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Ahead for a resilient Energy Union with a forward-looking climate change policy… or quitting soon the existing energy & climate trap?

by Jean-Michel Glachant
Director, Florence School of Regulation

9 October 2014

 

Only two years ago the EU energy and climate policy was mainly seen as effective and forward-looking. Of course it was not perfect, but as any policy to a certain extent it was a bit messy to compromise for this or that other due cause. Today doubts on the effectiveness of the EU energy and climate policy are rising  so high that the European Commission might undertake a serious U-turn, presumably without claiming to reduce oppositions to new developments.

Five pillars of the former EU energy and climate policy are already down. 1/ We have banked on rising fuel prices and growing oil scarcity. We now see cheap shale gas in the US; expanding shale or deep sea oil & gas from Brazil to Cyprus. 2/ We conceived our internal power market to spread all over the EU a fleet of CCGTs (Combined Cycle Gas Turbines) competing with market base priced gas. We now have renewables flooding the power market with unsustainable wholesale prices mashed by subsidies given from outside the market. 3/ We have relied upon a Green Revolution with a renewable push giving to the EU a technological and manufacturing “first mover” advantage vis-a-vis the rest of the world. We are not exporting much in fact, but significantly importing and our Green growth (being still not self-financed) starts to run out of steam. 4/ We created a smart auxiliary engine for decarbonisation: carbon pricing and allowance trading. Of course the entire world would sooner or later follow us because we are so smart. Alas carbon price is so low in the EU that gas cannot compete with coal, which is two times more polluting but irresistibly growing to occupy our entire fossil fuel power base. The world is not dreaming about the EU-ETS (European Trading Scheme) and at the 2015 United Nations Climate Change Conference in Paris we might have to definitely bury our dreams. 5/ While expecting to payimported fuels quite a high price we indeed  considered our fuel imports secure enough, with Russia being reasonable since so long (already as SSSR)  and the Middle East being kept cool by US army and diplomacy for decades.

Having lost these five pillars the EU energy and climate policy can only wake up with a strong headache. Will any “Energy Union” rescue us? It cannot be magic but could put some balm on our wounds, by creating. 1/ A frame for a better common gas security and more generally a common energy security policy overseas. 2/ A house to put altogether all our existing renewable sources in an open internal energy market revamped for massive renewables. 3/ A planning office and an investment fund to upgrade our energy storages, grids and IT infrastructures  to strengthen our common energy security, our common renewables market, as well as the so called “Internet of Things”, which will inevitably revolutionize the way households manage their homes, their domestic devices, their heating and their energy bills.

The new Energy Union? In the end what we need is not a magic wizard, but  only a good plumber…

 

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