In February 2015, the European Commission unveiled its blueprint for an EU Energy Union, one of the most widely discussed projects of the first months in office of the Juncker Commission.¹ The Commission’s “Energy Union package” is a strategic document that is meant to pave the way for the creation of an integrated European energy market, where member states cooperate to strengthen their energy security, decarbonise their economy and reduce waste in energy consumption. Making the EU’s energy sector more climate-friendly and decreasing its reliance on external energy suppliers are the overarching objectives of the Energy Union.

 

The Energy Union package outlines five broad and interrelated policy tasks: increasing energy security, solidarity and trust; creating a fully integrated European energy market; improving energy efficiency while contributing to the moderation of demand; decarbonising the economy; supporting research, innovation and competitiveness. The package reiterates some of the long-standing objectives of EU energy policy, notably the integration of the internal energy market and strengthening the security of energy supplies from abroad. However, it also includes new elements, particularly the focus on innovation and the technological upgrading of energy systems.

 

The proposal to create an EU Energy Union was first made by the then Polish prime minister (and now president of the European Council) Donald Tusk in April 2014. Tusk’s proposal put particular stress on the exploitation of domestic fossil fuels (coal, oil and gas) and the creation of a joint European gas purchasing authority. This, he argued, would prevent “Russia’s energy stranglehold” on Europe.² In the following ten months, however, the European Commission largely reframed and developed Tusk’s initial proposal.

 

Tusk’s call was a response to Russia’s annexation of the Crimean peninsula and its destabilisation of Ukraine, which put the EU on a confrontational path with Moscow, a key fossil fuel supplier of the Union. The Commission’s Energy Union package reflects concerns about excessive reliance on Russia as an energy provider. However, its rationale and objectives are broader. The package builds on the legislation previously adopted by the EU, such as the 2009 directives and regulations outlining common rules for the electricity and gas markets, which constitute the Third Energy Package.³ This legislation aimed at integrating and opening up national gas markets. Most importantly, the EU’s climate goals and the idea of sustainable economic development profoundly influenced the philosophy of the Energy Union.

 

Nonetheless, it is unclear whether the EU will manage to implement the Energy Union package and ensure its energy security through a sustainable and environment-friendly process. Some member states, most notably Hungary, do not show particular concern for the EU’s dependence on Russian energy supplies and fear that the Energy Union could be a hurdle to future deals with Russia.⁴ Other member states – particularly Poland and the United Kingdom – advocate the exploitation of contentious and heavily polluting fossil fuels, particularly shale gas and coal. The shale gas boom in the United States made cheap American coal available for export to the European market and raised hopes that Europe could replicate the US experience. Due to the current low prices of fossil fuels and the costs of the transition to a low carbon economy, many of the EU’s East European members consider the decarbonisation of their economy unaffordable and are reluctant to endorse policies in favour of renewable energy and energy efficiency.⁵

 

The different composition of the energy mix in EU member states partly explains their distinct policy priorities. Coal still plays a key role in the energy mix of many East European member states (notably Estonia, Poland, the Czech Republic and Bulgaria), where it is used in electricity generation. All member states rely on oil as an energy source, but for some (Malta, Cyprus, Luxembourg, Greece, Ireland) this reliance is much higher and exceeds half of total energy consumption. Gas is the main source of energy in the Netherlands, the United Kingdom, Hungary, Lithuania, Romania and Slovakia; it is also a major component of Italy’s and Germany’s energy mix. Nuclear power is the main energy source in France and covers more than 20 percent of energy consumption in Sweden, Slovakia, Bulgaria and Slovenia. These differences, as well as the varying degrees of dependence on the import of energy from abroad, complicate the task of integrating national energy markets in the EU.⁶

 

What are the obstacles to the creation of the Energy Union? Can an EU Energy Union be reconciled with the EU’s climate goals? What would be its foreign policy implications? It is argued that instability in the EU’s neighbourhood – where most of the EU’s energy imports originate – is the key driving factor behind the Energy Union. This involves the risk of an excessive securitisation of the project, whereby climate and environmental targets could be marginalised and priority is given to the exploitation of fossil fuels. Limited funding and the lack of ambition of the EU’s renewable and energy efficiency targets pose considerable obstacles too. Furthermore, the lack of coordination among national energy mixes and policies could prevent the integration of national energy markets. In order to implement an environmentally sustainable Energy Union, the EU will have to create adequate governance mechanisms, reconcile different national priorities and potential conflicts with member states.

