With Europe’s dependence on energy and raw materials increasing, there is an urgent need to overhaul the EU’s climate policies, writes Konrad Szymanski.
The policy objectives of our energy and climate policy, adopted in 2007 are to reduce CO2 emissions, to secure supply and to ensure economic competitiveness. For this purpose we decided – not without controversy – to introduce a mandatory 20 per cent CO2 reduction target, a mandatory target of 20 per cent for the share of renewable energy use in Europe and an indicative energy efficiency target of 20 per cent.
The CO2 target has been accomplished by the crisis, not climate policy. Other targets are no less troublesome for the European economy, which is paying a price with its competitiveness. If we are to get out of this crisis, our climate policy must be fundamentally reformed today. I am not aware of any politician in the European parliament that is fully satisfied with the operation of this supposedly well-balanced mix of policy measures and legislation.
Europe’s dependence on energy and raw materials – including those needed for the renewable energy industry – is growing. The security of supply is threatened not only by the dependence from third countries, but also due to a halt in the modernisation of coal fired power. Production instability from renewable energy sources (RES) disrupts the work of transmission systems.
Energy prices are rising in Europe, while the competitiveness of energy-intensive industries is in decline. In the top five of the global report prepared by Deloitte, we have only one economy from Europe – Germany – and with a forecast of decline in the coming years. The high prices of energy, linked among others, to the market-detached introduction of RES are a major – alongside the labour market – factor for the loss of competitiveness.
The reduction of CO2 emissions, in line with expectations, exceeded 20 per cent. The main reason is a general economic downturn. The only factor that has worked well – the market for emissions trading scheme allowances – is under permanent political pressure, aiming at intervention and stimulating artificial price rises.
A set of policy and legislative measures has failed to work and does not take into account the differences between the member states in terms of their ability and capacity to bear the costs of these changes. Percentage targets do not reflect the differences in the size of economies nor the scale of industrial production.
The support system for renewable energy sources is blocking public money in subsidies that could be used for research and innovation that this industry needs like no other. In addition, price increases associated with this support system strike the poorest the hardest.
Reduction targets for energy-intensive industries affect their competitiveness, as exemplified by the recent decisions regarding the steel industry, where we can expect a 30 per cent scarcity of CO2 emissions allowances by 2020.
This all adds up to create instability within the regulatory system – a key issue for the energy sector and heavy industry, whose investment cycles count for 15-20-25 years.
Defining a new climate and energy policy after 2020 provides an opportunity for a fundamental change. This is not the time to repeat previous mistakes. Any positions ought to depart from proposing the three independent targets in the field of renewable energy, energy efficiency and CO2 reduction.
Changing CO2 emission reduction must be linked to a global agreement or an arrangement that would cover at least the six major world economies – the US, China, India, Brazil, Russia and the EU. This new reduction target must also be preceded by a macroeconomic analysis across the EU and the individual member states, with particular regard to free trade with major partners, like the US.