11 November 2010: European Commission’s new energy strategy

Yesterday, the European commission presented its proposals for a new energy strategy for the next decade. In Brussels jargon, this is known as the Energy Action Plan. The EU is good at ‘plans’, but less good at action, so the commission has wisely named this document simply Energy 2020.

The lack of action is not primarily the fault of the commission. It is usually good at coming forward with proposals (which is after all part of its raison d’être – it is the only institution permitted to initiate EU legislation). Most of these proposals are blocked or substantially watered down by national governments in the Council of Ministers and/or by members of the European parliament.

Energy 2020 is pretty disappointing, but it does start on a high note:

The price of failure is too high. Energy is the life blood of our society. The well-being of our people, industry and economy depends on safe, secure, sustainable and affordable energy. At the same time, energy related emissions account for almost 80% of the EU’s total greenhouse gas emissions. The energy challenge is thus one of the greatest tests which Europe has to face.

All of which is true. The reader might then expect some radical policy proposals to follow. But there aren’t any. This document identifies priority areas, including energy efficiency (which is to be welcomed), but specific proposals will have to wait. First, the strategy has to be agreed by national governments at a summit in February 2011. If it is, the commission will then propose concrete legislative initiatives in the next 18 months.

What should the commission have proposed? Many things, including the measures to increase energy efficiency suggested in my article on energy efficiency (see How to deliver energy efficiency in the EU). To pick just one example, the use of combined heat and power (CHP, which the commission calls “cogeneration”), should be made compulsory whenever fuel is burnt to generate electricity. In its draft Energy Efficiency Action Plan (which wasn’t even adopted as a plan, let alone leading to any action) in 2009, the commission said the use of heat,, as well as power, should be a “prominent criteria” in the decision by public authorities about whether to grant planning consent. Yesterday’s document strengthens this slightly:

Energy efficiency, in the production as well as in the distribution, should become an essential criterion for the authorisation of generation capacities and efforts are needed to substantially increase the uptake of high efficiency cogeneration, district heating and cooling.

‘Essential criterion’ is better than ‘prominent’. It could be interpreted as meaning that without CHP, consent will be refused. However, it could also be interpreted in another, much weaker way: ‘CHP is a good idea – have a think about it.’ The EU’s existing directive on CHP can be summed up in this way. The commission should come forward with proposals to make CHP compulsory whenever anything is burnt to generate electricity.

One area where the commission is doing much better – or at least trying to do so – is ending fossil fuel subsidies. The International Energy Agency published its 2010 World Energy Outlook this week. This states that fossil fuels got subsidies of $312 billion in 2009, while renewable energies got just $57 billion. A blog on the website of the  European Wind Energy Association says that the IEA report:

… should finally stamp out the myth that renewable energies are dependent on subsidies…

and that:

… renewables got just $1 for every $5-6 given to fossil fuels last year. The IEA goes on to forecast that government support for renewables will go up to $205 billion in 2035. That is still – a quarter of a century in the future – less than two-thirds of the sum being doled out to fossil fuels today.

(See EWEA: More than $5 fossil fuel subsidies for every $1 of support for renewables.)

The commission has proposed that European governments’ subsidies to hard coal should be phased out by 2014. However, this has to be agreed and then implemented, by national governments. Spain, Germany and Romania give out most of the €3 billion in European coal subsidies each year. The Spanish government actually wants to increase the subsidies to coal (see 5 November 2010: Courts block Spanish coal subsidies). The German government has indicated that it isn’t very happy with the commission’s proposal and Germany is notably less communitaire (happy to act against its own interest to help strengthen the EU) than it was before the financial crisis. So, there is no guarantee that the commission will win this argument.

To make matters worse, this week the industry committee of the European parliament called for the phase out to be extended to 2020. The parliament doesn’t have the power to block the commission on this, and the industry committee isn’t even the lead committee on this issue (that’s the economic committee). However, this gives the governments a perfect excuse for refusing to do what the commission proposes. ‘We’re only doing as the MEPs advised.’

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