One for all - an energy policy for the EU
By Prof. Derek Taylor, Former Energy Advisor to the European Commission
Part 1: In the beginning.....
I first worked in the energy sector in 1973. At that time I knew nothing at all about energy - other than how to use it. I have worked in the sector almost continually since that year, much of it in the policy area, and now feel that I know a bit more about it. Something! But, like all those claiming to be "experts", my knowledge is very far from complete or even comprehensive. So, in reading further, please keep in mind that this blog can only ever provide a partial, imperfect picture of a vitally important but incredible complex and complicated sector.
This blog post is linked to an invited lecture I gave in December 2015 as part of the GERC Invited Lecture Series.
There are three pillars on which any energy policy is built. These are "security of supply", "competitiveness" and "sustainability". “Security of supply” is a reasonably obvious objective. Everybody’s first concern about energy is that it is there and available whenever we want it or need it. Our lives seem to grind to a sudden halt when our electricity supply fails. "Competitiveness" might appear to be rather less clear as an objective. However, to put it quite simply, it means that the price we have to pay for our energy cannot be too high. We and industry need to be able to afford the energy we all use. All forms of energy have some negative impacts on our lives or our environment. It is important to limit these impacts - to keep our energy "sustainable" - so we can continue to use it in the future.
I often refer to these pillars as the legs of a three-legged stool. They must all be the same length and the same strength - otherwise the stool cannot be used or will break. A balance between the three is vital. It will be a disaster if we have cheap energy always available if it pollutes and eventually destroys our environment. There is no point having access to very "clean" energy if we cannot afford to use it or clean and cheap energy that is never available. Two out of three is not better than nothing! A successful energy policy must achieve balance of all three and it is far from easy to achieve.
Over 75% of the total energy that the world consumes comes from fossil fuels with more than half of this coming from oil. These resources are finite. There may be reserves that we can count in tens of years - and we could find more, but one day - sooner or later - they will come to an end. In the meantime the world is steadily increasing it energy use and we all want our share of these resources. Unfortunately, less than half of the energy resources that the European Union (EU) needs are produced domestically. So we have to import an ever growing amount of oil, gas and coal into the EU. In fact we import over 60% of our coal, over 65% of our natural gas and over 90% of our crude oil; at a cost to our economy of over €400 billion each year. Our main supplier of all three fuels is Russia. Our import dependency increases each year (quite dramatically in the case of the U.K. over the past decade) and poses a growing threat to our security of supply.
For many of us, relatively small changes in the cost of our energy do not have a significant impact on our way of life. We might complain that our fuels bills are expensive in a cold winter or it is costing us more to put petrol in our cars. But we do not go cold or hungry as a result. Unfortunately, for others, this is not the case. It may come down to a decision between trying to keep warm on a freezing cold day or eating a meal. Nor is it the case for those industries that use a lot of energy in the processes they use to produce goods. Coal is often the cheapest of the fuels we use but, for environmental reasons, in many parts of the world we are trying to wean ourselves off it. Unfortunately, for heating we usually have to replace it by more expensive gas or electricity. In the electricity sector we can also replace it, at least partially, by renewable energies but these carry a higher cost. In addition, having to import so much of our energy from third countries means we have less control over the costs.
With the twenty-first "Conference of the Parties" - better known as "COP21" - taking place as Iwrite this (December 2015), we are all aware of what is presently the greatest threat to our planet, Climate Change. This is being brought about by the emission of greenhouse gases (GHG) into the atmosphere overwhelmingly as a result of energy production, transport and use. Fossil fuels are the main culprit because however we burn them they emit carbon dioxide. Under the "Kyoto" agreement, the EU is supposed to reduce its annual emissions of the year 1990 by over 20% by 2020. We are well on track to achieve this reduction - though we have had the questionable benefit of the financial crisis and economic recession at least partly to thank for this as it resulted in a decrease in energy consumption and demand growth. However, the EU with a population of approximately 510 million - around 7% of the world's population - still produces 11.5% of the world's carbon dioxide. So we need to make a much greater effort in future.
In 2006 energy had been thrust to the forefront of policy issues in the EU. Mr Putin had turned off the Russian gas tap - again. The oil price was becoming increasingly volatile (rising from below €20/bbl at the beginning of 2002 to over €70/bbl by mid-2006) and we were not at all on track to meet our Kyoto emission targets. Something needed to be done. Against this background, at the Glen Eagles European Summit, UK Prime Minister Blair surprised many by proposing that the EU adopt a European Energy Policy and the European Commission was tasked with producing one. In 2007 it tabled its first European Energy and Climate policy. This heralded a new approach to energy policy throughout the EU.
Keep an eye out for part 2 coming soon.
*You can keep up to date with GERC activities on our social media channels*