extra profits raked by energy companies will be implemented nationally by the end of the year with the expectation that the generated sums can be redistributed to consumers and businesses.
Even though such a tax finds support among mainstream EU politicians, it is uncertain whether it will provide the expected relief in the months to come. It will take some time for national capitals to implement these measures and for the projected €140bn to be collected, let alone distributed. The biggest risk here is that the agreed extra tax on fossil fuel companies and price cap on revenue by non-gas companies (wind, solar, nuclear) will further distort the market and reduce even more the EU domestic energy supply. It is also unclear how this extra tax will affect both fossil and non-fossil fuel companies’ plans for future investment in improving their services and further deployment of much-needed renewable capacities.
The jury is still out if (and when) the energy ‘windfall tax’ will provide its expected benefits. However, it is little wonder that national capitals want to get additional tax revenue in their coffers. In the last 12 months, EU governments have spent more than €300bn on national subsidies in order to rein in the skyrocketing price of gas and electricity. Expect this figure to continue to grow.
What EU leaders vehemently disagree on is whether the block should implement a cap on natural gas prices. The different geographies, economies and national interests of the EU-27 tie up a complex knot, which the European Commission is struggling to untangle. Some worry that such a price limit on gas prices might drive off future supply, complicate LNG deliveries or further stress domestic markets. Alternatives include capping the price for deliveries of a certain origin (like Russia) or limiting the scope of the measure so it doesn’t affect LNG supply.
All these concerns on taxes and caps are valid; EU leaders rightfully want to limit the pain for households and industry. However, even if all these market interventions and levies artificially stabilise prices, this won’t solve the energy crisis, which is far from its closing act. The elephant in the room is that the EU might simply not have enough power supply this winter. Energy rationing and frozen industrial production could become a grim reality in some EU countries.
Demand Reduction and Security of Supply
The current problem is that every country is essentially subsidising gas and electricity prices at a level which doesn’t propel neither households nor businesses to drastically reduce their power usage. Be it the infamous German 200 billion euro package, or France directly nationalising a private energy champion, governments across the board are subsidising a sector which is too big to fail. The risk of social unrest and economic meltdown (and loss of electoral support) has convinced every national leader that heavy market intervention is justified. Justified, but ultimately unsustainable and dangerously inflammatory during rampant inflation and a cost of living crisis. Lowering the price of energy is important, but so is ensuring that your citizens and industry use at least 10-15 % less energy overall. Many European governments are not clearly communicating the urgency of the situation to their citizens and the need to save as much energy as possible.
The huge gap of missing Russian gas is currently filled by a combination of urgent (and costly) shipments of LNG deliveries, together with traditional gas pipeline flows from Norway and Algeria. The problem with LNG shipments is that they are expensive, rely on building additional European regasification terminals, and lead to competition with international (mostly Asian) markets for the limited amount of LNG production. This emergency patchwork might work in the weeks ahead but is not a stable foundation for ensuring Europe’s energy supply in the long run.
True, the EU managed to ensure its gas storages were 90+% full in October, which is a feat on its own. However, most of this storage gas came in the spring and summer from Gazprom deliveries, which simply won’t be there in early 2023. Not to mention the fact that storage facilities are there for stabilising peak demands or emergency situations for certain days or weeks. No country can run its economy on gas storage alone.
A True European Energy Union
To reiterate, high gas prices are half of the problem. European member states need to act fast to ensure our collective energy security. In parallel to all current initiatives to stabilise energy prices, all European governments should increase their efforts on ambitious national campaigns for decisive demand reduction. More importantly, it is urgent that the EU-27 coordinates on a number of measures that ensure a collective energy response that is bigger than the sum of its parts.
First, the EU needs to pioneer joint gas purchases by groups of member states in order to lower negotiated prices with external providers and ensure security of supply. This measure will be extremely important next spring/summer, when the EU will need to refill gas storages again, but this time with potentially zero volumes coming from Russia. European member states should not be in competition with each other for securing the best price and the necessary volumes.
Second, certain national capitals should come to grips with the gravity of the situation and overcome internal domestic constraints. Germany and Belgium should wake up to the fact that their countries and the whole continent needs more power and should prolong the lifespans of their nuclear reactors beyond 2023 and as long as possible. Not to speak of France’s selfish decision to block a new Pyrenean gas pipeline, which could foster the transfer of energy from the Iberian Peninsula to the rest of the continent.
Additionally, the Netherlands should also reconsider their stance on producing just the minimal quantities of natural gas from their fields of Groningen, which is the largest natural gas field in the EU. Pumping additional domestic volumes in 2023 and 2024 could provide an important lifeline for the country and European partners in partially replacing Russian natural gas. After the energy storm has receded, the Netherlands could continue the planned phase-out.
The silver lining in this crisis is that the pledge to ‘improve interconnectivity between member states’ will hopefully finally come to fruition and graduate from the pages of defunct policy papers. Joint gas storage between European neighbours or better connecting infrastructure will bring the EU one step closer to a true common energy market.
Lastly, the current energy emergency needs to convince European governments that any future bilateral deal with Gazprom on gas is cursed. Putin has hinted that one pipeline of Nord Stream 2 remains operational and that some of the volumes to Europe can be also redirected through TurkStream. Russia’s thinking is to make national capitals resort back to Russian gas as an energy lifeline in the coming winter as a tool to break European unity and continue Moscow’s energy blackmail.
It is clear that Russia does not have sufficient gas infrastructure to Asia, so it cannot easily pivot its European deliveries elsewhere. Gazprom is forced to burn the gas in the air right now or liquefy it for LNG. The longer the EU abstains from Russian gas purchases, the bigger the squeeze on the Russian federal budget and the bigger the pressure on their energy sector to struggle due to lower investment. Gazprom is already crumbling in terms of share price and overall market standing.
The European Union is de facto in an energy war of attrition with the Russian Federation. An open hand shouldn’t be extended to the barbarians in the Kremlin once again. Europe must stand united with a determined, clenched fist.Dimitar Lilkov Crisis Energy EU-Russia
Fixing Gas Prices Won’t Solve the EU’s Energy Crisis
18 Oct 2022
Europe’s immediate reaction to the invasion and attempted destruction of Ukraine was to impose harsh sanctions on Russia. However, the EU should also think about how to create mechanisms that, in the long term, will involve Russia in financing Ukraine’s recovery from the conflict.
Stopping Russian energy imports so as to reduce the Kremlin’s capacity to finance the war in Ukraine is the most urgent political imperative. There can be no other political reaction to the heinous war atrocities in Ukraine. Reducing imports cannot be implemented simply by closing valves on pipelines. In parallel with strong actions on imports from Russia, Europe must strive to radically reorient the sources of its energy supply. Many additional steps will be needed, such as making use of existing EU energy assets and potentials, including those that were supposed to be abandoned or disposed of. Critical times will come with peak summer demand and preparation for winter, with the requirement to fill gas storage capacities in the autumn.
A recent presentation by the International Energy Agency shows that it is possible to limit dependence on Russian gas, oil, and coal. This would require substantial measures to be taken to reorient the geographical sources of energy supply, as well as changes in the energy mix in each European country. It is unsurprising that there is obvious hesitation in some countries, including doubts as to how fast the EU could move in such a direction without substantially damaging its own situation. The same can even be said of the impact of high energy prices for Ukraine, which continues to import Russian gas.
The daily value of energy imports from Russia this year is in the hundreds of millions of Euros. In other words, EU purchases of Russian gas are four times that of EU aid offered to Ukraine so far. Europe faces the multiple challenges of reducing its energy dependence on Russia, reducing energy bills, and, once the war is over, providing effective support to Ukrainians in rebuilding their country. We rely on political action to resolve this war immediately, but in order to reach long-term economic goals, we should also use market forces. This can be achieved only through several different actions aimed at reducing demand for all types of energy, applying efficient sanctions – or as Bruegel in its paper calls it, “smart sanctions” – and imposing a war-related charge on all remaining European energy imports from Russia.
Another element to bear in mind is that although ceasing Russian energy imports aims to limit Putin’s financial capabilities, the impact of these measures will not be immediate. The reduction and eventual permanent cessation of energy imports will affect Russia with a delay. In the meantime, Europe’s search for new oil and gas suppliers is affecting world markets. Predictably, this drives prices up, and more importantly, it keeps gas prices well above oil, which is rather unusual. Paradoxically, such high prices allow Russia to compensate for the decline in export volumes. Russia benefits from high prices because everyone, not just the EU, is looking for additional supplies. But in the long run, markets deliver change. High prices encourage the global development of new capacities of worldwide supplies of coal, oil and gas, and electricity. Current high energy prices coincide with efforts to speed up the decarbonisation of the European economy. Coincidentally, this might make it easier to ensure a positive start to the green transition and the implementation of the European Green Deal.
As noted earlier, high energy costs mitigate the impact of sanctions on Russia. Europe, together with its allies, should undertake efforts that affect global markets, global supply and demand, and, therefore, push down energy prices on the global market. Their decline will contribute to the effectiveness of the sanctions imposed on Russia.
Already now, the cost of energy for EU countries is excessive, but it should be seen as a justified price to pay for solidarity. Soon, there will be another high bill to pay, as rebuilding Ukraine will require massive financial resources. How could Russia be involved in these reconstruction expenditures? Obviously, seized wealth through sanctions could be tapped for this purpose. But even billions in foreign exchange reserves might not be sufficient. As Russian energy exports continue to flow into Europe, albeit in reduced quantities, the EU could consider imposing a special levy on such remaining imports with the aim of creating a special fund for the reconstruction of Ukraine. A sanction-related charge on imports from Russia would have to be cleared as compatible with WTO rules, but due to the war, its conditions could be more easily defended than, say, US tariffs on steel imposed by the Trump administration. This would generate resources that could be directed to a dedicated fund and used as aid to Ukraine. Such a war-related levy on imported Russian energy would be at the expense of European importers and customers who cannot help but rely on Russian supplies. But over time, current high energy prices would lead to the expansion of other sources, and if global supplies increase, the motivation to import more expensive Russian oil or gas will diminish. Consequently, if Russia will want to continue exporting, it will have to offer energy products at a discount or stop deliveries. This levy on energy imports would eventually be passed on to Russia, indirectly forcing the country to contribute to the funds intended for rebuilding Ukraine.