 

The ensuing analysis sets out the broader context in which the Commission prepared the Energy Union package, notably the crisis in relations with Russia and the debate on climate targets. It then focuses on how the EU plans to implement the Energy Union, the domestic challenges that will arise in the process and the foreign policy implications of the project.

 

The European Union is heavily dependent on the import of energy from abroad. In 2013, the primary production of energy in the EU was less than half of the Union’s gross consumption. EU production has dropped by 15 percent since 2004, particularly due to the drop in energy generation from declining domestic fossil fuel resources. On the other hand, the EU’s import dependence increased from 46 percent to 53 percent between 2000 and 2013.⁷ Dependence on energy imports is particularly high in some member states, such as Italy, Ireland, Cyprus (over 80 percent of total energy consumption), Germany, Spain, Austria, Lithuania and Slovakia (between 60 percent and 80 percent).⁸

 

According to Vice-President of the European Commission Maroš Šefčovič, the EU spends 3.2 percent of its gross domestic product on energy imports, namely over 1 billion Euros per day.⁹ At the moment, wholesale electricity prices in the EU are 30 percent higher than in the US. Šefčovič, who is in charge of the EU’s Energy Union, has argued that the EU could reduce costs and dependence from abroad by building a single internal energy market, increasing energy efficiency and differentiating its suppliers.

 

The question of differentiating suppliers became particularly relevant with the beginning of the Ukraine crisis and the ensuing standoff between the European Union and Russia.¹⁰ As of 2013, Russia was the main supplier of fossil fuels to the EU, providing – in terms of value – 34 percent of the oil, 41 percent of the natural gas and 28 percent of the coal imported by the Union.¹¹ Due to the difficulties and costs of importing gas from more distant regions of the world, dependence on Russian gas is the most sensitive issue. Some member states are more reliant on Russian gas than others: Germany and Italy are the main importers in terms of volumes, whereas for five member states (Finland, Latvia, Estonia, Bulgaria and Slovakia) Russia is the only supplier.¹² Furthermore, most East-Central European member states have little or no backups to Russian gas in the sectors where it is used (notably household heating).¹³

 

EU countries have relied on Soviet/Russian gas supplies for several decades and, overall, Moscow has been a trustworthy supplier. Exports of Soviet gas to Western Europe started in the late 1960s and continued, unhindered by political developments, through some of the tensest moments of the Cold War.¹⁴ Currently, Russia has a strong interest in maintaining the image of a reliable partner, as its sales of natural gas, crude oil and petroleum products on the EU market constitute a large part of its exports.¹⁵

 

However, excessive reliance on Russian gas could be a problem for the EU for both economic and political reasons. Russia has sold gas to EU member states at different prices, often imposing higher prices on East-Central European countries. This has hindered the integration of European gas markets.¹⁶ In its gas supply contracts with East-Central European importers, Russian state energy company Gazprom imposed destination clauses requiring the purchased gas to be used in a specific territory. These clauses allowed Gazprom to keep price differentials among countries where it was the only or the dominant gas provider.¹⁷ In September 2012, the European Commission opened an antitrust case against Gazprom, which has the monopoly of Russian gas exports to the EU. The case is still ongoing: in April 2015, following a long investigation, the Juncker Commission filed a legal suit against Gazprom, accusing it of abusing its market power and overcharging customers in Eastern Europe.¹⁸

 

Russian gas supplies to the EU may become subject to disruptions due to the crisis between Russia and Ukraine. In 2006 and 2009, disagreements between Moscow and Kiev over the price of Russian gas sold to Ukraine resulted in disruptions of the flow of gas towards European markets, which seriously affected the economy and society in several East-Central and Southeastern European countries.¹⁹ Thanks to the Nord Stream pipeline, which became operational in 2011, the dependence of the EU-Russia gas trade on the Ukrainian transit corridor has decreased compared to 2009. However, around 50 percent of Russian gas exports to the EU still reach the Union via Ukraine. Southeastern European member states are heavily vulnerable to potential disruptions. Russia’s decision to cancel the South Stream project implies that, in the short and medium term, they will continue to depend on the Ukrainian corridor for their imports of Russian gas.²⁰

