Categories: Energy Article 1

Introduction

With the goal of “allow[ing] a free flow of energy across borders and a secure supply in every EU country, for every citizen” and thereby “making energy more secure, affordable and sustainable”,1 the European Commission has launched a package of policies and planned measures with the goal of setting the course for the “European Energy Union”. The Energy Union is built around “A Framework Strategy for a Resilient Energy Union with a ForwardLooking Climate Change Policy”, “An Interconnection Communication” (which, inter alia, sets out the measures needed to achieve the Union-wide target of 10 percent electricity interconnection by 2020, including identification of States that have already achieved the target, and those in which further efforts are essential); and the EU’s communication of its vision for the global climate agreement in Paris in December. With this launch, the EU reports that “an integrated energy market for all EU countries is closer than ever before”. As set out in the Strategy, the Energy Union is “based on the three long-established objectives of EU energy policy: security of supply, sustainability and competitiveness”. In addition to these, the EU’s announcement explains a range of other benefits that will arise from the new Union: "New technologies and renewed infrastructure will cut household bills and create new jobs and skills, as companies expand exports and boost growth. It will lead to a sustainable, low carbon and environmentally friendly economy, putting Europe at the forefront of renewable energy production and the fight against global warming."

Throughout the Energy Union launch, it was clear that the three energy objectives are clearly interlinked with climate objectives. The launch describes the EU’s climate strategy as a “key element” in the entire programme. In particular, the decisions taken at the October 2014 European Summit in setting the EU’s proposed greenhouse gas (GHG) emissions reduction target (the so-called Intended Nationally Determined Contribution, or INDC8 to be effectuated under the Paris climate protocol to the UNFCCC) are integrated into the Energy Union instruments, along with a detailed description of “the Road to Paris”, discussing the EU’s decision on a rather aggressive stand on climate and the new Protocol.9 As of the last editorial reading of this report, only six INDCs have been submitted, three of which are from Europe (the EU, Norway and Switzerland) and all three of these express significant commitments to emission reduction.

In this connection, in announcing the Energy Union, the EU mentioned on-going discussions of reform of the EU’s GHG emissions trading system (EU ETS), in part by introducing a market stability reserve (MSR). It is hoped that the MSR will increase the shock resilience of the EU ETS while neutralising the negative impacts that the prevailing market surplus is having on the incentives to develop, market and use low-carbon equipment and technologies. Citing “ageing infrastructure, poorly integrated markets, and uncoordinated policies”, the announcement notes that attention to these supporting factors is a necessary prerequisite before European consumers can benefit from the increased energy choices and lower energy prices that are in store. The announcement also notes that the Energy Union and its component strategies, guidelines and priorities will “complete the single energy market in Europe”. Towards its achievement of the three elements mentioned above, the Strategy itself identifies five mutually reinforcing and closely interrelated dimensions:
• Energy security, solidarity and trust;
• A fully integrated European energy market;
• Energy efficiency contributing to moderation of demand;
• Decarbonising the economy; and
• Research, innovation and competitiveness.

In presenting these factors, however, the EU’s announcement emphasises consumer price issues, as well as the enhancement of consumer access to energy, job creation and the maximisation of consumers’ energy options. 

Launch of Energy Union

In launching the Energy Union, Jean-Claude Juncker, President of the European Commission, said, "For too long, energy has been exempt from the fundamental freedoms of our Union. Current events show the stakes as many Europeans fear they may not have the energy needed to heat their homes. This is about Europe acting together, for the long term. I want the energy that underpins our economy to be resilient, reliable, secure and growingly renewable and sustainable."

The Energy Union is a matter of global importance well beyond the borders of the EU, in part because the EU is the largest energy importer in the world, importing 53 percent of its energy, at an annual cost of around €400 billion, with predictions that linking the Member States through an interconnected grid could save consumers up to €40 billion a year. Similarly, 90 percent of the EU’s oil products are imported, and wholesale energy prices are significantly higher in Europe than in the US. With regard to interconnection and options, the EU press release notes that 12 EU Member States do not meet the EU’s minimum interconnection target – that at least 10 percent of installed electricity production capacity be able to “cross borders”; and six Member States are dependent on one single external supplier for all their gas imports. The EU estimates that it will need to invest over €1 trillion in the energy sector by 2020. With regard to financial support for the necessary work, the Strategy notes, "The Commission will reinforce its support for this process through the use of all available Community funding instruments in particular the future European Fund for Strategic Investments (EFSI), and fully involving European financial institutions. However, the necessary infrastructure must also be in place inside the EU, including the possibility of reverse flows, to bring the gas to where it is needed."

