EU Energy Policy Blog

On January 1st, 2010, the Spanish Government took over the presidency of the European Union. Shaping the future political agenda at a European level is especially important in the field of energy and sustainability. The current unsustainable energy models, both European and global, and especially their consequences on climate change, need an urgent action on this field, which must be agreed at a European level from a long-term approach.

In this framework, and according to its mission, we have considered it appropriate to issue some recommendations on the priorities that the Spanish Government should consider to achieve the goal of a sustainable energy model at the Spanish and European level during its presidency. The selected priorities should have a high potential to reach the goal of a sustainable energy model. They should be politically affordable in today’s context, and require a European approach. They should build on the existing political momentum. And they should be few, after all six months is not a lot of time…Thus, our recommendation is to select four general priorities:

• Decarbonization of the energy sector,
• research and technology transfer on energy,
• promotion of energy conservation, and
• energy interconnections.

Reduction of carbon emissions in the energy sector

The first priority should be progressing in the reduction of carbon emissions in the energy sector, because of its importance for sustainability and its relevance in order to abide by international commitments. The urgency of this reduction of emissions has been stated in many documents. Therefore, it seems clear that a global agreement on this matter cannot be further delayed, under the architecture deemed more appropriate. The European Union must play again a leadership role due to its pioneering initiatives on the regulation of GHG emissions. As a final agreement has not been reached in Copenhagen, the Spanish presidency will have to assume this leadership under the new conditions in this critical interlude until the next conference.

However, no matter the result achieved in the international negotiations, we consider that the European Commission should review unilaterally its emission reduction goals in order to ensure the transformation of its energy system into one with lower carbon emissions. For this reason, it seems essential to ensure a price of the emission allowance in the ETS scheme high enough to offer an adequate signal to the required transformation of the energy sector (some experts set the price needed to change investment patterns in €40-50/tCO2). Moreover, the Commission should ensure the price stability and make it foreseeable using the available mechanisms, in order to offer security to the private or public investor, who in the end are responsible for the desired change.

Additionally, it is essential to extend the carbon price signal to the sectors that are not covered by the European emission trading system, and that are responsible for 50% of GHG emissions in Europe. However, the regulation on these sectors rests in the hands of the Member States. This may lead to differences in the reduction policies and, indirectly, to efficiency losses and to competitive losses between countries. Some Member States have already started to send price signals with taxes to diffuse sectors, but it would be better, due to the reasons mentioned, that this extension of the price signal to diffuse sectors be harmonized in the Union.

Obviously, it is essential to consider the effects of the emission reduction policies on the competitiveness of the European economy, especially if they are taken unilaterally. For this reason, the corresponding safeguard measures should be adopted.

Research and technology transfer

Another priority should be the promotion of R&D investment in energy technologies and its transfer to developing countries. Reducing the cost of these technology solutions will help to achieve the reduction goals at a much lower cost.

Therefore, the R&D goal must be to reduce the cost of low carbon technologies, both from the supply side (especially renewable energy to generate electricity, heat or fuel, and maybe also other technologies such as carbon capture and storage, considering their transfer to developing countries) and from the demand side (energy efficiency technologies, low consumption vehicles, electric or hybrid, etc.).

Actually, and given that the reduction of energy demand seems to offer, according to all estimations, a much higher potential to reduce emissions (more than 50%) with immediate application and at a lower cost, twe consider that investment on R&D for technologies for energy demand reduction should be particularly encouraged.

Hence, the proposals to allocate the Strategic Energy Technology Plan funds, currently discussed, should focus particularly on energy conservation technologies and, secondly, on renewable energy.

As has been previously stated, technology transfer to developing countries is essential. Firstly, it makes more affordable the effort to reduce emissions, which is particularly demanding in those countries. Secondly, it will help to reach a fair and equitable international agreement on climate change. Therefore, the transfer of technology in acceptable conditions to developing countries is considered as an equally important priority for Europe. Obviously, this transfer will run into problems, especially those related to intellectual property. However, these hurdles can be surmounted, as has happened in fields like public health, through flexible negotiations or, as a last resort, through the economic contribution from developed countries. The launch of international support actions to achieve universal electricity access, consistent with a sustainable energy model, should receive special attention.

Energy conservation

In addition to the actions described above, the promotion of energy conservation should be pursued intensively. The European Commission has already announced this priority in many white papers, green papers and Directives, especially the Action Plan for Energy Efficiency, under review now.

In this respect, it seems convenient to change the denomination from efficiency policies to conservation policies, because the latter is the actual goal. The priorities in this field should be focused on publishing the Directive of Energy Renovation for Buildings in the appropriate conditions and the Energy Efficiency Action Plan (the Commission does not have a document on the subject yet). For the latter, we propose the addition of compulsory goals for each country, and the obligation of evaluating the savings potential for each of them, for all specific sectors. Also, the European support to energy services companies should be strengthened.

Also in the field of energy conservation, including all the costs in the energy price is considered a priority. On the one hand, it means to make visible the external costs of the production and use of energy. Although the European policy already considers, as has being previously mentioned, the incorporation of a carbon price –something that, as said before, should be extended to diffuse sectors–, there are other external costs of energy related to the emission of other pollutants, security of supply, or other aspects such as road congestion, that should be also included in the energy price to achieve an efficient users’ behavior. On the other hand, the same reasoning implies the prohibition of subsidies for the use of energy (subsidized prices or any other subsidy that reduces the final energy price), except for exceptional and justified situations.

Energy interconnections

Finally, keeping in mind the concern about security of supply in Europe, energy interconnections, their promotion and their construction are also considered a priority. Today, international exchanges are limited, in spite of the European objective of a functioning single energy market. The main reason is the lack of energy interconnections. Moreover, this need for interconnections is expected to grow in the future because of the anticipated massive deployment of renewable energy. A window of opportunity exists now with the impending publication of the first ten year plan of development of European networks by the association of European transmission network operators.

Therefore, the priority is the increase in interconnections at the European level and its correct regulation for an effective functioning of the energy markets. In this respect, a deeper coordination between those responsible for transport networks and energy regulators is recommended.

Those interconnections will not only ensure security of supply –both at a European and Spanish level– but will also help to create wider and more efficient energy markets, encourage a more efficient use of energy sources and allow a higher integration of renewable energy in energy systems. In the Spanish case, the lack of electricity and gas interconnections is clear. The advantages of its deployment, too: increasing the Iberian Electricity Market, the possibility of a deeper penetration of intermittent renewable energies and the ability of providing a more diversified gas supply to Central Europe.

The promotion of interconnections clashes with obvious problems of national sovereignty. Thus, the challenge is more political than technical or economic and its strategy should be more politically oriented than fund-oriented.

Pedro Linares and Ignacio Pérez-Arriaga, BP Chair from Comillas University

P.S The full document produced by the BP Chair also explains why some issues currently in the Spanish government list should not be prioritized.

This entry was posted on Tuesday, January 12th, 2010 at 5:25 pm and is filed under Climate Change. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.