Christian Egenhofer, Head of the Energy and Climate Program, CEPS Brussels

The EU Energy Policies: straight ahead or time to steer the wheel?

Christian Egenhofer

Associate Senior Research Fellow, Centre for European Policy Studies (CEPS)Visiting Professor, SciencesPo (Paris), College of Europe (Bruges & Natolin), Guido Carli

LUISS University (Rome)

Hotel Majestic, Rome, 29 May 2013

Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

THE ENERGY TRANSITION IN EUROPE: DIFFERENT PATHWAYS, SAME DESTINATION?

5/29/2013 2Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

2007/08 Climate and Energy Package was meant to setout long-term framework to address EU energy andclimate challenges

1. Climate change2. Security of Supply3. Competitiveness

2007/08 Climate & Energy Package

• “Increase security of supply • Ensuring the competitiveness of European industry and

the availability of affordable energy;• Promoting environmental sustainability and combating

climate change”

“… to transform Europe into a highly energy-efficient and low greenhouse-gas-emitting

economy …”

“Europe 2020” Strategy (Mission Statement Barroso II Commission)

2030 framework for climate and energy policies

Improved energy efficiency

Improved energy efficiency

Promotion of new technologies, growth

and jobs

Promotion of new technologies, growth

and jobs

Affordable and competitive pricesAffordable and

competitive prices

CompetitivenessCompetitiveness

Adequate energy infrastructuresAdequate energy infrastructures

Grid StabilityGrid Stability

Diversification of fuels, supply countries and

routes

Diversification of fuels, supply countries and

routes

Security of energy supply

Security of energy supply

Development of alternative energy

sources

Development of alternative energy

sources

Reduction of energy consumptions

Reduction of energy consumptions

Reduction of emissionsReduction of emissions

SustainabilitySustainability

European Commission “2030 framework”… “must ensure progress towards three objectives”

Source: European Commission (DG Energy)

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The (new) EU in search of a new consensus

1. Economic crisis undermines EU climate ambition (20% target = almost reached) + not in line with 2 C target, international finance, EU decarbonisation … ETS etc.

2. New EU is more heterogeneous (GDP per capita ranges from 274% to 45% of EU average)

3. Industrial competitiveness matters more

4. US energy prices (vs EU prices)

5. EU share of global emissions is fast falling & no global climate change agreement in sight

6. EU energy prices go up

7. Old framework must be renewed


The 2007/8 Climate and Energy Package was adopted within a unique political constellation

- Consensus within and between EU Institutions (European Council, European Commission, European Parliament, certainly for EU-15)

- Strong and committed leaders (‘positive EU cycle’)- Economy on track- Expectation of a Global Agreement- EU dominated by EU-15 (?)

Lessons

Interactions between different policies exists (irrespective of targets). Existing mechanism (i.e. linear reduction factor, ex-ante Impact Assessment, three targets) were not sufficient to address interactions


• Industrial policy benefits (technology leadership, export-led growth, green jobs/growth/ economy etc.) have lacked evidence

Lessons (2)

• Regulation works, e.g. car efficiency standards, regulation for houses …

• Least-cost policy (ETS) faces political obstacles while high-cost policy is successful

• Carbon price is indispensible but not ETS !

• We know what works! We have experiences with hybrid instruments.


Lessons Learned (3)

• Importance of national/local energy and other policy choices have been underestimated (German energy transition, UK price floor, contract for differences, nuclear policies ….)

Continuity but no roll over


Is there an issue?

What is main issue?

• Climate change policy? (carbon pricing)

• EU energy policy? (Renewables)

• Investment economics ?

• Member states exert national/local energy choices (Art. 194 II Lisbon Treaty)? (Energy transition) ?


Issue is price of energy

• European or national prices ?

• Real or published prices? Transparent or non-transparent?

• Sustainable or non-sustainable energy?

• Short-term or long-term vision?

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CEPS Energy M arkets ForumKey challenges and potential remedies to address

Challenge Measures/ remedies To bedealt

with in Work Programme

1 Spill-over effects of national energy choices (e.g. loop flows, negative prices)

Reveal divergent national preferences regarding the future energy mix and point to increasing constraints resulting from the EU framework

WP 1

Increase regional coordination and cooperation

WP 1

Incentivise greater cross-border TSO cooperation (e.g. cross-border re-dispatching)

WP 1

Facilitate international exchange between national governments, regulatory authorities, TSOs & DSOs and energy market participants

All WP

2 Electricity network expansion (How to optimise electricity/ energy networks?)

Improve methodologies to allow for cross-border cost-benefit allocation

WP 1

Identify and build institutional capacity to address distributional effects, i.e. deal with winners and losers

WP 1

Identify ways (for TSOs) to better incorporate DSO related flexibility

WP 2

Develop new ways of improving public acceptance of cross-border infrastructures or those with a significant cross-border impact, for example by authoritative analysis or other means

WP 2

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Christian Egenhofer, Head of the Energy and Climate Program, CEPS Brussels

Technology

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