An ambitious political agreement on the governance of the Energy Union was reached today between negotiators from the Commission, the European Parliament and the Council.
With today’s deal the Member States of the European Union will be equipped to govern the Energy Union – this common project aimed at ensuring that all Europeans have access to secure, affordable and climate-friendly energy. This new governance system will enable the European Union to realise its goals of becoming world leader on renewables, putting energy efficiency first, provide a fair deal for consumers and set the course for the EU’s strategy long-term greenhouse gas reduction.
By building trust and consensus between the Member States on energy and climate matters the governance will set the best way to achieve the energy transition and the modernisation of the EU economy and industry. The governance of the Energy Union will be instrumental to enable the political process required to deliver what 73% of EU citizens want: a common energy policy for all EU Member States.
Today’s deal means that four out of the eight legislative proposals in the 2016 Clean Energy for All Europeans package have been agreed by the co-legislators, after yesterday’s agreement on Energy Efficiency (see STATEMEMT/18/3997) and the agreements on 14 June and 14 May on the revised Renewable Energy Directive and the Energy Performance in Buildings Directive respectively. These four pieces of legislation complement the revision of the Emissions Trading System, the Effort Sharing Regulation and the Land Use Change and Forestry Regulation that were also adopted earlier this year. Thus, progress and momentum towards completing the Energy Union and combatting climate change are well under way. The Juncker Commission, working under its political priority “a resilient Energy Union and a forward-looking climate change policy“, is delivering.
This regulation will ensure that the objectives of the Energy Union, especially the EU’s 2030 energy and climate targets – reduction of 40% of greenhouse gas emissions, a minimum of 32 % renewables in the EU energy mix and the 32.5 % goal of energy efficiency savings – are achieved by setting out a political process defining how EU countries and the Commission work together, and how individual countries should cooperate, to achieve the Energy Union’s goals. This will be done by making sure that national objectives and policies are coherent with EU goals, while at the same time allowing individual countries flexibility to adapt to national conditions and needs. The regulation will equally promote long-term certainty and predictability for investors. The new rules stress the importance of regional cooperation in the development and implementation of energy and climate policies. EU countries are also called on to encourage their citizens to participate in the preparation of the plans. This will ensure that the views of citizens and businesses as well as regional and local authorities are heard. This will set a new relationship between European citizens and decision makers so that the governance and its national energy and climate plans all Member States of the EU to build further consensus on the best way to achieve the energy transition and move from a situation of decision by a few to a situation of action by all. This will contribute to have all Member States making the best and most cost-efficient choices and the right investments so that their energy decisions climate-consistent and avoid costly lock-ins.
Commission Vice-President for the Energy Union Maroš Šefčovič said: “With this ambitious agreement on the Energy Union’s governance, we put in place its cornerstone. It will enhance transparency for the benefit of all actors and investors, in particular. It will simplify monitoring and reporting of obligations under the Energy Union, prioritizing quality over quantity. And it will help us deliver on promises in the field of energy, climate and beyond. Now I am looking forward to the Member States’ draft energy and climate plans by the end of this year, as they send a strong signal to investors who need clarity and predictability. The Energy Union is on track, going from strength to strength.”
Commissioner for Climate Action and Energy Miguel Arias Cañete said: “After agreeing on renewable energy last week, and on energy efficiency yesterday, today’s deal is another major delivery in our transition to clean energy. For the first time we will have an Energy Union Governance, fixed in the European Union rule book, encompassing all sectors of the energy policy and integrating climate policy in line with the Paris Agreement. When finalised by the Member States in their national plans, this will translate into the right investments to modernise the EU economy and energy systems, creating new jobs, lower energy bills for Europeans and reduce costly energy imports to the EU. One thing is certain, with the Energy Union governance we have the necessary stepping stone for the preparation of Long-Term Strategy to reduce the emissions of greenhouse gases that are warming up the planet and changing the climate.”
- Calls for each Member State to prepare a national energy and climate plan for the period 2021 to 2030, covering all the five dimension of the Energy Union and taking into account the longer-term perspective. These national plans would be comparable throughout the EU. Assessments of the draft plans, and recommendations by the Commission, will result in final plans that ensure that the 2030 climate and energy targets will be reached in a coherent, collaborative and least-cost way across the EU.
- Aligns the frequency and timing of reporting obligations across the five dimensions of the Energy Union and with the Paris Climate Agreement, significantly enhancing transparency and delivering a reduction of the administrative burden for the Member States, the Commission and other EU Institutions.
- Ensures that EU and Member States can work together towards further enhancing the ambition set up in the Paris Climate agreement and strengthens regional cooperation across the Energy Union dimensions.
