Events from the past year have had a radical effect on Europe’s energy policy. While the goal of achieving net zero before 2050, confirmed 12 months ago at COP26 in Glasgow, is still in place, there is a higher emphasis across Europe to provide enough gas and oil for winter and to mitigate the economic and social impact of high prices.
You might think that because of the recent developments in the search for new energy sources and the use of coal that the climate agenda set by global leaders at Glasgow’s conference has been left by the wayside. But, this is not true! In fact, energy is now one of the most important political issues we face.
The recent energy crisis sparked by Russia’s invasion of Ukraine has certainly provided a sharp reminder that hydrocarbons are still the backbone of our continent’s energy supply which provides more than 80% of all European needs.
In light of the sudden turn of events, relying on hydrocarbon imports has become much less favorable. As a result, the prospect of shifting to low-carbon sources of supply has become more attractive.
Wind power is much cheaper than gas, which means that it’s a good time to go green. Buying locally-produced energy also reduces the discomfort of being dependent on unreliable trade partners. The idea of renewable energy has become blurred with the idea of securing our country against future sources of foreign oil. The growth of investment in wind and solar energy sources is the dominant trend.
Previously considered a “bridge” to a lower carbon economy because it is a less polluting fossil fuel than coal and oil, gas has become the primary target of the transition agenda.
This demand for energy cannot be eliminated quickly because the infrastructure of home heating systems and industrial plants is so ingrained. It may seem like it’s not making a difference, but total consumption has fallen. In June of this year, Europe used 16% less natural gas than they did in the same time period last year- that number is only going to keep falling.
In the short-term, new LNG facilities being built in the US and the Middle East will provide additional supplies to fill the immediate gap. However, Russia is unlikely to be able to take back its dominant position as a supplier even if this war ends soon.
At COP26, the urgency of the situation has led to a reassertion of national control over energy policy. Governments are more concerned with lights, prices, and customers than achieving consensus across 28 countries or a global deal that may never come.
The European Commission’s proposals for price caps and a common purchasing arrangement have been hampered by the need to move at the pace of the most reluctant member state. In Germany, in particular, national support packages—securing supplies and protecting consumers with price subsidies—have overshadowed efforts to find a pan-European solution.
The focus of national policies is internal, and the cost is high. Thanks to Covid, and energy support packages put in place within the world of government debt across the EU, the national debt has risen above 90%—and continues to grow thanks to new packages being put into place. Interest rates are rising as bonds are bought, which will lead to an increase in interest for loans that need to be serviced. In a climate framed by inflation and austerity, there is little opportunity for any serious response in regard to emerging economies’ cries for justice concerning standing on the environment.
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Source: Financial Times
