Implications of energy poverty for economic

competitiveness and social cohesion

Open Seminar “ESPON Evidence for Regional Policy-Making”9-10 June 2010, Alcalá de Henares, Spain

Questions posed to the ReRisk project

• 1. How and to which degree will an increase in energy prices impact on the competitiveness and cohesion of European regions?

• 2. In which fields and to what degree can regional policy makers take influence on the development of renewable energy sources and fight energy poverty?

• 3. Which sources of sustainable energy generation can be activated and/or further strengthened within European regions?

Impact on the competitiveness and cohesionSome regions are more vulnerable than others due to an unfavourable economic structure:

A high percentage of wealth creation (GVA) is in industries with higher than average energy costs and / or

A high percentage of industrial employment depends on these industries

Ranking of Regions by Gross-Added Value in Industries with High Energy Spending

NUTS2_2006 RegionGVA of industries with high energy spending / total regional GVA (%)

CZ08 Moravskoslezsko 25.13%

NL11 Groningen 22.36%

ES12 Principado de Asturias 21.02%

CZ04 Severozápad 20.37%

ES21 Pais Vasco 18.40%

ES22 Comunidad Foral de Navarra 17.82%

DE22 Niederbayern 16.84%

ES42 Castilla-la Mancha 16.76%

BE31 Prov. Brabant Wallon 16.44%

ITD5 Emilia-Romagna 16.25%

CZ07 Strední Morava 16.04%

GR24 Sterea Ellada 15.79%

NL34 Zeeland 15.71%

CZ05 Severovýchod 15.64%

Source: Own elaboration based on Eurostat data

Impact on the competitiveness and cohesion

• In the Italian regions of Emilia-Romagna, Lombardia, and Veneto, special attention should be paid to the manufacture of cement since energy purchases in this sector represent more than 30% of total purchases and energy spending is almost 10% higher than the EU average. A second critical sector is the “manufacture of glass fibres”, in which more than 18% of purchases are dedicated to energy and energy spending is 8.6% above the average level of spending in the EU. The sector of “manufacture of other non-metallic mineral products”, to which both cement production and manufacture of glass fibres belong, employs more than 30,000 people in Lombardia and Veneto and more than 46,000 in Emilia-Romagna.

• In the Czech region of Severovýchod, production processes in the sector of “other non-metallic mineral products” should be analyzed, since energy spending in this sector is 10% above EU average on national level and companies in this branch employ 21,564 persons in Severovýchod. Moravskoslezsko also has a very high level of employment (28,388 persons) in the basic metals industry. Special attention should be paid to processes related to “Forging, pressing, stamping and roll forming of metal; powder metallurgy”, for which energy spending is about 5% higher than the EU average and represents 7.65% of total purchases

Impact on the competitiveness and cohesion

Another set of regions can be hard hit by rising energy prices, due to their dependence on motorized transport:

Island regions and capitals: dependence on air transport

Central regions and their “hinterland” with a high level of commuting

High levels of employment in the transport sector

High fuel costs for freight

Fuel costs for freight as % of GDP

Region %

BG32 Severen tsentralen 14.22

BG34 Yugoiztochen 8.18

PL33 Swietokrzyskie 7.99

BG33 Severoiztochen 7.16

BG42 Yuzhen tsentralen 6.72

PL43 Lubuskie 6.67

PL34 Podlaskie 6.59

BG31 Severozapaden 6.39

CZ02 Strední Cechy 6.27

Transport employment / total employment

Region %

FI20 Åland 60.26

DEA2 Köln 45.78

SK01 Bratislavský kraj 38.22

FR10 Île de France 27.69

BE10 Région de Bruxelles-Capitale

26.07

ES30 Comunidad de Madrid 25.45

DE50 Bremen 25.25

DE71 Darmstadt 24.20

PL12 Mazowieckie 24.09

Impact on the competitiveness and cohesion

Energy prices are a much greater strain on household budgets in the East of Europe than in the West, as shown by national statistics. Low activity rates and other factors that make families slide into poverty are affecting a large number of Romanian, Polish and Hungarian regions. People living in the poorest region in Romania only earn 14% of the average income in Hamburg, Romanians pay 54% of the German average price.