- Introduces the necessary flexibility for Member States to reflect national specificities and fully respects their freedom to determine their energy mix.
- Ensures the follow-up of the progress made at Member State level to the collective achievement of the binding EU renewables target, the EU energy efficiency target and the 15% interconnection target.
- Introduces a robust mechanism to ensure the collective attainment of the EU renewable and energy efficiency targets.
- Establishes a clear and transparent regulatory framework for the dialogue with civil society in Energy Union matters and enhances regional cooperation.
Following this political agreement, the text of the Regulation will have to be formally approved by the European Parliament and the Council. Once formally adopted by both co-legislators in the coming months, the Regulation on the Governance of the Energy Union will be published in the Official Journal of the Union and will enter into force 20 days after publication.
The Regulation on the Governance of the Energy Union is part and parcel of the implementation of the Juncker Commission priorities to build “a resilient Energy Union and a forward-looking climate change policy”. The Commission wants the EU to lead the clean energy transition. For this reason the EU has committed to cut greenhouse gas emissions by at least 40% by 2030, while modernising the EU’s economy and delivering on jobs and growth for all European citizens. In doing so, it is guided by four main goals: putting energy efficiency first, achieving global leadership in renewable energies, providing a fair deal for consumers and being a leader in the fight against climate change. To put these goals into action, a robust governance system of the Energy Union is needed.
To that effect, the Commission presented on 30 November 2016, as part of the Clean Energy for All Europeans, package, its proposal for a Regulation on the Governance of the Energy Union. The Regulation as provisionally approved emphasises the importance of meeting the EU’s 2030 energy and climate targets, sets out how EU countries and the Commission should work together through an iterative process and how individual countries should cooperate to achieve the Energy Union’s goals. It takes into account the fact that different countries can contribute to the Energy Union in different ways. It also puts obligations on Member States to plan for the low carbon development in the longer run, at least 30 years from now.
If an individual country’s draft integrated National Energy and Climate Plan does not sufficiently contribute to reaching the Energy Union’s objectives, or if the EU collectively does not make sufficient progress towards these objectives, the Commission may issue recommendations to countries. The provisionally agreed Regulation also includes other ways of ensuring that the new plans are fully developed and implemented: in the area of renewable energy, these could include additional national measures (ranging from contributions to a financing platform to measures in the heating and cooling and transport sectors) and EU-level measures. In the area of energy efficiency, additional measures could in particular aim to improve the energy efficiency of products, buildings and transport.
The Regulation also foresees a more streamlined electronic reporting system, to ensure robust and transparent information in this area. The Regulation will from 2021 replace the Climate Monitoring Mechanism Regulation EU 525/2013, which governs EU’s and Member States reporting obligations towards the UN.
Gas doom hanging over Ukraine
The long history of gas transit across independent Ukraine began with Kiev’s initial failure to pay anything for Russian natural gas, both intended for transit to Europe and for domestic consumption, on the pretext of fraternal relations between the former Soviet republics. Later it cost the Ukrainians a meager $25 for 1,000 cubic meters of Russian gas, and that ridiculously small sum remained unchanged for quite some time. The sizeable amount of Russian gas provided at a discount price, plus domestically available oil resources, were distributed by the country’s greedy elite the following way: domestically produced gas was used on utilities, proceeds from the transit of Russian gas went to the state budget (minus the money that lined bureaucratic pockets), and Russian gas – to the industry (plus the corruption component).
Then came the Ukrainian revolutions and Kiev’s desire to join “Euro-Atlantic structures” and the desire to “get off the Russian gas needle and prevent the Kremlin from using energy as a weapon.” Ukraine has tried and is still trying to believe in all this by playing up to the collective West and hoping that the West will compensate Kiev for the losses caused by its revolutionary endeavors and anti-Russian antics. As a result, we see gas prices going through the roof, an energy crisis in Europe, and the completion of the Nord Stream 2 gas pipeline.
Those in power in Kiev hoped for the very last moment that the West valued their country more than it did the energy security of European countries. Much to their surprise (and only theirs), this is not so. It looks like the Europeans are interested in Russian gas supplies and are not so eager to keep Ukraine as the main transit country. Moreover, having “democratized Ukraine” to the state of an openly anti-Russian country, the West turned it into a country, whose leadership the Kremlin does not really want to talk to simply because it does not see any point in doing this. This is the reason why third countries care (or rather pretend to care) about Ukraine. Thus, in July of this year, there came out the “Joint Statement of the United States and Germany on Support for Ukraine, European Energy Security and Our Climate Goals.” According to it, Germany pledged to do everything in its power to make sure that the agreement between Moscow and Kiev on the transit of Russian gas across Ukrainian territory was extended for up to ten years. The statement came when it was already obvious that the construction of Nord Stream 2 would be completed, Germany resisted US pressure on this issue, Moscow paid no attention and Washington, exhausted by the battles of the presidential elections and the search for new strategies in the Old World, was trying to pit America’s European friends against Russia.
