The European Union Energy Policies:

Published on November 13, 2009

The Atlantic-Ural College

Efforts made through new energy policies and the use of cleaner technologies will provide some energy savings and encourage the use of low carbon emitting fuels. The automotive industry is already investing in areas of research concerned with these new policy objectives. The OECD reports that such applications could lead to the stabilization of greenhouse gas emissions in OECD countries by 2030.

The EU for sees an energy policy that takes into account different national considerations. Among the proposals from the European Commission, is the complete opening up of the market, policies strengthening foreign relations and taking steps in the direction of renewable energy. However there are still differences about the choices of energy especially in the area of nuclear energy. The European Commission proposes different options in order to put together an internal EU energy policy:

• Ending the internal market for gas and electricity. A European energy regulator could be established to discuss issues relating to cross-border distribution of electricity and to define a common network code;

• Strengthen solidarity between member states when energy supplies are under threat or experiencing difficulties. This could be done through the build up of gas reserves in addition to existing oil reserves, already mandatory under European law;

• Diversify the energy mix of the EU, while respecting diverging national energy policies. A regular strategic analysis of the EU energy policy would show the impact of national energy policies on other European countries. This process could provide the basis for creating common remedial measures in the case of conflict;

• Regarding the rising temperatures caused by global warming and subsequent climate change, a new road map on renewable energy is proposed;

• A strategic plan is needed regarding new technologies in the energy field to ensure European Industrial domination of this market;

• A common foreign policy is required on the issue of energy, to coordinate suppliers such as OPEC and Russia. This policy would include a list of new pipelines and terminals for liquefied natural gas (LNG), in order to improve security of energy supply. A revision of the energy dialogue between Russia and the EU should include the rapid signing by Russia of the Charter Treaty on Energy, an international convention which was a leading topic during the gas conflict between Russia and Ukraine in January 2006.

An energy policy is needed to define relations between the EU and ex-soviet states such as Azerbaijan, Kazakhstan and Turkmenistan. This will improve their independence and secure new sources of energy for the EU.

The role of Russia in the world energy markets defines to a large extent its geopolitical influence. In this perspective, the oil and gas sector are more than ever before, instruments of internal and foreign policy. They complement or replace nuclear arms, the legacy of the cold war era. The gas company Gazprom, is a selected player in Russian foreign policy in the post cold war era and has become the third largest enterprise of the world. Gazprom’s dreams of dominance upset the Europeans especially since the company obtained a share in the market supplying gas to Western countries. Its desire to own and control the whole energy chain, from production to distribution is worrying. Certain contradictions are irritating: Whilst claiming to be great believers in the “market” in Europe, its leaders do not appear to be in a hurry to apply these principles at home. In other words, they refuse to allow the West to invest in the production and delivery of resources in Russia.

Russia supplies about 44% of Europe’s gas imports and 25% of its total gas consumption. The countries most dependent on supplies from Gazprom relative to their total gas consumption are: Slovakia (100%), Finland (100%), Greece (86.8%), The Czech Republic (80.8%), Austria (73.4%), Hungary (63.4%), Poland (50.2%) and Germany (44.9%). France with 26.8% is slightly below the EU average. Turkey and Switzerland are at 28.3%.

Russia is the main external supplier of oil to the EU, representing 30% of total imports( 27% of total consumption). These percentages are expected to increase as reserves of North Sea oil diminish. The EU summit with Russia in Paris in October 2000 saw the launch of the bilateral energy dialogue aimed at securing access to Russia’s massive oil and gas reserves (one third of global gas reserves are in Russia). This dialogue was based on the assumption that regional interdependence would grow over time: the EU, for reasons of security of supply and Russia in order to secure foreign investment and facilitate access to European and international markets (exports to the EU represent more than half of the value of total Russian exports).

It seems clear that the issue of energy supplies has become a major concern to the EU, especially the need to diversify its energy routes.

Since securing energy supplies involves diversification of suppliers and supply routes into the EU, it affects the external relations of the EU. For this reason, the European Commission has attached great importance to energy in the development of the European Neighbourhood Policy (ENP). In May 2003 it published a communication to the European Council and European Parliament about the development of an energy policy with the neighbours and partners of the enlarged EU.

This paper presents the steps the EU should take to achieve the creation of a large integrated European market for gas and electricity based on common rules and principles. The development of new oil and gas infrastructure as well as the harmonization and technical interoperability of national gas and electricity networks plays a crucial role. According to this communication, the EU should invest heavily in these areas. There are some neighbouring countries that have a significantly greater importance in the securing of energy supplies to the EU and these are the signatories of the Eastern Partnership agreement of the summer of 2009.

For the European Commission, the inclusion of the energy guidelines in the European Neighbourhood policy is fundamental to the stability and prosperity of the European Union.

One of the regions which is of growing interest to the EU as a huge potential source of energy is the Caspian Sea. Given the sensitive geographical situation of this area, the Commission is emphasising the importance of securing the delivery routes of the energy resources. The control of transit routes for oil and gas is vital for the security of energy supplies to the EU and also for the economic, social and political development of the Caspian Sea region. In this context, planning alternative energy routes through Iran and Turkey is as important as securing the existing routes through Russia.

The Commission proposes making full use of aid programs provided within the European Neighbourhood Policy to help develop economic activity in the energy sectors of the Caspian Sea region. The EU could participate in the financing of projects through the European Investment Bank. In addition, it proposes launching discussions with countries in the region on energy cooperation and economic development with the aim of making the region more attractive to European investors. These discussions seek to reduce potential risks, commercial and political, which could be triggered by projects related to these new sources of supply, such as the construction of the Nabucco pipeline. This forms part of the objectives of the above mentioned Eastern partnership.

These wide ranging analyses underline the importance of the provision of academic training to meet these challenges.

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Fossil fuels have shaped modern society and have enabled us to enjoy an unprecedented level of development. In the coming decades, fossil fuels will remain important drivers and factors for economic growth. However it is imperative that we begin the transition to renewable energy sources that is essential for a viable future on this planet. The investment in the diverse areas of renewable energy will create sustainable growth, employment and wealth.

Based on this observation, IPAG Paris and the Khazar University of Baku have decided to unite their efforts to create an MBA “Energy and Sustainable Development”.

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With sincere regards,

Olivier VEDRINE

Programme Manager