By increasing the cost of energy imported from Russia by, for example, 1/4 through such a special levy, large amounts could be generated to be used to help Ukraine. They would depend on the extent of residual imports from Russia to the EU. In the long term, Russia will suffer from reduced exports to Europe, sunk costs of infrastructure capacity, and lower energy prices on world markets. And the “Solidarity with Ukraine” levy on energy imports from Russia could continue for years, even after the war ends and until the amounts obtained sufficiently cover Ukraine’s reconstruction needs.Jarosław Pietras Energy EU-Russia Ukraine
Linking Russian Sanctions to Rebuilding Ukraine
Blog - Ukraine
09 May 2022
Dimitar Lilkov Energy EU-Russia Renewable Energy
#ComeTogether – Ep. 7 with Kostas Skrekas and Dimitar Lilkov
Multimedia - Other videos
14 Apr 2022
Amid much fanfare, in February 2015, the EU launched its flagship proposal for an EU Energy Union. Occurring less than a year after Russia’s annexation of Crimea, the EU’s response was a sweeping vista of energy diversification based on a unifying internal energy market and greater energy efficiency. Spooked by the fear of being cut off from Russian gas supplies and a spike in the oil price to over $110 a barrel, the EU proposed speedy, resolute action.
Indeed, in 2014 the then Polish Prime Minister Donald Tusk argued that ‘regardless of how the stand-off over Ukraine develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak.’
2022, unfortunately, is telling a similarly sorry story.
Remarkably, seven years and one ongoing Russian military invasion later, the EU’s Energy Union remains a pipe dream. Europe is still addicted to Russian gas and has not appreciably reduced its dependency since 2015. And this addiction (45% of total gas imports in 2021) is crippling the EU’s ability to conclusively weaken Putin’s energy-resourced war machine.
In 2015, the Juncker Commission pushed energy diversification high on the institutional agenda, but this prescience wasn’t shared by national capitals. And given the scale of Gazprom’s current gas grip on Europe – 12 European countries are dependent on Russia for at least 80% of their gas supplies– it’s clear that the EU’s proposals have failed miserably.
In truth, this was a political failure driven by two factors. First, the collapse in energy prices from late 2014 (largely driven by global oversupply). This easing of price pressures lulled European leaders into a false sense of energy security aided by the rapidness of Russia’s Crimea takeover.
For all the official protests at Russian expansionism, most national governments focused solely on business as usual with their Russian suppliers. Germany’s embrace of the Nord Stream 2 pipeline is the worst kind of example.
The second was the emergence of climate change ambition as the sole driver of national and European energy policy. The race to cut carbon emissions and place the EU as the world’s leading environmental bloc resulted in Brussels overlooking important strategic concerns. Risks such as security of supply and overdependence on Russia as an energy producer were blithely ignored as Europe’s climate ambitions expanded.
The result is an EU that – incredibly – continues to send billions of euros to Russia for gas and oil supplies notwithstanding the ongoing devastation of Ukraine. Energy supplies remain exempt from EU sanctions. Germany, as Chancellor Scholz recently noted, has no intention of quenching its thirst for its energy imports from the Kremlin.
So while the EU has reheated its 2015 proposals and waxes lyrical about diversifying gas supplies from everywhere but Russia, expanding gas storage facilities, increasing energy efficiency, and being a climate change champion – its poorest members in Eastern Europe remain hopelessly exposed to Russia’s whims.
This is an exposure that will persist for many more winters to come.
In this context, member states like Poland, Latvia, and Bulgaria should actively seek two key revisions to Europe’s climate change agenda. Revisions that reflect post-Ukraine realities.
First, the countries that are most dependent on Russian energy supplies should be granted derogations to continue operating coal powerplants as they build up their renewable energy capabilities. Even Europe’s Green Deal Tsar, Commission Vice President Frans Timmermans, acknowledges this prospect. This will help them reduce their existing dependencies, thus ensuring political autonomy and collective security.
Second, the EU as a whole needs to give states in central and eastern Europe more flexibility in deciding their short-term energy mix. This is the only solution to helping them keep their lights on (and factories powered) while simultaneously reducing dependencies on Russian gas.
And this mix will, for many countries, include significant dollops of nuclear power. Consistent with the EU’s recent taxonomy on sustainable activities, nuclear can provide a generational transition to achieving zero carbon economies. When it comes to gas, the cornerstone of the old Energy Union proposals – greater cross border interconnection – can help link up countries with excess power supply to their needy neighbours.
Back in the heady days of 2015, Commission Vice President Maroš Šefčovič argued that the Energy Union was the “only way to transcend the so-called contradiction between ‘competitiveness’ and ‘decarbonisation’”. But Šefčovič and the EU fatally misdiagnosed the problem.
The real contradiction isn’t between economic growth and combatting climate change. As the ongoing horrors in Ukraine illustrate, the real dilemma is about the EU having the political courage to implement an energy policy that serves and protects all its members equally.
Decarbonisation will remain a key priority for the EU in the long-term. However, it is time to concede that you can’t accomplish a successful European Green Deal without first achieving security of supply and price predictability.
Climate change cannot be the only driver of Europe’s energy policy.Eoin Drea Dimitar Lilkov Climate Change Energy EU-Russia
Climate Change Cannot be the Only Driver of Europe’s Energy Policy
22 Mar 2022
As the horrific shelling of Ukrainian cities continues and Putin’s war crimes escalate, the European Union is relentlessly trying to respond on different fronts. At the latest emergency Council session, energy ministers pledged to urgently link Ukraine’s electricity grid with European power systems. When it comes to the EU’s notorious dependence on Russian gas, the European Energy Commissioner has reportedly stated that long-term, ‘the best and only solution is the European Green Deal’. True, in the long-run we all hope that Europe will operate a sustainable low-carbon economy, independent from Russia’s hydrocarbons. However, as the spectre of John M. Keynes grimly reminds us, in the long-run we’re all dead. As the drums of war rumble increasingly closer, we need to act urgently and stop pretending that a fossil-free future is just around the corner.
Brace for impact
The EU depends on Russia for 40 % of its overall natural gas imports and 26 % of its imported crude oil. In the winter of 2021, Russia delivered less and less natural gas to Europe through the Ukrainian transitory network, while European gas storage capacity currently hovers around 30 %. The EU must prepare for severe limitations should the Kremlin decide to squeeze deliveries further. There could be severe energy shocks, especially in certain Central and Eastern European and Baltic countries, where the staggering dependence on Russian gas ranges between 70 to 100%. Diversification of supply is no longer merely a recurring think-tank recommendation. It has become an absolute necessity.
Limit our financial transfers to Putin’s war chest
Even if Gazprom’s deliveries to Europe remain uninterrupted, the EU needs to seriously consider reducing import volumes. Oil and gas account for 60 % of Russia’s exports and more than a third of the country’s federal budget. With the benchmark Dutch front-month gas price at 185 euros per MWh and crude oil spiking above $100 per barrel, European member states are directly subsidising the Kremlin’s coffers with hundreds of millions of Euros daily. Even worse, our energy addiction led to the exemption of Sberbank and Gazprombank (!) from the SWIFT ban on Russia’s biggest banks. The two were exempted as they process nearly all exported oil and gas payments. This is a weak spot for our collective sanction strategy and softens the blow on their financial system.
This would be extremely difficult, but the EU must collectively limit its energy imports from Gazprom. First, the EU needs to ramp up all potential Liquified Natural Gas (LNG) imports it can get its hands on. The LNG market is already strained, with Qatar and the US struggling to satisfy growing demand. All EU member states possessing LNG infrastructure need to ensure it is operational and consider investing in novel sites. The recent announcement that Germany will plan two novel LNG terminals is good news.
Second, the EU needs to boost all available supply domestically (even if it is limited) and from partner countries such as Norway, Algeria, and Azerbaijan. European countries should seriously consider restoring partial operation of their coal-fired power plants and delay the decommissioning of their nuclear reactors (namely Germany and Belgium) so that we can boost our electricity supply.
Third, the EU needs to coordinate in increasing gas storage capacities across the continent. This will be extremely costly, as there are risks of European partners outbidding other member states in order to pursue national interests. According to a recent analysis by Bruegel, the EU can overcome a winter with limited or no Russian gas deliveries if the costs are adequately redistributed and the Union collectively tackles the inevitable strain on its energy supply.
Lastly, European households and industries must try to moderate their demand for natural gas for manufacturing, heating, and electricity generation. This is complex and potentially costly, but even a slight reduction in overall cross-continental demand can make a difference. Implementing energy efficiency measures and accelerating the operation (and reduced red tape) of large-scale renewable energy projects should also be parallel objectives.
Support Ukraine and work with global partners
The announcement of the urgent linking of Ukraine’s electricity grid with European power systems is certainly good news. EU member states should also stand ready to supply Kyiv with natural gas, the same way Slovakia operated the reverse-flow to Ukraine during the 2014 crisis.
On the international front, the US would be an important ally in guaranteeing expanded LNG deliveries in the future. Washington should also release as much oil as possible from its strategic reserve in order to calm energy markets. The International Energy Agency and its members have already agreed to release 60 million barrels of oil in order to guarantee supply. The Transatlantic alliance should put substantial effort to convince OPEC countries to do the same and increase the amount of oil available on the market.
Revive the true European Energy Union blueprint
Championed by President Juncker in the Commission and MEP Jerzy Buzek in the European Parliament, the Energy Union was one of the most ambitious attempts for novel supranational initiatives during the 2010s. The foundational principles aimed to ensure security of supply, and improve interconnection and member state cooperation on energy storage. Most of all, the goal was to complete an actual internal energy market with all of the necessary related legislation and infrastructure, and even ensure that the EU speaks with one voice on energy affairs. This is our true objective for establishing a position of power vis-à-vis Russia on the energy front. However, due to the complacency of certain member states, some of the most ambitious objectives of the Energy Union have been forgotten. In recent years, the initiative has mostly become a secondary extension to the European Green Deal.
Given the current geopolitical situation, guaranteeing our security of supply and energy independence has become an essential aim. The European centre-right must return to the basics of the true Energy Union and become its spearhead so that the EU can safeguard the collective interests of its citizens. The recent proposal by MEP Radosław Sikorski on a ‘European Gas Union’ resonates in this exact direction.
The upcoming EC proposal on European gas independence is extremely important, as it will be announced next week. Hopefully, it will address these issues and come forward with an ambitious supranational strategy, which will be followed by national capitals.
Business as usual with a war criminal is simply not an option.Dimitar Lilkov Energy EU-Russia Ukraine
The EU Must Limit Gazprom’s Grip and Slash Putin’s War Chest
Blog - Ukraine
03 Mar 2022
The European Union has accomplished many of its energy policy goals. Energy efficiency has improved, the share of renewable energy has increased, and emissions have decreased; the latter two have progressed even faster than expected. In 2020, a milestone was reached when renewables overtook fossil fuels in the EU’s electricity mix.
