European integration has always been rules-based. Yet the Commission identifies “the implementation and enforcement of existing EU legislation” as the first priority of its new strategy. Specifically, it promises to insist that member-states implement the third energy market package. This is sensible, but not new: the Commission has been insisting that national governments implement this package ever since it was adopted in 2009.
The paper reiterates the Commission’s desire to centralise regulation. “Today, the European Union has energy rules set at the European level, but in practice it has 28 national regulatory frameworks. This cannot continue.” Whatever the Commission thinks, this will continue. In the late 1980s the Commission proposed a European Environment Agency to regulate Europe-wide. When the agency was created in 1990, national governments had changed its role to one of collection and dissemination of information: more of an environmental Eurostat than a green policeman.
The Commission’s attempts to centralise energy regulation face the same strong opposition in the Council. In 2009, as part of the third energy package, the EU set up the Agency for the Co-operation of Energy Regulators (ACER). As the name suggests, this is a forum for discussion between national regulators, not a body that actually regulates EU markets. In the Energy Union paper the Commission says that ACER should “carry out regulatory functions at the European level”. The Council is not likely to agree.
Apart from the statement that obeying existing rules is its first concern, the Commission identifies only one other priority: the integration of Central and South-Eastern European energy markets into the wider European market. It promises that it “will take concrete initiatives in this regard as an urgent priority” – though does not reveal what these might be. Central and South-Eastern European countries are indeed very important for Europe’s energy and climate policies: CER will publish a paper on this subject next month. But a credible strategy for an energy union would have set priorities for shaping the whole of Europe’s energy market, not simply identified how that market should be enlarged. The strategy paper ends with a section called “the Energy Union in 15 action points”. Several of these have bullet points, so in total there are 27 items on the Commission’s ‘to do’ list. President Jean-Claude Juncker and his team have not said which of these it considers to be the most important. It is very unlikely to be able to do all of them.
So what should be the priorities for building an energy union? First should be energy efficiency. The Commission should propose that most new power stations must be combined heat and power. Heat that is produced when anything is burnt should be used rather than being wasted up cooling towers. The Commission suggested this as part of the 2012 ‘energy efficiency directive’, but the Council rejected the proposal. The Commission should try again.
The second priority should be the construction of an efficient Europe-wide electricity grid. An improved and extended grid would enable member-states to harness much more renewable energy, so increasing energy security and reducing carbon emissions. With a Europe-wide grid, the EU could generate wind and tidal power in the north of the continent, and wind and solar power in the south. Electricity could be transmitted north to south during nights, when solar panels do not generate, and south to north during days when the wind is not blowing. (However good the grid, it cannot cater for all scenarios. Electricity storage or gas power stations as back up capacity will be required to ensure that the lights stay on during calm nights.)
The third priority should be energy subsidy reform. In 2009 the G20 promised to end inefficient fossil fuel subsidies. Little progress has been made since then. The paper notes that “collectively, the EU spent over €120 billion per year – directly or indirectly – on energy subsidies, often not justified”. It declares that “environmentally harmful subsidies need to be phased out altogether”. But all it proposes to do on energy subsidies is an “analysis of energy prices and costs (including taxes and subsidies)”. This is just a delaying tactic. The International Energy Agency and the International Monetary Fund have both conducted this analysis, and published the results, in the last two years. There is no need for more analysis. There is a need for action. The Commission should use its state aid powers to reduce existing subsidies to coal power stations, and prevent new subsidies to coal (other than for carbon capture and storage demonstration projects). In July 2014, the Barroso Commission gave state aid clearance to the UK for new subsidies to existing coal fired power stations. London argued that this was necessary to provide a back up for intermittent renewables. Gas power stations are more economically efficient in this role, and much less polluting. The Juncker Commission should reverse the state aid clearance for new subsidies to old coal.
The fourth priority should be diversification of gas suppliers. On the day that the Commission published its paper, Russian president Vladimir Putin threatened to cut off gas supplies to Ukraine. This was predictable. The paper stresses the need for Europe to reduce energy imports and dependence on single suppliers of hydrocarbons. (Russia is not named in this context; it does not need to be named.) The suggestion that Council President Donald Tusk made when he was Polish prime minister – that member-states should club together to become single gas buyers when negotiating with the Kremlin – is given a polite nod but nothing more: it will be “assessed”.