It has never been a secret that the West needs reliable transit, and this is something that Ukraine also insists on. However, Kiev has officially labelled Russia as an “aggressor country,” which means that this very “aggressor” must ensure this transit and bring billions of dollars in revenues to the Ukrainian budget. This looks like a kind of “Euro-schizophrenia” where Ukraine is an anti-Russian country and simultaneously serves as a reliable transit country for Russian gas. Things do not work this way, however, and it looks like Europeans are beginning to realize this. Therefore, most of the European consumers support Nord Stream 2 even though they do not show this in public. Suffice it to mention the recent conclusion of a years-long contract for gas supplies to Hungary.
Vladimir Putin’s statement, made amid soaring gas prices and growing threats to European industry, came as an energy lifeline for all Europeans.
“Russian President Vladimir Putin supported the initiative of Deputy Prime Minister Alexander Novak to increase gas supply on the market amid rising energy prices in Europe… Novak said that Russia can stabilize the situation with prices by providing additional volumes of gas on the exchange, adding that this country’s main priority is to accommodate domestic demand,” Lenta.ru reported.
Commenting on the possibility of increasing gas supplies via Ukraine, President Putin recalled that Ukraine’s gas transport system had not been repaired “for decades” and that “something could burst” there any time if gas pressure goes up.
“At the same time, it is more profitable and safer for Gazprom to operate new pipeline systems,” he added. Putin thus confirmed what is already clear to all that Ukraine is an unreliable and, in fact, an extra link, and that Europe can get gas bypassing technically and politically unreliable Ukrainian pipes. He also pointed out that Gazprom would suffer losses from an increase in gas transit via Ukrainian territory, while new gas pipelines offer cheaper transit options. He added that Gazprom is saving about $3 billion a year by using new pipelines and that Russia was ready to increase gas supplies and make them cheaper for European consumers.
Gas shortages have already forced the Ukrainian government to freeze gas prices for household consumers, but prices for gas for industrial enterprises are rising along with those on European exchanges, where on October 6, they reached a very impressive $ 2,000 per thousand cubic meters and went down only after Putin’s statement came out.
Meanwhile, the head of Ukraine’s Federation of Glass Industry Employers, Dmitry Oleinik, said that this [rise in gas prices – D.B.] would lead to an inevitable rise in prices. However, producers will not be able to jack up prices indefinitely, because at some point buyers simply will not be able to cover production costs.
“The Ukrainian consumer will not even be able to cover the cost of production. Plants and factories will slowly shut down and people will lose their jobs – this is already very serious. Budget revenues will “plummet,” and expenses will skyrocket… The issue of bankruptcies is just a matter of time,” Oleinik warned.
If Ukraine continues to follow the chosen course, it will face de-industrialization. By the way, this will suit the West, but certainly not the Ukrainian industrial oligarchs, who have long been eyeing agriculture, including the prospect of turning themselves into land barons. However, the farming sector will not be happy about the high prices on gas that bakeries, sugar factories and greenhouses run on. There will be nowhere to run.
Apart from purely practical realities, the conclusions I can draw from the current energy situation in the world and Vladimir Putin’s statements regarding the Ukrainian transit, are as follows:
- Gas supplies through Ukraine and to Ukraine are not solely an economic issue, given Kiev’s endless anti-Russian escapades;
- This problem affects the energy security of Europe;
- Since there are several angles to this problem, it must be solved in a comprehensive manner;
- At the same time, this cannot be done exclusively in the interests of the West and Ukraine to the detriment of the interests of Russia.
As you can see, it is once again up to Kiev and its shadow patrons to decide. And winter is just around the corner…
From our partner International Affairs
Russian Energy Week: Is the world ready to give up hydrocarbons?
In an official message to mark the opening of the Russian Energy Week international forum on 13-15 October in Moscow, Russian President Vladimir Putin stressed that there are numerous issues on the agenda related to current trends in the global energy market, including improvements to industry infrastructure and the introduction of modern digital technologies into its operation.
“The efficiency of energy production and consumption is the most important factor in the growth of national economies and has a significant impact on people’s quality of life. Many countries have already adopted policies to accelerate the development of clean energy technologies,” he wrote in the message to guest and participants.