On the other hand, the Energy Union’s stated objective of a reduction of import dependence has not been achieved; quite the opposite. Although the start of the crisis in Ukraine shifted the dynamic in this domain, the overall direction is not convincing. In 2020, energy imports into the EU rose to their highest level in 30 years, topping 60%. This is a major failure and is currently reflected by sharply rising energy prices.
The European Union is far too dependent on imported fossil energy, especially Russian natural gas. During the colder months of the year, this provides Russia with a very strong bargaining chip that it will not shy away from using when needed. From both an energy policy and a geopolitical perspective, the Nord Stream 2 gas pipeline is a historic investment failure that will only exacerbate European dependence on Russian gas.
At a time when the European Union’s industrial policy calls for greater strategic autonomy, resilience, and security of supply on all fronts, the foundations of energy policy have been left unaddressed. As such, EU countries have rightly reduced their own fossil fuel consumption and abandoned coal in particular, but have not been able to sufficiently replace it with new low-emission alternatives. It has therefore become necessary to increase imports of fossil fuels.
Only now are EU countries beginning to wake up to the fact that, without significant additional investment in nuclear power, it will be very difficult for them to increase their use of carbon-neutral electricity, for example in heating, industry, and transport, and thus meet their climate targets. Many countries are reversing their decisions to close their nuclear power plants, and the new Dutch government, among others, has just announced a complete turnaround and the construction of two new nuclear power plants. Although the Netherlands has the image of an environmentally-conscious nation, it is highly dependent on fossil energy and one of the laggard EU nations, with its energy mix being comprised of less than 10% renewable energy.
After a winding process, the European Commission also agreed to include nuclear power, albeit on interpretative terms, in the scope of a sustainable financial classification system, the EU taxonomy for sustainable activities. This move was absolutely essential. It has been calculated that meeting the 2030 climate targets will now require an additional €350 billion investment in the EU each year compared to the previous decade.
The Commission’s decision reflects a simple reality: nuclear power must be strongly involved in the energy mix of tomorrow. Wind, solar and hydro power alone are not enough to secure the viability of our societies. It is also noteworthy that currently, 60% of the European Union’s renewable energy comes from biomass. Their use should not be severely restricted by legislation either, or it will once again result in an increasing dependence on fossil fuels.
Additional investment to counter the sharp rise in energy prices will not bring rapid relief. In the long-term, however, increasing Europe’s own low-emission energy production is key to building a sustainable energy model; this means investing in renewable energy, nuclear power, good transmission connections, and energy storage.
At present, each member state must do all it can through local means to alleviate the difficulties caused by the energy price crisis. In recent weeks, most EU countries have channelled various targeted subsidies to households, businesses or agriculture, including through reductions in energy taxes, vouchers or direct financial assistance for gas bills. However, in the long run, we must address our energy deficit. Europe can no longer be so dependent on imported energy, and it is very difficult to imagine how this dependency might be effectively reduced without nuclear energy. Solutions to Europe’s dependence on imported energy are still being sought at a European scale, and will be for the foreseeable future.Henna Virkkunen Energy EU-Russia Ukraine
The EU is too Dependent on Imported Energy
Blog - Ukraine
15 Feb 2022
In light of the European gas price crisis of 2021, questions are mounting whether Gazprom—a Russian majority state-owned energy corporation and an important supplier of energy to Europe—had contributed to record-breaking European gas price hikes by manipulating the market and withholding the supply of gas from Europe. Most recently, the Russian gas giant was accused of market manipulation by such a respected heavyweight of the energy world as Fatih Birol, Director of the International Energy Agency.
There’s growing evidence that Gazprom was, in fact, involved in deliberate withholding of significant volumes of gas from the European market, despite the fact that there were plentiful supplies of natural gas in Russia, ready to significantly reduce pressure on European consumers. Currently, some Martens Centre colleagues and I are working on a more detailed report on these facts, which will be published in the Spring 2022 issue of the European View – but here are some highlights.
First, Gazprom had surprisingly reduced gas supplies to Europe in 2021. According to Gazprom’s own data, it had supplied only 185.1 billion cubic meters (bcm) of gas to the so-called “far abroad” (i.e., countries beyond the former Soviet space), which is notably lower than the annual exports of 2017-2019, and only 3.2% or 5.8 bcm higher than in COVID-struck 2020. But this growth of exports was mostly enjoyed by two countries; China and Turkey. Supplies to Turkey surged in 2021 by 63%, or 10.3 bcm. Full figures of yearly gas supplies to China in 2021 are not known, but based on the 10-month gas exports figure of 8 bcm, the total annual gas supply from Russia to China will likely be around 10 bcm in 2021 – up from 4.1 bcm in 2020.
If the 16 additional bcm of Chinese and Turkish supply are subtracted from the total 2021 statistics, we find that the remainder of the co-salled “far abroad” – which essentially means the European Union – received 10 bcm of Russian gas less in 2021 than in 2020, for a total of 169.1 bcm.
This situation underlines the need to further investigate long-term contractual relations between Gazprom and its major European counterparts.
Second, the decline of gas supplies to Europe in the second half of 2021 is actually supported by day-to-day EU gas supply statistics provided by Gazprom on its website. According to this data, Gazprom had reduced supplies to the EU in September-December 2021 alone by 13.6 bcm, and gas supplies running via the Ukrainian gas transit network and via the Yamal-Europe gas pipeline running through Belarus and Poland were reduced by 58% and 51% respectively during that period.
Third, Gazprom has significant excess upstream gas production capacity. During a speech in September, Gazprom’s CEO Alexey Miller admitted the existence of excess production capacities in the amount of “150 bcm of gas”. Mr. Miller further explained that Gazprom’s gas output in 2021 was the “best figure in the last 13 years”.
Fourth, Gazprom also reported a record-breaking injection of gas into Russia-based storage facilities for the 2021-2022 winter season – around 73 bcm. That’s a 13 bcm increase, or nearly 22%, compared to the level of 2020-2021. If these 13 bcm had been to Europe instead, they would have significantly eased the pressure on the European gas market, reducing the late-December European underground gas storage deficit (which was around 20 bcm) by two-thirds.
Maybe Russia needed some extra gas stocks due to extreme temperatures? Not to the extent that Russia might need to pump 22% more storage gas than it did last year: as admitted by Mr. Miller during a meeting with President Vladimir Putin, by late December, Russia’s underground storage facilities were at 83% capacity, meaning only 17% of these record-breaking reserves were drawn out in November and December.
Fifth, Gazprom owns about 10% of total European underground gas storage capacity. Gazprom has been filling its own European underground gas storage capacities ahead of the 2021-2022 winter season at a much slower pace than other European storage capacity owners.
Gazprom says it hadn’t been receiving any additional gas supply requests from European consumers. That brings us back to the non-transparency of contractual relations between Gazprom and its main European counterparts. When asked whether they had sent requests to Gazprom asking for increased fuel supplies, most of Gazprom’s European counterparts refused to provide a straightforward answer: “When asked by Reuters, European energy firms Wingas and Engie said they had not asked for extra gas, while Eni, Uniper, OMV and RWE did not elaborate apart from saying Gazprom had met contracted commitments”.
This situation underlines the need to further investigate long-term contractual relations between Gazprom and its major European counterparts. In the era of a sizeable gas deficit in Europe, European gas companies should provide clear answers as to whether they actually demanded extra gas supplies from Gazprom; if not, why, and if so, what the response was.
All these facts are sufficiently significant evidence to demand the launch of a full-scale investigation into Gazprom’s alleged manipulation of the European natural gas market ahead of the 2021/2022 winter season. Fundamentally, a Russian state actor harming consumers by forcing gas prices to surge should trigger alarms for all European policymakers.Vladimir Milov Energy EU-Russia Ukraine
How Gazprom Manipulated the EU Gas Market
Blog - Ukraine
03 Feb 2022
Theo Larue Energy Green Deal Renewable Energy
The Week in 7 Questions with Maria da Graça Carvalho
Multimedia - The Week in 7 Questions
29 Oct 2021
It took the recent energy crisis for the European Union’s dependency on imported fossil fuels to make the headlines. Naturally, as long as the share of fossil fuels remains high in the energy mix of member states, the EU will continue to depend on external providers.
The shock reactions within European markets and the European political scene is, however, rather unjustified. This is the second time in a decade that Putin has weaponised the gas supply to the EU, actions which now pose an overarching dilemma: Will we obtain long-term, binding contracts with Russian companies supplying gas and thereby ensuring stability, or will chaos ensue?
In 2015, after the first shock of the use of natural gas as a weapon against Ukraine and later against countries of the Union, the EU proceeded with the ambitious legislation of the Energy Union. However, despite the legislative planning, forecasts for natural gas supply over the last six years have been insufficient. This is particularly problematic given natural gas’ role as a transitional fuel. Furthermore, the appropriate storage infrastructure specifically for green energy was not built.
In addition to the provision of the Treaty, which enshrines the energy mix as a national competence, a number of countries took their own initiative, focusing on their interests. First of all, Germany secured bilateral low-tariff agreements with the main Russian provider Gazprom, combined with the development of relevant infrastructure, namely Nord Stream 2. Other member states, such as Poland, insist on a form of political guerrilla warfare.
Last week, the European Commission announced measures including:
- Joint voluntary procurement from the member states, maximising the benefit of the bargaining power of the world’s largest single market.
- Increased strategic stocks to avoid large price fluctuations.
- Use of the resources of the Emissions Trading System by the member states for the relief of the most vulnerable, something that the Greek government is already doing.
Such “tools” may work only as emergency response measures but do not address the fundamental problem of dependence on fossil fuels and their suppliers.
It is important to tackle the problem of security of energy supplies for Europe at its root cause. This is also a necessary aspect of delivering on the Green Deal’s ambitious goal of making Europe the first continent with a carbon-free economy by 2050.
The EU’s main weapon in the face of the energy crisis is the sum of the unprecedented financial resources currently at its disposal: the Recovery and Resilience Facility, the Multiannual Financial Framework 2021-2027, and other financial tools, with InvestEU being the most important one. Renewable energy, combined with renewable energy storage facilities, is the answer to the dilemma of whether we are headed for Putin’s embrace or for chaos.
Existing technology, and as it happens technology that is principally developed in Europe with European taxpayer money, enables large-scale sustainable investments in onshore and offshore wind farms, photovoltaics for every household and industrial consumers, hydroelectric power from oceanic currents, and also power generation from waste.
