The EU Energy Policies: straight ahead or time to steer the wheel?
Christian Egenhofer
Associate Senior Research Fellow, Centre for European Policy Studies (CEPS)Visiting Professor, SciencesPo (Paris), College of Europe (Bruges & Natolin), Guido Carli
LUISS University (Rome)
Hotel Majestic, Rome, 29 May 2013
Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu
THE ENERGY TRANSITION IN EUROPE: DIFFERENT PATHWAYS, SAME DESTINATION?
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2007/08 Climate and Energy Package was meant to setout long-term framework to address EU energy andclimate challenges
1. Climate change2. Security of Supply3. Competitiveness
2007/08 Climate & Energy Package
• “Increase security of supply • Ensuring the competitiveness of European industry and
the availability of affordable energy;• Promoting environmental sustainability and combating
climate change”
“… to transform Europe into a highly energy-efficient and low greenhouse-gas-emitting
economy …”
“Europe 2020” Strategy (Mission Statement Barroso II Commission)
2030 framework for climate and energy policies
Improved energy efficiency
Improved energy efficiency
Promotion of new technologies, growth
and jobs
Promotion of new technologies, growth
and jobs
Affordable and competitive pricesAffordable and
competitive prices
CompetitivenessCompetitiveness
Adequate energy infrastructuresAdequate energy infrastructures
Grid StabilityGrid Stability
Diversification of fuels, supply countries and
routes
Diversification of fuels, supply countries and
routes
Security of energy supply
Security of energy supply
Development of alternative energy
sources
Development of alternative energy
sources
Reduction of energy consumptions
Reduction of energy consumptions
Reduction of emissionsReduction of emissions
SustainabilitySustainability
European Commission “2030 framework”… “must ensure progress towards three objectives”
Source: European Commission (DG Energy)
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The (new) EU in search of a new consensus
1. Economic crisis undermines EU climate ambition (20% target = almost reached) + not in line with 2 C target, international finance, EU decarbonisation … ETS etc.
2. New EU is more heterogeneous (GDP per capita ranges from 274% to 45% of EU average)
3. Industrial competitiveness matters more
4. US energy prices (vs EU prices)
5. EU share of global emissions is fast falling & no global climate change agreement in sight
6. EU energy prices go up
7. Old framework must be renewed
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The 2007/8 Climate and Energy Package was adopted within a unique political constellation
- Consensus within and between EU Institutions (European Council, European Commission, European Parliament, certainly for EU-15)
- Strong and committed leaders (‘positive EU cycle’)- Economy on track- Expectation of a Global Agreement- EU dominated by EU-15 (?)
Lessons
Interactions between different policies exists (irrespective of targets). Existing mechanism (i.e. linear reduction factor, ex-ante Impact Assessment, three targets) were not sufficient to address interactions
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• Industrial policy benefits (technology leadership, export-led growth, green jobs/growth/ economy etc.) have lacked evidence
Lessons (2)
• Regulation works, e.g. car efficiency standards, regulation for houses …
• Least-cost policy (ETS) faces political obstacles while high-cost policy is successful
• Carbon price is indispensible but not ETS !
• We know what works! We have experiences with hybrid instruments.
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Lessons Learned (3)
• Importance of national/local energy and other policy choices have been underestimated (German energy transition, UK price floor, contract for differences, nuclear policies ….)
Continuity but no roll over
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Is there an issue?
What is main issue?
• Climate change policy? (carbon pricing)
• EU energy policy? (Renewables)
• Investment economics ?
• Member states exert national/local energy choices (Art. 194 II Lisbon Treaty)? (Energy transition) ?
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Issue is price of energy
• European or national prices ?
• Real or published prices? Transparent or non-transparent?
• Sustainable or non-sustainable energy?
• Short-term or long-term vision?
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CEPS Energy M arkets ForumKey challenges and potential remedies to address
Challenge Measures/ remedies To bedealt
with in Work Programme
1 Spill-over effects of national energy choices (e.g. loop flows, negative prices)
Reveal divergent national preferences regarding the future energy mix and point to increasing constraints resulting from the EU framework
WP 1
Increase regional coordination and cooperation
WP 1
Incentivise greater cross-border TSO cooperation (e.g. cross-border re-dispatching)
WP 1
Facilitate international exchange between national governments, regulatory authorities, TSOs & DSOs and energy market participants
All WP
2 Electricity network expansion (How to optimise electricity/ energy networks?)
Improve methodologies to allow for cross-border cost-benefit allocation
WP 1
Identify and build institutional capacity to address distributional effects, i.e. deal with winners and losers
WP 1
Identify ways (for TSOs) to better incorporate DSO related flexibility
WP 2
Develop new ways of improving public acceptance of cross-border infrastructures or those with a significant cross-border impact, for example by authoritative analysis or other means
WP 2
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