It also notes that: "Investors can draw on the Investment Portal being set up as part of the European Fund for Strategic Investments that is designed to boost the transparency of the EU investment project pipeline to make information accessible to potential investors. The Commission will also bring together information on infrastructure projects funded by the Connecting Europe Facility and EU Cohesion Policy Funds, to bring more coherence in the wide array of existing funding schemes and maximise their impact."

In this connection, the Commission announced that it will convene a dedicated Energy Infrastructure Forum where progress should be discussed with the Member States, relevant regional cooperation groups and EU institutions. It will meet for the first time in late 2015.

Strategy coverage

In addition to energy efficiency, decarbonisation and price structures, the strategy addresses a broad range of energy options including oil, gas, domestic electrical grids, liquefied natural gas (LNG), nuclear power under the Euratom Treaty, renewables, “unconventional sources” such as shale gas, and participation in the global energy markets. It also discusses research and development, upgrading and modernising transmission systems and markets, energy standardisation and “smart metering”. It addresses the importance of foreign policy instruments and options, particularly the establishment of strategic energy partnerships with producing and transit countries, specifically mentioning Algeria, Azerbaijan, Norway, Turkey, Turkmenistan and Ukraine; as well as the future possibility of reframing the EU’s energy relationship with Russia and referring generally to “the Middle East; Africa and other potential suppliers”. The Strategy summarises the actions to be taken through the Energy Union in the following 15 points:
1. Full implementation and strict enforcement of existing energy and related legislation.
2. Diversification of the EU’s supply of gas.
3. A revision of the Decision on Intergovernmental Agreements.
4. The implementation of major infrastructure projects, particularly the Projects of Common Interest, through the Connecting Europe Facility, the European Structural and Investment Funds, and the future European Fund for Strategic Investments.
5. Creation of “a seamless internal energy market” that benefits citizens, ensuring security of supply, integrating renewables in the market and remedying the currently uncoordinated development of capacity mechanisms.
6. Further development of the regulatory framework set up by the 3rd Internal Energy Market Package.
7. Development of regional approaches to market integration.
8. Biennial reports on energy prices and the role of taxes, levies and subsidies.
9. Review and revision of all relevant energy efficiency legislation.
10. Retrofitting existing buildings for energy efficiency and development of a “Smart Financing for Smart Buildings” initiative.
11. “[A] comprehensive road transport package promoting more efficient pricing of infrastructure, the roll-out of intelligent transport solutions and enhancing energy efficiency”.
12. Implementation of the EU-agreed climate and energy framework for 2030, including “legislation to achieve the greenhouse gas reduction target … both in the Emissions Trading System and in the sectors outside the Emissions Trading System”.
13. A new Renewable Energy Package to be proposed in 2016–2017, toward cost-effective achievement of the 2030 target on renewables.
14. “[A] European energy R&I [research and innovation] approach, comprising an upgraded Strategic Energy Technology Plan and a strategic transport R&I agenda, with a limited number of essential priorities and clear objectives, in 2015–2016”.
15. Revitalisation of the EU’s energy and climate diplomacy, making full use of the EU’s external trade policy “to promote access to energy resources and to foreign markets for European energy technology and services”.

As regards the regulatory setup, the Energy Union proposes a more centralised approach, focusing on the Agency for the Cooperation of Energy Regulators (ACER): "The Commission considers that EU-wide regulation of the single market should be strengthened through a significant reinforcement of the powers and independence of ACER. This is necessary for it to effectively oversee the development of the internal energy market and the related market rules as well as to deal with all cross-border issues necessary to create a seamless internal market."

There is no proposal for any Union-level taxation to support the Energy Union, although Member States are encouraged to re-evaluate their national energy taxation frameworks. The Energy Union will not address “energy poverty” and other social welfare issues relevant to the energy sector, noting that efforts to “shield vulnerable customers through social policies within the competence of authorities on the national, regional or local levels, ... should preferably be provided through the general welfare system”. In the EU, GHG emissions fell 18 percent in the period 1990–2011. By 2030, it aims to cut its emissions by at least 40 percent, boost renewable energy by at least 27 percent, and improve energy efficiency by at least 27 percent. Other key information about the Energy Union is available online.

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