The EU’s answer to the dilemma now shamelessly posed by the Russian president is to accelerate investment in renewable energy, through synergies between the private sector and the member states, and through transnational projects, by all available means. This is the only way the EU energy market will be able to provide affordable energy to its households and businesses. In addition, the EU will be taking a first, momentous step towards real strategic autonomy.Maria Spyraki Crisis Energy EU-Russia Ukraine
In Putin’s Embrace or in Chaos?
Blog - Ukraine
19 Oct 2021
What does the completion of Nord Stream 2 signify for Europe? When will the pipeline become operational? What opportunities does it bring for the Kremlin’s geopolitical intentions?
Destabilising Europe’s security remains Vladimir Putin’s central goal and the main concern of the pipeline’s opponents. Nord Stream 2 has yet to reveal its dangerous potential and the many ways it can unbalance and divide the European region.
The tide of outrage, indignation, and apprehension from both sides of the Atlantic has not subsided with the completion of the pipeline’s construction. The frustration of many political actors in Ukraine, other Eastern European countries, Germany, the United States, and within Russian opposition circles is understandable: many have fought for years to prevent the pipeline from coming into effect. The completion of the pipeline on Sept. 9, 2021 is a point of frustration.
Some pundits seem confused, above all, by Germany’s actions on the “last meters” of the pipeline project. They still make assumptions about Angela Merkel’s motives for reaching a compromise with the U.S. that made the completion possible. Some express helplessness, while others hope for a future transition to new technologies such as hydrogen. One would think that if Ukraine were to turn into a hydrogen exporter overnight, it could magically solve current gas (and money) supply problems.
Going back to reality, let’s take a quick check:
– It is no longer possible for Germany, Europe, or the U.S. to prevent gas flowing through the pipeline someday. The question is at which point will Europe have a strong position. Nord Stream 2 has now become a legal battle that will be fought out in Europe – mostly in German courts.
– The so-called compromise between the United States and Germany on Nord Stream 2 means the US State Department has shifted the main centre of influence and responsibility on the pipeline issue to Europe. There are primarily German and European (legal) actions that are to be invoked in case of Russian attempts to use the pipeline as a geopolitical tool. U.S. sanctions are no longer a decisive factor; that function belongs to the European legislature. Gazprom, in its incarnation as Nord Stream AG, will have to accept it.
– The side effect of a delay to actual gas flow is being felt by all European gas end consumers in the fall of 2021, due to the huge gas price increases, surpasses over $1900 per 1 000 cubic meters in early October 2021. It’s likely this is caused by artificial supply shortages from Gazprom. Gazprom is trying to solve its access problem to the European gas market by pressuring and blackmailing the end consumer, underestimating European consumer protection mechanisms. The more aggravated the situation regarding gas prices becomes, the more decisively the EU’s response in its forthcoming statements regarding Nord Stream AG may be formulated.
– Europe makes use of its legal mechanisms in this confrontation. The fear that Gazprom would gain a strong stance in Europe, equal to its monopoly position on the gas market in Russia, has been dispelled by a recent German court decision. It granted Gazprom no exemption rule from the EU Gas Directive. The key term Gazprom must now learn is ‘fair competition’.
– The pipeline’s completion will not be followed by the rapid granting of an operating license, but by months or even years of legal wrangling, going in parallel to or following the process of its certification. Currently, Gazprom is involved in several European lawsuits. In the meantime, the pipeline‘s capacity will be significantly limited for transit flows, as is the case with OPAL. The share by which Gazprom sought to increase the volume of gas transported to Europe through the new pipeline will thus remain unfulfilled for the time being.
The project, once emphatically described by Angela Merkel as “purely economic”, is developing into a long-term legal-political dispute. Gazprom will initially probably maintain pressure and allow gas prices to skyrocket, in order to obtain a fast and unconditional operating permit for the pipeline. With winter approaching and European gas storage facilities – surprise, surprise! – almost empty, this affects European end consumers. Nordstream AG also tries to create a fait accompli by filling the first stretch of the pipeline with gas before the completion of all the necessary procedures. This Russian strategy may, however, backfire. The European legislature has already proven itself stronger than some grieving analysts give it credit for. In a few months, the European Commission will deliver its decisive opinion on whether the pipeline is a threat to European energy security. Thus, in the Nord Stream AG versus the EU constellation battle, the last word has yet to be spoken. Kremlin geopolitics still have a lot to learn about the power of European laws.Oxana Schmies Energy EU-Russia
Nord Stream 2 – No European Green Light
12 Oct 2021
In the last six months, energy prices have skyrocketed across the continent. European governments are already announcing multi-billon euro emergency measures in order to soften the blow for citizens. One of the reasons for the price surge is the growing demand for gas from industries and for power generation across the EU, as our economies bounce back from the pandemic. At the same time, Russia has limited its natural gas exports to Europe, mostly due to its dirty political game of applying pressure to Germany for the final greenlight on Nord Stream 2. Moscow’s antics and a cold winter in Europe could lead to unheated homes and even put ‘lives at stake’. This also means that inflation will continue to grow.
To make matters worse, the wind has literally stopped blowing in the sails of renewables – calm weather in the North Sea has meant very low renewable energy output. In parallel, the carbon price on the EU’s Emissions Trading System (ETS) has reached a record 60 euros per tonne of CO2. Ironically, the UK is desperately turning to dirty coal in order to provide electricity to citizens and industry.
All of this has prompted calls to speed up the EU’s transition, in order to reduce the bloc’s dependency on fossil fuels. However, before EU policy-makers push for even stronger (and costly) green commitments, it would be welcome to pause and reflect on what is actually happening.
It is easy to get lost in all the numbers about energy and climate, but a couple of basic facts are essential.
The first is that it takes a long time for new energy sources to displace existing ones. Unfortunately, fossil fuels are sticky and still account for 80 % of the world’s energy generation. Currently, solar, wind, and hydro are negligible chunks of the global energy mix. Even in the EU, their impact is overstated – more than half of the EU’s renewable sources are actually biomass (i.e., literally burning wood and crop waste). Not to mention that renewable energy from photovoltaics and wind is intermittent and challenging to store and transport.
Source: Adapted from Gates, B. ‘How to avoid a climate disaster’ (2021). Original data: Smil, V., ‘Energy Transitions’ (2018)
Second, if the EU has made the sustainable transition one of its top priorities, the rest of the world has not. The EU’s agenda on sustainability is laudable, but the bloc currently contributes less than 8 % of global CO2 emissions. Even with the hypothetical support of the US, the efforts to reverse rising temperatures by mid-century would be almost futile if the other major polluters don’t chip in.
The harsh reality is that for every coal plant we are closing, China is opening at least three new ones per annum. The EU’s coveted mechanism to impose a carbon levy (CBAM) on third countries is not planned to fully be in force until the late 2020s. Not to mention that Brussels will need to find trusted international allies on this subject in order to avoid trade wars and ensure such a mechanism bears fruit.
In the next decade, Europe’s energy demand is projected to increase, and we are on a risky path of making energy supply extremely volatile and costly. Regrettably, the biggest pain of this transition will be felt by the poorest households and certain middle-class families across Europe. Currently, there are more than 30 million Europeans who cannot pay their energy bills, and millions more that need to make monthly compromises in order to do so.
Even if the EU overachieves its current climate targets by 2030, this will be a tiny dent in the global fight against carbon emissions. This doesn’t mean that the bloc should sit on its hands and do nothing. Improving air quality, reducing biodiversity loss, and building a true circular economy should remain among the priorities for European policy-makers.
However, the biggest risk is that if the EU succumbs to all of the current green demands, the energy math simply won’t add up. We’ve decided to phase-out coal, which is needed, but in our devotion to a carbon-neutral future, we seem to have miscalculated the energy transition.
There is growing pressure on countries to snub nuclear, even though there is scientific proof that its risks are manageable and nuclear energy does not cause more harm, when compared to other clean energy sources. Germany’s decision to decommission its nuclear plants means that the country is losing one of its major sources of carbon-free electricity, and will become even more dependent on Russian gas. The same will most likely happen in the UK and Belgium.
This is a folly. The stigma on nuclear should be lifted and we shood collectively pool additional resources in exploring novel applications of this clean energy source. Brussels likes to see itself as the main agenda-setter on climate and environment, but the EU Treaties clearly define that sovereign member states make the ultimate decisions on their national energy mix.
The EU needs to have a more pragmatic and targeted approach to climate change. Let’s focus not only on ambitious legislation and climate targets, but also on becoming leaders and exporters of innovative green technologies. How many more billion euros are we willing to invest in solar panels and EV batteries with low efficiency gains, most of which are produced by slave labour in China? Most importantly, how does the continent intend to guarantee stable and affordable energy supply to households and industries in the short-term?
Try as it might, the European Union simply cannot repent for the climate sins of the rest of the world. The current energy price hike is just a precursor of the problems European politicians will have to confront in the next decade. They need to be overcome by prioritsing security of supply, innovation, and boosting the competitiveness of the European economy.
Not by prioritising dogmas and climate grief.
Dimitar Lilkov is a Research Officer at the Wilfried Martens Centre for European Studies in Brussels. The views expressed in this piece are his own.Dimitar Lilkov Climate Change Energy Green Deal
The Inherent Flaws in the EU’s Green Ambitions are Already Showing
29 Sep 2021
Methane is a powerful greenhouse gas, warming the planet eighty-six times as much as carbon dioxide (CO2) over a 20-year period, before decaying to CO2. While the focus to reduce climate change has rightly been placed on carbon dioxide, methane is the second most important greenhouse gas contributing to the warming experienced to date. It is also a major precursor of ground-level ozone formation, a pollutant that negatively impacts health and crop yields. Reducing methane emissions is indispensable in the fight against climate change, in line with the Paris Agreement’s goals, the European Green Deal and the EU Climate Law.
The most important question that we must answer is: why should we act now?
Climate actions to reduce methane are often included as ‘CO2 equivalents’ in national climate plans, like in commitments made by countries under the Paris Climate Agreement. But the impact of methane and carbon dioxide are not equivalent.
More than half of global methane emissions stem from human activity in three sectors: fossil fuels (35%), waste (20%), and agriculture (40%). In the fossil fuel sector, oil and gas extraction, processing, and distribution account for 23%, while coal mining accounts for 12% of global anthropogenic methane emissions. In this framework, it is important to proceed with an ambitious revision of our environmental legislation, such as the Effort Sharing Regulation and the Landfill Directive.
In the energy sector, imports account for over four-fifths of the oil and gas consumed in the EU, and most methane emissions associated with oil and gas are occurring outside EU borders. That’s why we must explore regulatory tools on fossil energy imports, develop methods with importing and partner countries to align our efforts, and secure a UN-based pathway on methane in 2021. In the meantime, we could proceed with bilateral agreements with these exporting partner countries.