“The forum business programme is therefore set to look in detail at the possibility of developing green energy based on renewable sources and the transition to new, more environmentally friendly fuels. I am confident that the events of the Russian Energy Week will allow you to learn more about the achievements of the country’s fuel and energy sector, and that your initiatives will be put into practice,” Putin said.
Leaders of foreign states have also sent greetings to the participants and guests. For instance, President of the Republic of Angola João Manuel Gonçalves Lourenço, Prime Minister of Vietnam Pham Minh Chinh, Crown Prince of Abu Dhabi Armed Forces Mohamed bin Zayed bin Sultan Al Nahyan, and Vice Premier of the State Council of China Han Zheng.
In their greetings, it generally noted the importance of the topics to be discussed at the forum as well as the need to build an international dialogue and consolidate efforts to achieve the sustainable development goals, including as regards climate change.
The programme covers a wide range of issues of transformation and development in the global energy market. In the context of energy transition, the issues of energy development are inextricably linked with the introduction of new technologies, and the transformation aimed at reducing greenhouse gas emissions into the atmosphere. Climate protection is a task that cannot be solved by one country; it is a global goal, which can be achieved through building dialogue and cooperation between countries.
The participants in the discussion will answer the question: Is the world ready to give up hydrocarbons? In addition, during the panel session, the participants will discuss whether oil, gas and coal are really losing ground in the global energy sector; whether the infrastructure will have time to readjust for new energy sources; how long will there be enough hydrocarbons from the field projects that are being implemented; and whether an energy transition using fossil fuels is possible.
The international climate agenda is forcing many countries to reform their carbon-based energy systems. For Russia, which holds a leading position in the global hydrocarbon markets, the transition to development with low greenhouse gas emissions presents a serious challenge, but at the same time it opens up new opportunities for economic growth based on renewable energy, hydrogen technologies, advanced processing of raw materials and implementing green projects.
The Climate Agenda included sessions dedicated to the operation of the Russian fuel and energy sector in the context of energy transition, the impact of the European green pivot on the cooperation between Russia and Europe, as well as the session titled ‘The Future of Coal in a World Shaped by the Climate Agenda: The End, or a New Beginning?’
Sessions of the ‘New Scenarios for the Economy and the Market’ track are dedicated to the global challenges and opportunities of the electric power industry; the impact of ESG on the Russian fuel and energy sector; the potential for the renewable energy sources; and other issues of the future of energy.
The Russian Energy Agency under the Ministry of Energy brings together experts from key international analytical organizations to discuss the future of world energy during the session titled International Energy Organization Dialogue: Predicting the Development of Energy and Global Markets.
The Human Resource Potential of the Fuel and Energy Sector, participating experts will discuss the prospects for developing the professional qualification system, and a session titled Bringing the Woman’s Dimension to the Fuel and Energy Sector. Optimizing regulation in the energy sector and organizing the certification and exchange of carbon credits in Russia are the basis of the Regulatory Advances in Energy.
Anton Kobyakov, Advisor to the Russian President and Executive Secretary of the Russian Energy Week 2021 Organizing Committee, said “the level of various formats of international participation testifies to the importance of the agenda and Russia’s significant role in the global energy sector. We are a reliable strategic partner that advocates for building international cooperation based on the principles of transparency and openness. With the period of major changes in the industry, it is particularly important to engage in a dialogue and work together to achieve both national and global goals.”
The forum, organized by the Roscongress Foundation, the Russian Ministry of Energy, and the Moscow Government, brought together many local and foreign energy and energy-related enterprises. The speakers attending included Exxon Mobil Corporation Chairman of the Board of Directors and CEO Darren Woods, Daimler AG and Mercedes-Benz AG Chairman of the Board Ola Kallenius, BP CEO Bernard Looney, and TotalEnergies Chairman and CEO Patrick Pouyanné.
World Energy Outlook 2021 shows a new energy economy is emerging
A new energy economy is emerging around the world as solar, wind, electric vehicles and other low-carbon technologies flourish. But as the pivotal moment of COP26 approaches, the IEA’s new World Energy Outlook makes it clear that this clean energy progress is still far too slow to put global emissions into sustained decline towards net zero, highlighting the need for an unmistakeable signal of ambition and action from governments in Glasgow.
At a time when policy makers are contending with the impacts of both climate change and volatile energy markets, the World Energy Outlook 2021 (WEO-2021) is designed as a handbook for the COP26 Climate Change Conference in Glasgow, which offers a critical opportunity to accelerate climate action and the clean energy transition. The new analysis – which the IEA is making available for free online – delivers stark warnings about the direction in which today’s policy settings are taking the world. But it also provides clear-headed analysis of how to move in a well-managed way towards a pathway that would have a good chance of limiting global warming to 1.5 °C and avoiding the worst effects of climate change.
