After decades of neglect and indifference, the supply, demand and consumption effects of energy are now at the forefront of the global policy agenda. And as the European Union’s member states pursue economic and political integration, the need for an integrated EU energy policy is increasingly apparent. For the EU still struggles with a fragmented energy supply system and a lack of political cohesion that is undermining any long-term energy strategy. These shortcomings were revealed by the gas dispute between Russia and Ukraine that led to reduced gas supplies to Europe in the winter of 2008-2009. This intentional disruption reflected the EU’s own failure to create an integrated energy policy would be in the interests of European consumers.
Supply problems in Europe are further aggravated by the challenges of climate change and economic recovery that have significant energy aspects. Europe now needs to take the following steps to address these institutional shortcomings and furnish itself with an energy strategy that gives it security and stability while fostering environmentally responsible economic growth.
Diversification of energy sources is the first crucial step. This requires long-term planning and coordination because the necessary infrastructural decisions will take decades to implement. Calls for supply diversification stem largely from the EU’s reliance on Russian gas, and Russia’s vast gas reserves loom large in any EU energy policy debate now that Moscow has shown that it is willing to use energy for political purposes. It controls the vast majority of the gas pipeline system, and has negotiated individually with European nations, with the result that it holds a disproportionate degree of leverage over the European gas market. This system is inherently unbalanced, distorted and must be corrected. New and alternative pipelines such as Nabucco must be built, and closer relationships with other suppliers encouraged. It would be unrealistic to call for an end to Russian gas imports altogether, or even an end to Europe’s major reliance on them, but the EU can increase its own leverage by developing alternative sources of supply.
“To have an effective energy policy, the EU must integrate national stockpiles, supplier policies and multilateral cooperation efforts”
If the EU needs to devise a single energy strategy to deal with Russia, it also needs to enhance its cooperation with Moscow on such issues as nuclear policy and counter-terrorism so as to foster warmer relations in general. Europe would then be in a better position to take a firm and unified stance on voluntary supply disruptions to avoid repeats of the 2006 and 2009 Ukraine-Russia gas disputes. In other words, Brussels should develop a policy under which the cutting off of supplies to one EU nation is equivalent to cutting off the supplies to all member states, and is therefore unacceptable.
The EU must at the same time avoid unnecessary antagonism; it is Russia’s right to sell and profit from its natural resources, but this must not extend to holding EU countries hostage to winter temperatures. Russia currently operates a “divide and conquer” strategy for dealing with its European customers, and this has put it in a powerful and advantageous position. We should not forget, though, that while the EU relies on Russia for a quarter of its gas, Russia relies on the EU for a majority of its income from gas. But this advantage can only be used to benefit EU consumers if the member states stick together and devise a single energy plan. Russia is currently in a precarious financial situation thanks to the sharp drop in commodity prices that is partly due to its dilapidated energy infrastructure and declining output. Now is the moment for the EU to use its relative strength and take bold action.
The development of renewable energy sources should play a major part in any integrated EU energy policy. Not only is alternative energy an environmental plus but also it diversifies energy supply by creating a domestically controlled resource. Europe is at the forefront of alternative energy development, even though there are many pitfalls it must avoid. EU nations must not become too committed to any one source that may ultimately prove to be fruitless – for instance solar or wind energy – without careful consideration of the market forces they will have to contend with. A solar or wind lobby can be just as self-serving as an oil or gas lobby, while excessive government involvement in the energy sector through subsidies or restrictive regulation, however well intentioned, can distort natural market conditions and ultimately do damage to alternative energy development. EU-wide collaboration on alternative energies research and development and on subsidy programmes needs to be encouraged so as to curb the use by individual member states of policies that undercut each other’s efforts, notably the offering of generous subsidies to lure investment and development from elsewhere in Europe.
“For far too long each EU nation has looked at its energy policy through the prism of its own national interests”
Germany and Austria in particular need to re-examine their staunchly anti-nuclear stances and consider building new nuclear plants, or at least continuing the operation of existing ones. Global warming has done much to change the argument over nuclear power, and perhaps an EU-wide nuclear commission or blue ribbon panel could explore whether or not nuclear power expansion is now more practical for Europe. But such action would have to begin immediately as nuclear power construction, even more so than other energy source, takes many years.
To have an effective energy policy, the EU must integrate national stockpiles, supplier policies and multilateral cooperation efforts. European states must coordinate their national stockpiles of energy sources, possibly creating a single European stockpile as a buffer against supply disruption. This would, in turn, add more leverage to Europe’s negotiating position with suppliers. It could possibly be done in conjunction with organisations like the International Energy Agency (IEA). An EU gas stockpile could have reduced Russia’s leverage over smaller European nations in the recent gas dispute. And although in the wake of the latest gas crisis the EU has taken some steps in this direction by stepping up infrastructural projects like gas inter-connectors, more needs to be done and the timetable expedited.
Only a strong and unified European voice reinforced by the option of alternative supplies can counter intimidation tactics. Dependence on Russian gas varies within the EU, and this creates policy divisions. These divisions must be overcome by the recognition of Europeans’ common interests, for over-reliance on any one supplier is inherently dangerous and eventually results in a distorted business environment regardless of the supplier nation or the type of commodity. By acting together, the EU can protect those member states that are more reliant on and vulnerable to Russia, and this has not occurred in the past because EU governments have all scrambled to protect their own interests at the expense of the common good.
The EU now needs to develop a single European body for international energy negotiations. Closer European cooperation would give the EU greater leverage not only when dealing with suppliers like Russia but with other consumers like the United States and the emerging economies of Asia. The EU body’s responsibilities could extend to overseeing resource allocation for research and development and alternative energy subsidies so as to avoid conflicting national policies. For far too long each EU nation has looked at its energy policy through the prism of its own national interests. Perhaps under the guidance of this new energy body, the EU should instead encourage the concept of a Europe-wide energy strategy that draws on member states’ comparative advantages to strengthen the system as a whole. Instead of attempting to standardise energy practices throughout the EU to conform to an arbitrarily conceived model, these differences should be drawn upon as strengths.
Many of these proposed solutions to Europe’s energy problems have been attempted before, but have been stymied by the lack of internal cohesion between EU governments. This lack of a European ‘grand strategy’ leaves these issues unresolved, and in some cases exacerbates the problems because of the way Europeans undercut each other. These are times of economic uncertainty, and that makes it more important than ever that the EU governments should seize the opportunity to create a common energy policy.