Europe Needs Cheap Energy Right Now
March 27, 2014
by Paweł Olechnowicz, Chairman of the Board of Directors of Central Europe Energy Partners (CEEP).
We must deal with climate policy cautiously and, while setting its goals, observe the direction taken by the world’s most competitive economies. If the European Union wants to maintain its potential and leading position in the global economy, it must reduce energy prices and make every effort to help industry grow. Otherwise, the EU will become a society of consumers and social benefits.
EU talks on whether it is better to reduce CO2 emissions by 30 percent or by 40 percent are pointless. Tangible benefits from climate policy are possible only if moves to safeguard the environment cover the whole world. But the fact is that average per capita CO2 emissions are around 7 metric tons in the EU and around 17 tons in the United States. And this is only the tip of the iceberg, clearly showing that we have to approach climate policy with caution, and while setting its objectives we should observe what is happening in competitive global economies.
The EU’s Cohesion Policy is still not performing well enough. The GDP gap between the EU-15 (the “old” European Union states) and the EU-11 (those countries that joined the bloc in 2004 and afterwards), has remained almost the same for the last 10 years. According to the statistics, in 2012, GDP per capita in the EU-15 was still three times higher than in the EU-11. In extreme cases, the gap reaches a ratio of 1:16 (for example, Luxembourg compared to Bulgaria). To reverse this trend, Central European countries must develop their industry steadily and efficiently, effectively creating new jobs. To this end, they need cheap energy, generated mainly from domestic sources.
Reindustrialization, optimum use of indigenous raw materials, and cheap energy are no longer challenges of the future. We need a decision now, before it is too late. No one doubts that the EU is rapidly losing its competitive edge, not only to Asia, but also to the United States. The revival of industrial investment in the U.S. is, above all, a consequence of the revolution taking place there with the growing production of crude oil and natural gas from unconventional sources.
Central Europe Energy Partners welcomed the European Commission’s latest efforts in the fulfillment of its 2020 goals and suggestions on how to achieve them. The EU is, right now, at a difficult crossroads, because in Europe we have been facing an increase of unemployment by 8 million in recent years, due to a serious failure in terms of global competitiveness. The services-based model for the development of EU economies provided a short-term positive result, but was not sustainable in the long term.
The latest crisis has shown that economies with a stronger industrial base were more easily able to overcome the crisis. The EU needs more investment, not only to restore its potential, but also to develop more production. In terms of developing new capacities, the best example is the replacement of depleted coal power plants, and building new ones based on Best Available Technology (BAT). The EU needs cheap energy to drive our industry, and to be as independent as possible from outside energy sources. Our dependence on energy imports is steadily increasing, even though the EU has indigenous sources such as coal, gas, and potentially shale gas, as well as crude oil (though not enough). In terms of competitiveness, both the EU’s internal and global aspects of CO2 emissions should be considered by the bloc’s guidelines. What the EU needs to do is to decrease CO2 emissions and develop European industry in terms of new products and capacities—although new emissions will not be avoided even if BAT is applied.
One such example is the EU steel industry, which is considered the most modern in the world. The refinery industry is winding down, yet new EU climate policy requirements are being imposed on it.
Central Europe Energy Partners has been consistent in its support for balance between the EU’s economic development and its climate policy. However, the rate at which climate policy objectives are achieved cannot be set without regard to the actual situation of both EU member states and the global economy. Industry is leaving Europe. To stop this, we must first reduce energy prices. This is also important because, as we could see during the recent economic crisis, industry-driven economies survived in much better shape. For Central Europe Energy Partners, indigenous sources of energy, such as coal, gas, and crude oil, are just as important as renewables, and should also be covered by EU guidelines. The same goes for the production of energy based on fossil fuels, as well as renewables, if they apply BAT.
Saving energy used in production, especially in energy-intensive industries, is equally important.
Overall, all types of industry should be treated equally, especially when it comes to subsidies. We certainly need to get away from the present situation where distortions in competition between various energy sources occur due to different state aid rules being applied. The industries which apply BAT contribute to an increase in productivity, making the EU more competitive, so they should all be equally supported by the EU.
This means that EU guidelines should be re-drafted if the bloc wants to play a positive role in Europe’s industrial development and strengthen its own competitiveness.
Central Europe Energy Partners (CEEP)
is an association formed by a group of Polish companies from the energy and fuel sectors that aims to facilitate integration in the energy sector in Central Europe and strengthen the position of this sector in the European Union. The association was established on May 4, 2010 in Brussels. This is the first industry-specific organization from Central Europe that has a permanent representation to the European Union. At present, CEEP has 22 members—companies and research institutions from countries including Czech Republic, Lithuania, Poland, Romania and Slovakia. In June 2014, Central Europe Energy Partners will celebrate its fourth birthday. Being the first regional association representing the Central European energy sector and its companies (gas – including shale gas, coal, oil, renewables, nuclear, grids, etc.), its overriding goal is to support the integration of Central Europe’s energy sector within the framework of a common EU energy and security policy. CEEP is active in the International Energy Agency. It also works closely with the European Centre for Energy and Resources Security in London. It is taking part in consultations with EU bodies, including legislative initiatives within the Union.