The WEO-2021, the IEA’s annual flagship publication, shows that even as deployments of solar and wind go from strength to strength, the world’s consumption of coal is growing strongly this year, pushing carbon dioxide (CO2) emissions towards their second largest annual increase in history.
“The world’s hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems,” said Fatih Birol, the IEA Executive Director. “Governments need to resolve this at COP26 by giving a clear and unmistakeable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future. The social and economic benefits of accelerating clean energy transitions are huge, and the costs of inaction are immense.”
The WEO-2021 spells out clearly what is at stake: what the pledges to reduce emissions made by governments so far mean for the energy sector and the climate. And it sets out what needs to be done to move beyond these announced pledges towards a trajectory that would reach net zero emissions globally by mid-century – the Net Zero Emissions by 2050 Scenario from the landmark IEA report published in May, which is consistent with limiting global warming to 1.5 °C.
As well as the Net Zero Emissions by 2050 Scenario, the WEO-2021 explores two other scenarios to gain insights into how the global energy sector may develop over the next three decades – and what the implications would be. The Stated Policies Scenario represents a path based on the energy and climate measures governments have actually put in place to date, as well as specific policy initiatives that are under development. In this scenario, almost all of the net growth in energy demand through 2050 is met by low emissions sources, but that leaves annual emissions still around today’s levels. As a result, global average temperatures are still rising when they hit 2.6 °C above pre-industrial levels in 2100.
The Announced Pledges Scenario maps out a path in which the net zero emissions pledges announced by governments so far are implemented in time and in full. In this scenario, demand for fossil fuels peaks by 2025, and global CO2 emissions fall by 40% by 2050. All sectors see a decline, with the electricity sector delivering by far the largest. The global average temperature rise in 2100 is held to around 2.1 °C.
For the first time in a WEO, oil demand goes into eventual decline in all the scenarios examined, although the timing and speed of the drop vary widely. If all today’s announced climate pledges are met, the world would still be consuming 75 million oil barrels per day by 2050 – down from around 100 million today – but that plummets to 25 million in the Net Zero Emissions by 2050 Scenario. Natural gas demand increases in all scenarios over the next five years, but there are sharp divergences after this.
After decades of growth, the prospects for coal power go downhill in the Announced Pledges Scenario – a decline that could be accelerated further by China’s recent announcement of an end to its support for building coal plants abroad. That move may result in the cancellation of planned projects that would save some 20 billion tonnes in cumulative CO2 emissions through 2050 – an amount similar to the total emissions savings from the European Union reaching net zero by 2050.
The differences between the outcomes in the Announced Pledges Scenario and the Net Zero Emissions by 2050 Scenario are stark, highlighting the need for more ambitious commitments if the world is to reach net zero by mid-century.
“Today’s climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050,” Dr Birol said. “Reaching that path requires investment in clean energy projects and infrastructure to more than triple over the next decade. Some 70% of that additional spending needs to happen in emerging and developing economies, where financing is scarce and capital remains up to seven times more expensive than in advanced economies.”
Insufficient investment is contributing to uncertainty over the future. Spending on oil and natural gas has been depressed by price collapses in 2014-15 and again in 2020. As a result, it is geared towards a world of stagnant or even falling demand. At the same time, spending on clean energy transitions is far below what would be required to meet future needs in a sustainable way.
“There is a looming risk of more turbulence for global energy markets,” Dr Birol said. “We are not investing enough to meet future energy needs, and the uncertainties are setting the stage for a volatile period ahead. The way to address this mismatch is clear – a major boost in clean energy investment, across all technologies and all markets. But this needs to happen quickly.”
The report stresses that the extra investment to reach net zero by 2050 is less burdensome than it might appear. More than 40% of the required emissions reductions would come from measures that pay for themselves, such as improving efficiency, limiting gas leakage, or installing wind or solar in places where they are now the most competitive electricity generation technologies.
These investments also create huge economic opportunities. Successfully pursuing net zero would create a market for wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells of well over USD 1 trillion a year by 2050, comparable in size to the current oil market. Even in a much more electrified energy system, major opportunities remain for fuel suppliers to produce and deliver low-carbon gases. Just in the Announced Pledges Scenario, an additional 13 million workers would be employed in clean energy and related sectors by 2030, while that number doubles in the Net Zero Emissions by 2050 Scenario.
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