A strong, independent, and scientifically rigorous Monitoring, Reporting and Verification (MRV) system is central to address methane emissions. It is necessary to provide credible data, identify issues and efficient measures, and assess the progress achieved. A mandatory MRV system would also improve Member States’ reporting to the United Nations Framework Convention on Climate Change (UNFCC). A robust MRV framework requires the EU to move away from voluntary approaches and adopt binding harmonised requirements.
Methane emissions are a global issue, and tackling their impact on the environment would require international cooperation, knowledge-building, and best-practices sharing. Given the fast development of monitoring and reporting technologies, the Independent Observatory could be a key institution in identifying and spreading innovations for MRV. Coal mines should also be covered by mandatory MRV for methane emissions, including abandoned mines.
We also have to support the establishment of an independent international methane emissions observatory, in partnership with the United Nations Environmental Programme (UNEP), the Climate and Clean Air Coalition (CCAC), and the International Energy Agency (IEA).
A strong Leak Detection and Repair (LDAR) programme is a critical element of the EU’s strategy to reduce methane emissions and achieve the EU climate and environment goals. The scope should cover the full supply chain of fossil gas, oil, and coal, and include biogas and biomethane to ensure that all methane leaks from the energy sector are covered. It should be flexible enough to quickly adapt and capitalise on the upcoming innovative technologies expected to deliver environmental benefits and cost reduction, such as alternatives technologies sensing methane to be mounted on mobile platforms like trucks, drones, and planes.
In the agricultural sector, we should encourage innovation, and incentivise our industries to adopt the best practices and available technologies. We must ensure that proven, cost-efficient innovations are quickly implemented in the EU and integrated into EU agricultural policies. We must be particularly ambitious in the agriculture sector, in parallel with the Common Agricultural Policy.
By the end of 2021, the EU should – in cooperation with sectoral experts and the Member States – develop an inventory of best practices and available technologies to explore and promote the wider uptake of innovative, mitigating actions. These actions should have a special focus on methane coming from enteric fermentation. In this regard, we have to establish a framework which incentivises and rewards farmers, along with the entire value chain and especially frontrunners, for their efforts.
In the waste sector, the EU should continue to tackle unlawful practices and provide technical assistance to Member States and regions in order to increase the implementation of the existing legislation.We should also help the Member States and regions stabilise biodegradable waste prior to disposal and increase its use to produce climate-neutral, circular, and bio-based materials and chemicals, and divert this waste towards biogas production.
In the review of the Landfill Directive in 2024, the EU should consider further action to improve landfill gas management, minimise its harmful climate effects, and harness any of its potential energy gains. Closure and after-care procedures of landfill cells are key to reducing leakages, taking into account the entire life cycle of landfills. We must provide specific incentives, suited to each Member State’s conditions, to ensure separate collection of bio-waste to the maximum possible extent, including by encouraging public-private sector cooperation.
The immediate implementation of methane reduction measures on human sources of methane could reduce methane emissions by as much as 45% by 2030. Reducing methane now will avoid nearly 0.3 C of warming by 2045. That would vastly reduce the formation of and exposure to ground-level ozone. Most importantly, according to the global methane assessment report, each year after 2040, this would prevent globally:
– 255 000 premature deaths;
– 775 000 asthma-related hospital visits;
– 26 million tonnes of crop losses globally; and
– 73 billion hours of lost labour from extreme heat.
It is time to act now!
Maria Spyraki is an MEP (EPP – ND Greece) – Rapporteur of the EU Strategy to reduce methane emissions.Maria Spyraki Climate Change Energy
Reducing Methane Emissions – Time to Act Now
02 Jul 2021
As the loss of sea ice accelerates throughout the Arctic, as a direct result of the global climate emergency, so too does the opportunity for harnessing its potential. Although its fluctuation is well documented, each decade the ice further recedes by an average of 13.1%, making its riches increasingly accessible.
According to estimates, the Arctic Circle is home to roughly 90 billion barrels of untapped oil – an enormous 13% of Earth’s total reserves – and roughly one quarter of global gas reserves, in addition to vast deposits of minerals. So far, extraction has transpired only on land, due to obvious logistical obstacles and associated high costs. But the push for offshore development is accelerating, effectively firing a proverbial starting pistol for Arctic nations to mark their territory.
Comprised of eight states (Norway, Sweden, Finland, Russia, the United States via Alaska, Canada, Denmark via Greenland, and Iceland), the race for geopolitical dominance in the Arctic region is being driven predominantly by one country, Russia. Although territorial disputes among the five coastal nations (Norway, Denmark, the US, Canada and Russia) are largely settled by UNCLOS or ad hoc via other fora, Russia has been fast-tracking its Arctic agenda as of late, framing the Northern arena as one of its primary great-power ambitions.
In contrast, however, the EU appears to be struggling to find its footing. Since its 2016 Joint Communication laying out its Arctic policy, notwithstanding a few sporadic declarations, it has paid insufficient attention to the region and its fast-paced developments. Although the Commission is scheduled to deliver an updated policy later this year, questions loom as to how assertive and tangible its objectives will be.
In line with the very real challenges posed by developments in the region, the EU’s updated Arctic policy needs to avoid the typical EU folly of being as convoluted as the challenges themselves.
Meanwhile, as the EU remains in the planning phase, Russia is constructing and refitting military bases at an alarming rate, developing new high-tech weapons (like the Tsirkon hypersonic anti-ship cruise missile) and holding regular drills in the region to strengthen its grip. Satellite images over the past five years confirm this steady build-up along its Arctic coastline. This includes new facilities on the Kola Peninsula, air bases on the islands of Novaya Zemlya, Alexandra Land and Kotelny, each equipped with their own array of bombers and/or fighter jets, as well as new radar systems and quick-reaction forces off the Alaskan coast.
Experts have expressed particular concern about one Russian development, the Poseidon 2M39 torpedo, believed to be stored at its Kola site as it awaits further testing and deployment in the region. This new super-weapon is no joke, having the potential to sneak past the most advanced radar systems and launch “radioactive tsunamis” of contaminated water that could devastate large coastal cities and their surrounding environment for decades.
For Russia, the Arctic has always been of strategic importance. Hydrocarbon Arctic resources have played an essential economic role since the fall of the Soviet Union. As such, Russia’s heavy-handed Arctic strategy is keeping it afloat not only economically and thus facilitating Vladimir Putin’s stranglehold over the country, but it has helped preserve Russia’s position as a major player on the world stage for decades.
Another integral component of the Arctic puzzle is the potential for new global shipping lanes, namely Russia’s fabled Northern Sea Route, which has the potential to circumvent the Suez canal and cut shipping times from Asia to Europe by 10-32%. Although serious doubts have been raised about its viability, due predominately to high costs associated with climactic obstacles, it is rather a matter of when these routes will become viable, not if, giving Russia a monopoly on the management of a significant proportion of global shipping.
The exact cause of Russia’s recent sabre-rattling in the Arctic is debatable. Flexing its might in the region has, since the Cold War, been a key component of its nuclear deterrence strategy. It could therefore be an effort to further buttress its Northern Fleet, both conventional and nuclear. Its accelerated testing of its super-weapons in the region this year could be part of a larger Kremlin strategy to test the Biden administration, bolstering support for Putin as he grapples with domestic unrest. Conversely, the multifaceted build-up could simply be an attempt to stake its claim ever-closer to the North Pole and its many opportunities, coinciding with the melting ice. Ultimately, its rationale is likely a combination of some or all of the above-mentioned factors.
In line with the very real challenges posed by developments in the region, the EU’s updated Arctic policy needs to avoid the typical EU folly of being as convoluted as the challenges themselves. It needs to be direct, action-oriented and account for each of the developing challenges, from environmental and economic to addressing the Arctic ambitions of Russia and even China, who in 2018 announced itself to be a “near-Arctic state” and “an important stakeholder in Arctic affairs.” The EU must additionally consolidate its revised Arctic policy with pre-existing agreements, like the Green Deal and EU defence initiatives. It should also lay out how it intends to work with its three Arctic member states (plus Norway and Iceland) to pursue mutually inclusive objectives.
Importantly, the Commission should dedicate part of its Arctic policy to strengthening multilateral co-operation with its allies for security and strategic deterrence against Russia, balancing resolve and restraint, through NATO but also on a bilateral basis with other Arctic states, especially the US. Both could serve as a much needed stepping stone to reinforcing the strained transatlantic relationship and show Russia that it’s not the only player in the region.
After all, this so-called “geopolitical” Commission needs to assert itself and, in practical terms, lay out the roadmap for becoming a legitimate Arctic player. Otherwise, the EU risks letting another significant international event play out while it watches helplessly from the sidelines.Gavin Synnott Energy EU-Russia Trade
Walking on Thin Ice: The EU Must Define its Arctic Strategy or Risk Getting Left Out in the Cold
20 Apr 2021
Unresolved problems continue to haunt you no matter how hard you try to ignore them. Germany is painfully reminded of this after yet another turn in the never-ending Nord Stream 2 saga. The horrid poisoning of Russian opposition activist Alexei Navalny has put pressure on the German government (both at home and internationally) to rethink its commitment to the pipeline project, should the Kremlin refuse to cooperate in the investigation. There is little chance for Berlin to unilaterally cancel such a large infrastructure project, which is nearing completion. Any diplomatic hints that it might do so may be a well-calibrated attempt to test Vladimir Putin’s resolve. However, one thing is certain – the latest developments have shown again that the Gazprom-led pipeline is nothing more than a political project with grave implications for Europe’s energy security and uncertain economic gains.
For several years, the construction of Nord Stream 2 (NS 2) irked different European capitals and put a strain on Washington and Berlin’s relationship. The project is planned to double the volume of the existing Nord Stream 1 pipeline, with the total volume of both ventures being a maximum of 110 billion cubic meters of natural gas per year. Gazprom has pledged to guarantee 50% of the project funding and will be the sole shareholder in the project, which is backed by five other European companies. Although technically a private corporation, Gazprom remains owned by the Russian government and is used as an important tool in advancing the Kremlin’s economic and geopolitical interests outside Russia’s borders. The new extension of the pipeline will fortify the Russian Federation as the EU’s top supplier of natural gas – a position Moscow has exploited in the past through unfair price setting and partitioning gas markets in Central, Eastern, and Baltic EU member states. Regrettably, if the pipeline becomes operational, it will go against one of the European Energy Union’s main objectives – diversification of energy suppliers and reduced dependence on only a handful of third-country exporters.
