Report: Europe ‘must take drastic action to cut energy use’

Nov. 29, 2000 (Financial Times)–Europe “must take drastic action to cut energy use,” David Buchan reported on the EU’s first big review of energy policy in three decades.

The European Union can only meet its climate change goals and avoid risky dependence on foreign oil and gas if it takes drastic measures to curb energy consumption while keeping nuclear power options open.

This is the main conclusion of a green paper on security of energy supply due to be adopted by the European Commission today. It is the first major review of energy policy since the 1970s.

It comes in the wake of the high moral tone adopted by most EU ministers at The Hague climate change talks in refusing to let the US escape some of the direct reductions in greenhouse gases it is supposed to make under the Kyoto protocol.

Even before its publication today, the Commission paper had succeeded in its aim of launching an energy policy debate. Greenpeace, the environmental body, wrote a furious letter last week to Francois Lamoureux, the Commission’s director general for energy and transport, of “reducing the EU’s credibility in the eyes of the world” by suggesting the Union “is not in a position to meet its Kyoto protocol targets” without resorting to “this moribund energy source” of nuclear power.

The green paper claims “not to seek to maximise energy self-sufficiency or to minimise dependence, but to reduce the risks linked to such dependence”.

This dependence on imports fell from 60 per cent of energy consumption in 1973 to 50 per cent last year, but on present trends is likely to rise again to 70 per cent by 2030 as Europe increasingly rejects indigenous coal and nuclear power in favour of imported gas.

“Our dependence will be less marked, if we continue to increase competition in gas and electricity, begin giving aid for renewable energy, keep an open option on nuclear power and take drastic measures to curb energy demand in construction and transport,” said Mr Lamoureux.

On the supply side, the Commission proposes an increase to the current 90-day oil reserves with the extra stocks available for “anti-speculative” release on to the market, in the same way as the US recently used its petroleum reserve.

It also hopes to hold one of its biggest suppliers, Russia, which provides 41 per cent of the EU’s gas and 18 per cent of its oil, in the friendly embrace of a long-term partnership exchange of European capital and technology for Russian resources.

To this end, the EU and Russia have set up an energy working group headed by Mr Lamoureux and a deputy Russian prime minister.

More controversial is the Commission’s pointed reminder that the EU avoids 300m tonnes of carbon every year, equivalent to the emissions of 75m cars, by using nuclear energy. Yet five of the eight EU states with nuclear power have adopted a moratorium on its expansion and, of the other three, only Finland looks likely to build a new reactor in the next few years.

Despite this, the Commission urges a stepping up of research into nuclear fuel management and waste storage. It sees little hope for stemming the decline in coal “which generates pollution at every stage of production and utilisation”, though it suggests as a safety net in time of crisis a minimum “production base” of coal might be maintained.

The Commission acknowledges the “seductive” appeal of gas which it predicts will generate nearly half of Europe’s electricity over the next 30 years. It expresses the hope of “unhooking” the price of gas from that of oil. The two forms of energy have been traditionally linked on the ground that they are substitutable.

While the first liberalisation this year of the gas market has had no effect yet on gas prices, the two-year-old cross-border opening up of electricity has pushed prices down an average 15 per cent, and by as much as 45 per cent in some countries, such as Germany.

This price fall has in turn increased consumption, and the Commission concedes this is complicating EU efforts to cut carbon emissions. However, far from reining in liberalisation, the Commission confirms next year it will propose full opening of the electricity and gas markets, and proposes energy-saving tax incentives and rules to deal with greenhouse gases.

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