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Transcript of Ideas for liberty The Energy Challenge for Europe – and Lithuania Vilnius, 21 October 2008 Carlo...
Ideas for liberty
The Energy Challenge for Europe – and Lithuania
Vilnius, 21 October 2008
Carlo StagnaroDirector, Research & Studies
Istituto Bruno Leoni
Istituto Bruno Leoni
Energy security
• A priority for 35% of Europeans (Eurobarometer January 2007);
• Security = Availability of reliable, sustainable energy at a reasonable price;
• An economic, environmental, and geopolitical issue.
Istituto Bruno Leoni
Fear is the path to the dark side.
Fear leads to anger.
Anger leads to hate.
Hate leads to suffering.
Istituto Bruno Leoni
Economics of security
• Security = cost;• Security ≠ price stability;• Trade off tra between “security”, “price
stability”, and “low prices”;• Liberalizations: the system becomes more
flexible and reactive– Investments need to be driven by the
markets;– Network unbundling.
• Globalization: arbitrage becomes easier.
Istituto Bruno Leoni
What does “liberalization” mean?
• Competition between sources– Nuclear; – Renewables;
• Competition between companies– Privatization;
• Deregulation– Demand;– Supply;– Prices;
• Unbundling– Proprietary is better – require less
regulation;– Non discrimination;– Investment policies.
Istituto Bruno Leoni
20-20-20‣ Fail to meet a target? Commit
to a stricter one!‣ 20% less consumption below
the baseline‣ 20% emissions reductions
below 1990 levels‣ 20% renewables
✦ Three major questions
1. Is it feasible?
2. Is it significant?
3. Is it efficient?
Istituto Bruno Leoni
The Death of the Free Market
Investments displacement: who needs more natural gas?
✦Demand control (consumption reduction)
✦Supply control (renewables + emissions reduction)
✦Price control (renewables + emissions reduction)
Istituto Bruno Leoni
Economic freedom as an alternative
Istituto Bruno Leoni
Istituto Bruno Leoni
Geopolitics
• Peace is the best strategy to pursue (energy) security;
• Integration vs. Protectionism– EU integration;– Integration with Russia;
• The Challenge is not to reduce reliance on imports, but to better integrate our economies;
• Europe can play a major role– Internally: Build networks, promote
unbundling;– Externally: create conditions for the free
market;– Create a market, not a bureaucracy;– Avoid inconsistencies!
• Promote an Energy Doha.
Istituto Bruno Leoni
Lithuania and Europe
• How to pursue economic growth while achieving security and sustainability?
• Are Lithuania’s interest opposed to Europe’s interests?• Environment• Russia
• Renewables, nuclear power (Ignalina), power trade, and natural gas.
Istituto Bruno Leoni
Lthuania’s per capita emissions…
Istituto Bruno Leoni
…and carbon intensity
Istituto Bruno Leoni
Lithuania’s challenges / 1✦ Meet its energy demand
✦ New power plants – especially to substitute for Ignalina nuclear power plant (state-owned, 70% of the country’s need) – but not “too many”!
✦ More interconnections with the rest of Europe;✦ Deregulate electricity/gas imports
✦ “Electricity interconnections with Western and Scandinavian electricity systems would enhance the level of competition.” (Source: National Control Commission for Prices and Energy, 2007)
Istituto Bruno Leoni
Lithuania’s challenges / 2
✦ Deregulate prices even though “this may lead to increasing electricity prices for small, thus more vulnerable customers whose electricity consumption is usually less efficient” (NCCPE, 2007);
✦ Rationalize consumption✦ Technological improvement;✦ Remove regulatory barriers;✦ Let the market do its job!
Istituto Bruno Leoni
Lithuania’s challenges / 3✦ Create a real market for energy
✦ Ownership – not just legally – unbundling; and privatize!
✦ Privatize state-owned former monopolists:✦ “In the absence of competition in both the generation and
supply sector, the actual opening of the electricity market is equal to 13% out of possible 74% of the national electricity consumption” (NCCPE, 2007);
✦ European integration;✦ Consistent policies.
Istituto Bruno Leoni
Final thoughts
✦ You (and we) need more Europe…✦ …but the right Europe, not the wrong one:
✦ The market for power is not a national market;
✦ More imports, but also more security✦ The Russian problem;
✦ Impact of financial crisis: need for fresh capitals…✦ …to fund economically efficient, socially desirable
investments:✦ More capacity, more competition, more
interconnections.
An energy policy like…
Kung Fu Panda?
Istituto Bruno Leoni
Thank You for Your Attention
Carlo StagnaroDirector, Research & Studies
Istituto Bruno [email protected]