Europe faces deep challenges in the energy sector and has a critical year ahead in reshaping its energy policies, IEA chief economist Fatih Birol told Friends of Europe’s conference to launch the 2013 World Energy Outlook.

“It has rarely been so critical for European prosperity, since the Second World War, for Europe to shape sound energy policies in 2014,” he said.

The job descriptions of many of the world’s key energy players are being redefined, with countries such as the US and – within a couple of years – Brazil, becoming energy exporters while major current exporters such as the Middle East countries become significant consumers, partly as a result of the enormous subsidies paid out to fossil fuel..

Given the shale gas and oil revolution that has transformed the American energy market, Europe is being obliged to adjust to new energy realities which place it at a considerable disadvantage compated to the US as regards energy prices. There are, however, some things that Europe can do such as renegotiating gas contracts that will come to an end in the next few years so that they are not tied to oil prices. The focus should also be on completing the integration of Europe’s energy markets. Europe should also increase the exploitation of domestic energy resources, including renewable energy and shale gas, and introduce stronger measures to improve energy efficiency, Birol said. The one piece of good news for Europe is that its demand for energy is not growing.

He added that despite 25 years of efforts to reduce the share of fossil fuels in the global energy mix, it remains the same today – at 82% – as it was a quarter of a century ago. As a result, he said, the world is on course for an average temperature rise of 3.6ºC instead of the 2ºC it is aiming for. This is despite the fact that 1.3 billion people still have no access to electricity and that for the last three and a half years, oil prices have averaged more than $100.

The winners – both at a country and a company level – will be those that “read the game right”, Birol added.

Chris Beddoes, Director General of EUROPIA, pointed out that 24 million jobs in energy intensive industries in Europe are at risk but Auke Lont, Chief Executive Officer at Statnett, was optimistic that the electrification of the economy and technological breakthroughs could help Europe to overcome some of the challenges it faces.

Mechtild Wörsdörfer, Head of Unit for Energy Policy and Monitoring of Electricity, Gas, Coal and Oil Markets at the European Commission Directorate for Energy, highlighted the importance of completing the single European energy market for gas and electricity and acknowledged the threat of high energy prices to energy-intensive industries. But she highlighted a number of “no-regrets” options that Europe can take. “We very much need more energy efficiency and a higher share of renewables in the energy mix, but we also need more smart infrastructure and the electrification of the transport system.”

Japan is paying a huge amount more for LNG in the wake of the Fukushima disaster, said Jun Arima, Special Adviser for Global Environmental Affairs at the Japanese Ministry of Economy, Trade and Industry and Director General of the Japan External Trade Organisation (JETRO). Getting its nuclear capacity back on line once it is safe to do so is crucial for the Japanese economy, he said.

Carbon leakage is a huge problem for Japan, just as it is for Europe, Arima added. “That is why we need a balanced approach. “Policies driven only by climate change will not work. They will just push energy intensive industries to emerging markets and will not cut emissions at all.”

 

This Friends of Europe high-level conference was held on the occasion of the official Brussels launch of the International Energy Agency’s World Energy Outlook (WEO) 2013. Read more

Download PDF