Several European leaders have already objected to the project and its destabilising geopolitical consequences for energy security in Central and Eastern Europe, as well as its clear attempt to circumvent Ukraine as a transit country for natural gas to Europe. A recent European Parliament resolution, adopted with an overwhelming majority, called for the official halt of the project. There is little rationale for such costly infrastructure, given that it will not transport new volumes of gas, but will instead redistribute existing quantities flowing through Ukraine. The European Union has an abundance of existing gas infrastructure and has pledged to reduce fossil fuel dependence in the coming decades. There is a real possibility that NS 2 would become a stranded asset buried below the Baltic Sea in the near future.
For the time being, Gazprom looks set to complete the project, albeit with a significant delay due to regulatory hurdles and changes in the applicable European legislation. Irrespective of Russia’s military aggression in Crimea, foreign interference in elections, and energy blackmail of smaller EU-member states, it seems as if it will be business as usual for Germany when it comes to pipelines. There are at least two main reasons for Berlin’s dogged determination to see the project completed. First, Germany’s pledge to phase out nuclear energy by 2022 and reduce its reliance on coal means that households and industry will register a growing demand for natural gas as a transitionary resource throughout the 2020s. Second, the country is still path dependent on the dubious legacy of the German Social Democratic Party (SPD), and its steadfast belief in a ‘modernisation partnership’, meaning a warmer attitude towards Russia. Prominent political figures from the SPD in the last two decades have committed Germany to the whole Nord Stream energy venture, regardless of the split it causes between Eastern and Western EU member states, and also the betrayal towards Ukraine.
One of the few plausible scenarios for preventing the completion of the pipeline would be additional pressure from the US – more expansive sanctions from the US State Department might prove painful for current and future investors. Even if the President changes after the November elections, the White House will likely keep its determination to prevent further tightening of Gazprom’s energy grip on Europe.
It is most likely that Germany will not unilaterally cancel the completion of Nord Stream 2 in the upcoming months. The path dependency of Berlin’s energy policy requires that the country remain committed to the pipeline, even at the cost of going against the interests of many European member states and the European Energy Union’s overarching goals. Only an external occurrence can tip the scale against NS 2 – strengthened political and economic pressure from Washington, or an extreme deterioration of EU-Russia relations in the next several months. It is more likely that the wedlock between Berlin and Gazprom will be reaffirmed, and the promise for Europe to speak with one voice on its energy policy will remain nothing more than a pipe dream.Dimitar Lilkov Energy EU-Russia Renewable Energy
Nord Stream 2: Business as Usual at Europe’s Expense
06 Oct 2020
During the last decade of perma-crisis in Europe, we started to believe in our own impending demise. Suddenly there was money for nothing, China was chomping at our heels and our demographics were catastrophic. All that was left was a long, slow inevitable decline into global insignificance. Fast forward to 2019 and a similar vista appears, this time with the added bonus of catastrophic climate change. Now Europe teeters on the brink of another economic downturn.
These challenges, while serious and real, can be addressed by a long-term policy reorientation. But to adequately respond to the issue of climate change and to effectively project European interests on a global stage Europe must combat the one issue which is its biggest impediment. Europe needs to remember that thinking big isn’t a crime. Europe needs to understand that investing for the long term is a vital part of economic planning.
Take the environment. The airline industry is one of the largest sources of global Co2 emissions. Yet, notwithstanding the relative proximity of many of Europe’s main urban centres, high-speed rail in Europe remains “an ineffective patchwork of lines without a realistic long-term plan”. EU funding of 23.7 billion euro in co-funding for high-speed lines since 2000 is minuscule when compared to support levels for other transport modes. At a European level, the overall picture remains one of isolated national systems and incomplete domestic programmes.
Yet, the environmental benefits of high-speed rail are obvious. The development of high-speed networks in France, and more recently in Italy and Spain, have significantly reduced domestic air travel and resulted in reliable transport links between many major cities. Cross-border services – most notably the Eurostar connecting London to Paris/Brussels and Thalys linking Paris to Amsterdam (via Brussels) have become important transport arteries.
So why then the implied reluctance – at both a national and European level – to place high-speed rail at the centre of the EU response to fighting climate change? One reason is the economics of high-speed rail. Such developments are, by their very nature, expensive to construct, the time taken for such lines to become operational can be substantial (often a decade or more) and during this time they are constantly being subjected to negative media and economic analyses.
China built a comprehensive high-speed rail network in little more than a decade.
Consider both the proposed Lyon-Turin and London-Birmingham (HS2) rail links. The considerable opprobrium heaped on these projects relates mostly to cost. Unrealistic initial budgets (often required to gain political support for commencement) are used by opponents as an economic basis for seeking to halt the project. But cost-benefit analyses are, by their very nature, only based on a set of quantitative assumptions regarding issues such as construction costs and passenger numbers.
The traditional economic analysis ignores wider societal and environmental benefits. In addition, both of these projects also seek to achieve important strategic economic objectives in terms of improving cross border mobility (Lyon-Turin) and tacking increasing regional inequalities (London-Birmingham).
Often expensive (and they are very expensive) high-speed rail projects find it difficult to attract consistent political support. Welded to an election cycle governments find it difficult to coherently develop plans for high-speed rail lines that may take decades to become fully operational. This equates, in many politicians eyes, to decades of considerable government spending without any discernible impact on their re-election prospects.
China built a comprehensive high-speed rail network in little more than a decade. In Europe, proposals for new, or even for upgraded lines, can languish for decades in planning hell.
To counter this reality, the EU should be the perfect mechanism for ensuring consistent financial support for these long term investment projects. The EU should significantly increase co-funding for an earmarked list of strategic priority projects. For example, the approximate 500km distance between Berlin and Munich still takes a minimum of 4 hours to complete by rail.
Likewise, the 400km trip between Brussels and Frankfurt requires a journey time in excess of 3 hours. These train journey times are not sufficient to alter many passengers travel habits regarding short-hop airline flights. Up to 8-10 flights still leave Brussels for Frankfurt (and vice versa) on a daily basis.
Given the current climate crisis, and Europe’s wish to lead the response, this situation is clearly unsustainable. Tackling climate change is a very expensive business. Europe needs to hop aboard this high-speed train before it leaves the station.Eoin Drea Economy Energy EU Member States Industry Sustainability
To tackle climate change Europe needs to embrace high-speed rail
02 Sep 2019
After a prolonged political and legal skirmish, EU officials finally reached an informal compromise last week on the reform of the Union`s Gas Directive. Hailed as an important achievement, the compromise mostly aimed to rein in the Nord Stream 2 pipeline and ensure that the EU keeps Gazprom in check when it comes to gas supply and competition rules.
Who Calls the Shots
These changes were hastily proposed in 2017 by the European Commission in the desperate attempt to get some say over the construction of the Nord Stream 2 project which would substantially boost the direct gas flow between Russia and Germany. The construction of the pipeline has been the Apple of Discord between Germany and many Central European and Baltic countries. Berlin has faced growing criticism for allowing a pipeline project which will further increase Russia`s energy dominance and directly endangers the energy security of CEE countries.
The amendment of the Gas Directive didn`t intend to cancel Nord Stream 2 altogether but to make sure that the Gazprom-led project would comply with European energy legislation for ownership unbundling, third-party access and non-discrimination in tariff setting. Compliance with these provisions would require Gazprom to adapt their approach and be bound by a new set of rules which may hurt their business model.
The adopted compromise (text still not officially voted) make such rules applicable to new pipelines, but also grants the member state which is the first point of entry of the pipeline the right to ask for an exemption of these rules. This places Germany in a favourable position to push for such an exemption and ensure not only that the project goes through but that it also secures a lax regulatory treatment. Even though the Commission is the one which gives the final decision, it is unlikely that the freshly sworn-in EU executive will confront Merkel head on in late 2019.
The seemingly successful compromise on the Gas Directive manages to brush aside the most relevant question – why is Nord Stream 2 allowed to be constructed in the first place? This project has little rationale as it will not bring new gas to Europe but mostly redirect the current supply transmitted through Ukraine. The ultimate aim of Moscow is to completely circumvent Ukraine and redirect most of the energy resource directly through the Baltic sea.
Germany is going ahead with the construction of a project which has been condemned by several heads of state and the majority of the European Parliament as going against Europe`s interest. Moreover, Berlin is opening an additional avenue for further systemic corruption and political influence for Gazprom which is a direct conduit of the interests of the Kremlin.
For Angela Merkel, the current developments under the umbrella of a ‘European solution’ to Nord Stream 2 bring a sigh of relief. For several years she has been locked in this project mostly due to pressures from her coalition partner the Social Democratic Party (SPD). The infamous legacy of Gerhard Schröder and Sigmar Gabriel has committed Germany to this pipeline, regardless of the split it causes between Eastern and Western EU member states and also the betrayal towards Ukraine.
Irrespective of Russia`s military aggression, foreign interference in elections and energy blackmail of smaller EU-member states, for Germany it seems as if it will be business as usual when it comes to pipelines.
A Humiliation for Europe
Ensuring the diversification of energy supply and speaking with one voice on energy affairs have been top priorities for the European Commission and the still incomplete EU Energy Union. Regardless, the institution has struggled to play any meaningful role with respect to Nord Stream 2. The Commission even found itself in the embarrassing position of reminding journalists that the amendment of the Gas Directive was her proposal and not only the product of a Franco-German compromise.
The only upside is that this situation might potentially give the EU additional leverage in brokering a parallel favourable deal for Ukraine in her attempt to continue to provide a transit route to several CEE member states. The revision of the Gas Directive might improve the chances of incorporating the interests of Kiev in securing future transit fees from Russia and keep Ukraine`s infrastructure operational to some extent. All in exchange for an exemption on Nord Stream 2, of course.
And here lies the biggest problem. Instead of preventing the construction of the pipeline altogether, the member states have just managed to produce a lowest common denominator solution. Germany will get its cheap gas and even try to save face by promoting the importance of the achieved Franco-German compromise under European rules. In reality, this compromise is nothing more than a fig leaf for Germany.Dimitar Lilkov Energy EU Member States EU-Russia
Nord Stream 2: a pyrrhic victory for Germany
19 Feb 2019
For Russia, business and state are indistinguishable. This was just one of the main takeaways of the event “Understanding Kremlin’s influence in Central and Eastern Europe”, co-organised by the Wilfried Martens Centre for European Studies and the Center for the Study of Democracy (CSD) on Thursday, 1 December 2016 in Brussels.