Electricity & Gas Prices, 2nd Semester 2009

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A large group of so far lagging regions have options for growth by exploiting their potential for renewables, while others could become even less competitive and face growing social problems.

Some of the Pentagon regions, especially in Belgium, could benefit less from growth opportunities in the economic centres, thus dropping out of the circle of best-performing regions in Europe.

So far wealthy regions in the European periphery, especially the North, with a heavy industrial base, may have to analyze how increasing energy bills will affect companies’ competitiveness.

Impact on the competitiveness and cohesion

Influence of regional policymakers

Focus on:• The differing emphasis of national and

regional energy policy in term of the three pillars of energy policy: security of supply; economic efficiency; environmental protection

• The energy sources exploited in the regions (renewables; coal; oil; gas; nuclear)

• The mechanisms that drive renewable energy development

• The impact of energy prices on energy supply and demand

• The relative authority of sub-national actors relative to national and international actors for shaping regional energy development

The ReRisk team sent out a questionnaire encompassing 23 questions, addressing 157 NUTS 2 regional energy agenciesResponse from 41 agencies representing all EU countries

Influence of regional policymakers

Table 3: Energy Source Priority

Q 4: What energy sources are prioritized in your NATIONAL energy

policy?

Q 5: What energy sources are prioritized in your REGIONAL energy

policy?

Energy type Percent Percent

Nuclear 37% 10%

Coal 39% 24%

Natural Gas 54% 41%

Renewable Energy 54% 66%

Other 17% 22%

Regions play a greater role with regard to RES and can go beyond national standards, for example in environmental policy

Influence of regional policymakers

“Sustainable energy supply structures based completely on the importation of knowledge

and technology do not seem to be favourable for countries and regions. Local or regional R&D constitutes a good basis to optimise

energy systems and to reduce vulnerability. Besides, the yield of renewable energy

sources and the types of optimal technologies depend, in part, on local (climatic) conditions.

Thus, specific technologies have to be developed – mostly by means of local or

regional R&D”

(Luther 2004)

Sources of sustainable energy generation

Regions can act on various levels to reduce their vulnerability and to improve their capacity to adapt to the challenge of rising energy prices. With the right policies in place, rising energy prices can turn into an opportunity for growth.

Region + National / EU

Region + (Region)

Region + Municipalities

Policy Recommendations

Focus on LOCAL Scale

Push municipal leadership in public-private partnerships

Develop integrated spatial planning instruments Strengthen regional and local networks Establish urban planning principles for solar energy

use Implement Urban Metabolism procedures Incorporate solar and wind facilities in urban areas Improve efficiency of office design and work arrangements Improved transparency and information on energy

consumption Consumer Awareness and Education Involve end users in energy efficiency programmes and

policies Social policies fighting energy poverty on household level

Policy Recommendations

Focus on REGIONAL Scale

Promote awareness among regional policy makers on the impact of rising energy prices and the need for economic diversification

Prepare for climate change impacts in the regional energy infrastructure

Evaluate the feasible potential of all renewable sources in the region (“map of hidden reserves”)

Promote industrial symbiosis and/or industrial eco-parks

Focus on NATIONAL Spatial Scale Sustainable use of biocrops BAT (Best Available Technologies) for industrial energy

efficiency (benchmark indicators for subsectors)

Policy Recommendations

Focus on EUROPEAN Scale

Promote energy solidarity between regions and territories Define a vision for regional energy models 2050 Improve the data on energy use and efficiency in Europe Create a market for energy efficiency Fund and stabilize transregional research agencies

Focus on GLOBAL Scale

Accelerate the transition to non-fossil fuels in the aviation industry

Thank You for your attention

Latest data on risk of poverty and housing

Source: EC 2010 “The Social Situation in the European Union 2009”

Latest data on risk of poverty and housing

Source: EC 2010 “The Social Situation in the European Union 2009”