The event started off by presenting the main findings of The Kremlin Playbook: Understanding Russian Influence in Central and Eastern Europe, a CSD report in cooperation with the Center for Strategic and International Studies (CSIS), a Washington DC-based think tank. With ample qualitative and quantitative data, the study reveals the exact nature of Russia’s economic footprint in the domestic economies of Central and Eastern European countries, as well as its amplifiers.
“When think tanks produce publications like these, critical of Putin’s Russia, the Kremlin sees this as an existential threat”, mentioned Tomi Huhtanen, Executive Director of the Martens Centre, in his introductory remarks. Member of the European Parliament Paul Rübig, who sits with the centre-right EPP Group and is the longest-serving MEP from Austria acknowledged the importance of think tanks working together to counter Russian influence, as well as in the battle for facts in the media.
Ruslan Stefanov, CSD’s Economic Programme Director and The Kremlin’s Playbook project director underlined that no Russian oligarch is in a position to refuse Kremlin’s insistence and efforts to expand Russia’s economic influence, and that CEE countries are prime real estate for this influence.
Martin Vladimirov, another expert author of the Kremlin Playbook study emphasised that for Moscow the energy dependence of CEE is almost an issue of national strategic interest and gave the example of Gazprom which has been able to exploit economic governance deficiencies in the region to its advantage.
“No Russian oligarch will refuse Kremlin insistence to expand Russia’s economic influence.” Ruslan Stefanov, Kremlin Playbook author
But what makes the CEE countries so vulnerable to Russia’s attempts of political patronage? Is it capitalism, EU disillusionment or communism nostalgia? There was a deeply held assumption that, when they joined NATO and the EU in 2004, these countries would continue their positive democratic and economic transformation.
Yet more than a decade later, the region experiences a decline in democratic standards and governance practices at the same time that Russia’s economic grip of the region is strengthening. According to Vít Novotný, researcher with the Martens Centre, these countries have been more focused on the anti-communist rhetoric and dealing with their communist past, rather than improving governance and transparency.
With older generations slipping into old mind frames, Veronika Víchová, analyst of the Kremlin Watch Programme of European Values, a Prague-based think tank, highlighted the importance of counteracting the sophisticated disinformation strategy of the Kremlin. She maintained that cooperation among different states is key for countering Russian influence, and both NATO and the EU will need to diversify and cooperate more to address Russian soft power, including misinformation, disruption and even cyber-attacks.
Source: The Kremlin Playbook: Understanding Russian Influence in Central and Eastern EuropeEconomy Energy EU Member States
CEE and Russia: when economic dependence translates into political influence
02 Dec 2016
“We have stabilized the Euro and carried out reforms. Now we need to focus on innovation for growth and the digital economy.”
These are the words used by Manfred Weber, leader of the European People’s Party (EPP) Group in the European Parliament during his opening of the Economic Ideas Forum that was held in Brussels on December 2nd 2015.
The Economic Ideas Forum (EIF) is an annual high-level conference that brings together economic experts, decision makers and business leaders to discuss and consider innovative ideas and solutions to the economic challenges facing the EU today. The Forum has so far been a roadshow affair, with previous editions successfully held in Bratislava, Helsinki, Dublin, London and Madrid. Organized by the Wilfried Martens Centre for European Studies, the official think tank of the EPP, the EIF’s aim is to act as a laboratory for policy-oriented ideas.
Here are the seven key takeaways from the one day discussions:
- Digital Single Market (DSM): You snooze, you lose
The Commission’s plans for a Digital Single Market featured prominently in the discussion and all speakers agreed that their successful implementation could be agame-changer for the future of the digital economy in Europe. According to one speaker, some EU member states still need to wake up from their “digital snooze”, otherwise the EU will continue to lag behind in digital innovation, most notably in comparison with the US. One big market, rather than 28 different ones will make Europe an investment and digital-friendly continent.
- Industry 4.0: Embrace, don’t erase
As the birthplace of the industrial revolution, Europe has long relied on its industrial eco-system as a core economic strength. But the relative contribution of industry to the EU economy is declining. In response, we need to activate a new industrial revolution: we need to transform industrial production through the merging of digital technology, the internet and conventional industry.
In an era where users take the driving seat, and the economy becomes an “on demand” one, including the personalization and digitalization of products, the EU needs to provide a co-ordinated response on how to embed innovation at the core of Europe’s industrial sector.
- Collaborative economy: Disrupt yourself
Revolutionising our economies and work habits, that’s no modest ambition set out by the new, dynamic players that are part of the so-called collaborative economy. How about the more traditional players that are challenged in the process? They can use this as an opportunity to disrupt their own business models by adapting and borrowing practices from the newer players. This will lead to growth, lower prices for the consumer and increased efficiency in the utilization of resources.
- It’s the (data-driven) economy, stupid!
All the digital innovations discussed raised complex issues of data treatment, storage and protection. There was a general agreement that a balanced deal on data protection is a necessary prerequisite for the digital economy to fully accelerate in Europe. On the issues of data flows and “safe harbor” the temptation to build walls around Europe should be avoided.
- Energy Union: Don’t rush to Russia
In the energy field, speakers agreed that the objectives are security of supply, climate protection and the reduction of energy costs. The EU has gone a long way towards having a common policy to achieve these goals, but further steps will still be needed. Tackling the overreliance of some EU countries on external supply (i.e. Russian gas) can be achieved through a better connected European energy market, a stronger energy union and intelligent diversification.
As for the latter, agreement on the importance and role of renewable energy sources was mixed with an acknowledgement that other complementary solutions should also be considered, including nuclear power.
- COP21: Leader, not lonely front-runner
With the EIF taking place just before the Climate Change Summit, the timing was right to underline that what was at stake in Paris was the future of Europe as a leader in clean energy. If an agreement was not reached, Europe could turn into a “lonely front-runner”, shouldering a disproportionate part of the burden in fighting climate change and losing its competitiveness to countries with laxer standards.
- Ukraine: Remain Calm – now reform and support
The need for diverse and comprehensive reforms in Ukraine was best summarized by a speaker that urged for a “Maidan in government structures”, as well as de-regulation, privatization and an independent judiciary. In this, Ukraine should value the experiences of centre-right reformers from Central and Eastern Europe during the 1990s. In turn, Europe needs to avoid that Ukraine falls off the EU agenda and offer concrete rewards to encourage the reform process in the country, such as the concrete prospect of visa liberalization.
Closing the event, Martens Centre Executive Director Tomi Huhtanen told the audience how, in previous years, “financial crisis” and “economic recovery” were the topics dominating the EIF discussions. This time around, new buzzwords such as “collaborative economy”, “industry 4.0” and “data-driven economy” took over the conversation.
In a world where change seems to happen at an exponentially growing pace, 2016 is no doubt going to bring new, disruptive trends for the European economy. The Martens Centre will be there to discuss them as they happen, with a continued appetite for new ideas and concrete policy recommendations.Economy Energy Growth Innovation Trade
Economic Ideas Forum, inspiring ideas into policy action: 7 key takeaways
10 Dec 2015
The American energy revolution has radically transformed the US energy landscape in less than a decade. Surging energy production is increasing US energy self-sufficiency, the holy grail of American energy policy for over 40 years. The US economy appears to be the biggest winner in the new energy reality. The surge in US competitiveness presents an almost insurmountable challenge for important parts of European industry.
Yet, is the US, in the wake of diminishing reliance on foreign oil, redefining its role in the oil-rich and conflict-ridden Middle East, causing a US foreign policy revolution in the region? And is Europe on the winning or losing side of this new Middle Eastern reality?
In this article I describe the American energy revolution and argue that, despite growing energy self-sufficiency, the US will remain deeply integrated in the global energy markets. The American energy bonanza will thus continue to have a significant, though not revolutionary effect on the global energy landscape.
I also argue that, despite the official US rhetoric, the American energy revolution is causing a somewhat revolutionary shift in the US’s Middle Eastern policy. The US’s diminishing energy imports seem to be contributing to a less engaging role for the country in the region.
The lack of determined American leadership to end the conflicts in Syria and Iraq is also resulting in the European refugee crisis. Without decisive action, the EU is likely to stay on the losing side of the American energy revolution on the Middle Eastern and economic front, at least compared to the US.
Read the full FREE article published in the December 2015 issue of the European View, the Martens Centre policy journal.Mark Boris Andrijanič Energy Middle East Resources
Mark Boris Andrijanič
The American energy revolution: challenging Europe and the Middle East
07 Dec 2015
This week’s developments regarding the allegations of fraud and money laundering against Lukoil’s operations in Romania are an excellent case-study of EU politicians’ positions towards Russia. It highlights the difference between the EPP-affiliated, pro-European President Traian Basescu, and the Socialist, pro-Russian Prime Minister, Victor Ponta. We now see who walks the walk and who just talks the talk. It also shows a powerful Russian company trying to threaten and blackmail an EU member state; it just happens that in this case, the company’s position is very weak.
On 6 October 2014 Romanian prosecutors seized assets of a Lukoil refinery in Romania for allegations of fraud and money laundering amounting to 230 mil EUR. The Russian oil giant reacted by threatening to close down its operations in Romania and lay off 3500 people. Centre-left Prime Minister Ponta reacted by threatening prosecutors for jeopardizing the Romanian economy.
Centre-right President Traian Basescu explained in clear words that the Russian company has to respect Romanian laws and EU standards, if it wants to operate in Romania. He said that “Putin-style laws” do not apply in Romania; the Russian company should leave for Moscow, if it wants to operate according to “Putin-style laws”. “Leave the country, if you are not ready to obey Romanian law”, he said.
The behaviour of the Russian company and the positioning of the two Romanian leaders is highly relevant for EU’s attitude towards Russia: Traian Basescu, a second term president not seeking re-election in November’s presidential election, is known for his pro-European course and tough stance on Russia. Centre-left Prime Minister Ponta, affiliated with the European Socialists, is running in November’s Presidential elections seeking to become the country’s first Socialist President in a decade. Mr Ponta’s priority is to keep social peace ahead of the presidential elections. Any social unrest triggered by eventual lay-offs would jeopardize his campaign. Mr Ponta is ready to jeopardise the independence of the judiciary in order to keep social peace and to satisfy the interests of a Russian company suspected of having broken Romanian laws.
Lukoil painted a dark picture for its employees and for the Romanian consumers, in case it will have to close down its operations: closing down the refinery would lead to 3500 redundancies. This number is exaggerated, given that Lukoil employs only a total of 1100 people in the foreseen subsidiaries. This did not keep Prime Minister Ponta from adoptingtheir exaggerated number. Not being able to process its crude oil in the Romanian refinery would lead to fuel price increases at Lukoil’s gas stations, Lukoil claims.
Coincidence or not, on Thursday, Gazprom reduced by 15% the gas deliveries to Romania – this being just one of many similar measures taken lately. We are all familiar with Russian price blackmails, but in this case it will not work: Lukoil has a market share of just 20% on the fuel markets in Romania; this is far from a monopoly. If prices at Lukoil’s gas stations increase, every single consumer would just buy his or her fuel at any other European station across the street: An opportunity for every citizen to turn to European companies and to judge politicians on their behaviour in real crisis situations.Siegfried Mureşan Business Eastern Europe Energy EU Member States EU-Russia
Effectively Deterring Russia
10 Oct 2014
CES is proud to host the fourth Economic Ideas Forum, which will be held in Helsinki during the 6th and 7th of June 2013 under the Patronage of Prime Minister Jyrki Katainen. The annual conference brings together high level economic experts, Ministers of Economy, EU Commissioners, EU Prime Minister, as well as business leaders from around the world. The Forums provide an opportunity to consider innovative ideas and propose solutions to the economic challenges facing the EU economy.
This year’s Forum will once again contemplate the pressing issues on the economic agenda: the role and continued relevance of the EU in the global economy, new sources of growth, how to tackle unemployment, banking and financial regulation, green economy and sustainability. Every year, over 250 participants attend this high level, interactive conference. Confirmed speakers include Prime Minister of Latvia Valdis Dombrovskis; EU Commissioner Olli Rehn; Alexander Stubb, Minister for European Affairs and Foreign Trade of Finland; Irish Minister of European Affairs Lucinda Creighton; Erkki Liikanen, Governor of the Bank of Finland; Portuguese Minister of Finance Vitor Gaspar; and Jari Koskinen, Minister of Agriculture of Finland.
Previous Forums have been successfully held in Madrid (2010), London (2011) and Dublin (2012) and have received wide international media coverage. Please keep checking our website for more information regarding the programme, speakers and online registration.Banking Economy Energy Eurozone Growth
CES proud to host fourth Economic Ideas Forum in Helsinki under the patronage of PM Katainen
07 Feb 2013
The war in Ukraine changed the geostrategic influence on the energy markets in the world, manifested mainly through the changes in the price of energy fuels and electricity and took toll of the low-carbon transition plans. Soaring energy prices have prompted governments to rethink their energy policies. Many countries – including North Macedonia – are considering ramping up fossil fuels as part of their response, but increasing fossil fuels would put the 1.5 degrees Celsius target beyond reach.
Since October 2021, North Macedonia, forced by the sharp incline of the energy prices on the market delayed the closure of the coal-based power plants to support the energy security of the country. The energy crisis forced the North Macedonia’s Government to provide budgetary support to the energy companies, amounting 760.2 million euros so far.
A systematic literature review has been undertaken, followed by an in-depth analysis to ascertain the extent to which the new global energy paradigm will influence the main strategic energy-related objectives of the country. The results show deviation from the decarbonisation path and the planned measures, as well as possible changes in the investment cost scenarios. Based on this analysis, three key policy recommendations are provided to get back on the decarbonisation pathway.
The current unprecedented energy crises in Europe may be the main driver for the devaluation of the national economies, resulting with economic inflations. However, it presents a possibility for investment in renewable technologies and especially energy efficiency, therefore contributing to a sustainable green transition for North Macedonia.Balkans Climate Change Energy
Decarbonising the Economy of North Macedonia
08 Nov 2022
The EU’s energy sector is in a severe shock. The Kremlin’s deliberate choice to limit natural gas exports to Europe is causing lasting damage, which is ricocheting in many directions. Electricity prices have skyrocketed in all member states, setting new grim records. Natural gas rates are also soaring, while conventional alternatives such as coal and timber are becoming pricier or more limited in supply. Leading energy utilities like Uniper SE and Électricité de France (EDF) are asking for state bailouts to recover their huge losses. European governments are pumping billions of euros each month in order to keep energy prices artificially lower for end users. Most worryingly, European citizens are asking if there will be sufficient power supply during the winter to keep homes warm and businesses running. As the EU is in the eye of the energy storm, the most important question remains, what is there to be done?Energy EU-Russia
Europe’s Tough Energy Choices
08 Sep 2022
The Nord Stream 2 project aims to double the capacity Russia currently possesses for delivering natural gas directly to Germany through the Baltic Sea. This paper provides an overview of the current developments surrounding the project and of opposition to the pipeline by the European Commission and a growing number of EU member states. It goes on to analyse the risks involved in the new gas infrastructure and argues that Nord Stream 2 would be detrimental to the energy security of a number of Central and Eastern European member states and of Ukraine.
The paper contends that while the pipeline offers uncertain economic gains, it would dangerously weaken the EU’s strategic goals in Eastern Europe, disrupt the European Energy Security Strategy and damage member state unity. Ultimately, the new German government should recognise this and take the necessary measures to stop Nord Stream 2.Energy EU-Russia Neighbourhood Policy Sustainability
European Energy Security: The Case Against Nord Stream 2
13 Apr 2018
Security of energy supply is one of the three main objectives of the EU energy policy, on a par with competitiveness and environmental protection. However, prominence of the energy security as a policy area rose with the 2009 gas crisis and the 2014 conflict in Eastern Ukraine, prompting the EU to adopt Energy Security Strategy.
According to the strategy, EU countries should strengthen their ability to face possible supply disruption and improve coordination of their respective emergency and solidarity mechanisms. They should further reduce their dependency on particular fuels, energy suppliers and import routes and increase domestic energy production, while taking demand moderating measures.
All these goals have been long on the policy agenda of the V4 countries. After the exposure to gas crisis in 2009, considerable improvements in terms of route diversification have been made. However, there are new challenges, mainly stemming from geopolitical situation and possible new gas infrastructure that could disrupt the ongoing integration into a bigger regional gas market. V4 power sector has been long viewed as relatively unproblematic compared to gas sector but new and very serious challenges are arising with adoption of ambitious environmental policies and growing RES volumes.
This paper provides a brief overview of the main challenges and areas we view as problematic or particularly important. It is a subjective selection, covering only power and gas sector issues. To make the paper concise and relevant, we chose not to touch upon other important energy security related issues linked to oil, coal or nuclear fuel. Also, to put the discussion below into a context, we provide some key statistics for gas and power sector in V4 countries but we do this in the annex to save some space and maintain the focus.
The second part of the paper contains recommendations that would help policy-makers address the current challenges and strengthen the energy security in the Visegrad region and the EU as a whole.Energy EU Member States Resources Security
V4 – Energy Security and Regional Markets: Challenges Ahead
20 Dec 2015
The Ukraine crisis has reignited debate in Europe surrounding the EU’s lack of a fully functioning single energy market. It has brought home to all member states the general need for a more coordinated energy policy, even though they may differ on aspects of what needs to be done. This research highlights that integration of the internal single energy market should still be the EU’s main instrument to reach its three goals of cost competitiveness, security and emission reduction.
A roadmap for completing the single energy market is proposed based on a harmonised EU-wide system of renewable energy subsidies and significant infrastructure investment in many Central and East European member states. These smart investments would form part of a coherent, long-term investment plan for the European energy sector and would enable these member states to improve their energy security through greater investment in gas storage and interconnectors.
The goals of energy security, affordability and sustainability have never been higher on the EU’s agenda. All three goals would be served if Europe truly unified its energy market. National leaders have it in their hands to complete this slow and difficult integration process, if they can just summon up the necessary political will to do so.Energy Renewable Energy Resources Security Sustainability
Refuelling Europe: A Roadmap for completing the Single Energy Market
22 Dec 2014
President Putin’s decision to cancel work on the South Stream pipeline may have far-reaching consequences regarding the development of a single energy market within the EU. Although Commission President Juncker (and Bulgarian Prime Minister Borissov) have publicly stated that South Stream remains a potentially viable project, its de facto mothballing by Russia provides the EU with an opportunity to develop alternative energy scenarios in south east Europe.
These are scenarios which would improve both the diversity and security of the EU’s energy supply. This IN FOCUS sets out five key reasons why the end of the South Stream pipeline should mark the beginning of moves towards an European energy union.
IN FOCUS is a new series of commentaries in which the Martens Centre looks closely at current policy topics, dissects the available evidence and challenges prevailing opinions.Energy EU Member States EU-Russia Renewable Energy Resources
European Energy Union: Why the end of South Stream should mark its beginning
16 Dec 2014
Banking Economy Energy Innovation Jobs
Economic Ideas Forum 2014, Bratislava – Conference Report
01 Dec 2014
Banking Economy Energy Growth Transatlantic
Economic Ideas Forum Helsinki 2013 – Conference Report
02 Sep 2013
The European Union, as an early proponent of the shift to alternative forms of energy, has taken impressive efforts in promoting green business and environmental reform. Where does the EU stand today in its transition towards a sustainable economic model built on green business? What challenges do European policymakers and business leaders face in their progression towards a truly green economy? The availability of and access to private forms of investment capital is one of the most important challenges for new green industries struggling to maintain competiveness in the face of growing global competition. Other practical challenges for businesses in the renewable sector are highlighted in the paper using the case study of Germany. The paper proposes new forms of investment, sustainable financial products, the creation of common standards, and greater transparency. This should go hand in hand with the continuation of renewable energy subsidies and the exchange of information and the promotion of skills among businesses.Energy Environment Innovation
Green Energy- Green Business: New Financial and Policy Instruments for Sustainable Growth in the EU
01 May 2012
In this paper, three long-time observers of Russia and the EU perform a reality check on the EU–Russia relationship. All three authors agree that a more realistic EU policy would deal with Russia as it is, not as the EU wants it to be. The reality of today’s Russia is complex, as is the policy formulation process in the EU. Nevertheless, the EU should start with a clearer idea of where its own interests and priorities lie. It should accept that it can achieve fruitful cooperation with Russia in some areas while openly disagreeing with it in others. The EU needs to be prepared to work with Russia as an equal partner without compromising its own norms and values.Energy EU-Russia Foreign Policy
EU-Russia Relations: Time for a realistic turnaround
01 Mar 2011
The world is rapidly moving toward increasing penetration of smaller, more local sources of energy. This paper analyses the existence and design of an optimal policy for building robust markets for distributed renewable energy solutions, specifically energy technologies that can be adopted at the point-of-use by energy users (as opposed to energy utilities) that are carbon-free and renewable. This includes the objectives of distributed renewable energy policy, how they conflict among stakeholder types, which elements have been used to stimulate market growth and which policy type can drive towards unintended and intended consequencesEnergy Environment Innovation
Accelerating the Deployment of Distributed Renewable Energy: Through Innovative Market-Driven Policy Programs
01 Jan 2009