 

The EU mediated an agreement between Russia and Ukraine to secure the regular flow of gas in the winters of 2014–15 and 2015–16. However, the agreement will expire at the end of March 2016 and, given the extremely tense relationship between Moscow and Kiev, further disruptions are possible. Uncertainty over the future of supplies heightened following Russia’s announcement that, in the future, it will no longer channel gas through Ukraine, but will rely on different routes instead. According to the Russian leadership, by 2019 the EU would receive the gas it previously imported via Ukraine through the Nord Stream pipeline or alternative infrastructure that will be built in Southeastern Europe.²¹ Some governments in Southeastern Europe welcomed the announcement.²² However, amidst the tensions caused by the Ukraine crisis and the antitrust investigation, the European Commission reacted negatively to the Russian communiqué. Construction of the necessary infrastructure for the new transport route would require large sums of money and would not be completed before 2019, leaving the Southeastern flank of the EU dependent on the Ukrainian transit corridor until then.

 

Besides being a response to the EU’s dependence on energy from abroad, the Energy Union is an attempt to address climate policy goals. In October 2014, EU leaders agreed to set targets to reduce greenhouse gas emissions and enhance the production of energy from renewable sources. The targets include a 40 percent binding reduction in greenhouse gas emissions (compared to 1990 levels), boosting the share of renewables to at least 27 percent of total energy consumption and increasing energy efficiency by 27 percent. These goals are to be achieved by 2030. They were also the basis of the EU’s negotiating position at the upcoming United Nations Framework Convention on Climate Change (which took place in Paris in December 2015), where global goals to reduce greenhouse gas emissions were discussed.²³

 

The 2030 targets build on the ones already agreed for 2020, which encompass a 20 percent reduction of greenhouse gas emissions compared to 1990 levels and raising the share of renewables to 20 percent. Currently, the EU appears to be on track to achieve its 2020 targets. By 2012, it had already achieved a 17.9 percent reduction of greenhouse gas emissions. This was the result of a number of factors including structural changes after 1990 (notably the shift from heavy manufacturing industries to a more service-based economy), the progressive replacement of coal with gas, the increase in renewable energy and the economic slowdown that followed the 2008 financial crisis.²⁴ Twenty-five member states met or exceeded their 2013/14 interim goals for renewables. In 2014 renewable energy covered more than 15 percent of the EU’s gross final energy demand. The decrease in overall energy consumption in some member states and the development of the renewable heating sector (using cheap biomass) contributed to progress in renewable energy. Achieving an additional target of 10 percent of energy from renewable sources in transport (also by 2020) will be more challenging, as the projected share for 2014 was of 5.7 percent.²⁵

 

The 2020 and 2030 targets should contribute to making the EU less dependent on energy imports: as the consumption of fossil fuels is reduced to limit greenhouse gas emissions, so will be the Union’s reliance on imports of these raw materials. In this respect, the climate and energy goals and the Energy Union are two steps in the same direction. Indeed, the Energy Union could complement and strengthen the EU’s climate policy if its governance bodies strengthen the governance of the Union’s climate and energy policy as a whole. In particular, governance mechanisms that supervise the implementation of the 27 percent renewables target at national level are highly desirable, as the target is only binding at EU level. The same applies to the efficiency target, which is not binding at all and could be circumvented by member states. Their reluctance to proceed with the implementation of energy efficiency goals was highlighted in late March 2015, when the EU opened infringement procedures against all member states – with the sole exception of Malta – for their failure to translate the EU’s Energy Efficiency Directive into national law.²⁶

 

Increasing energy security is a cornerstone of the Energy Union. According to the Commission’s communication on the Energy Union (A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy), this will be done through the construction of new pipelines carrying gas from Central Asia to Europe (the Southern gas corridor²⁷) and the creation of liquefied natural gas (LNG) hubs in East-Central Europe and the Mediterranean. The new infrastructure is supposed to be complemented by new gas storage sites and the possibility to use “reverse flows”, namely channelling the gas wherever it is needed in the EU market and beyond. In 2014 and 2015, for instance, the EU used reverse flows to supply Ukraine with gas, following Russia’s decision to suspend deliveries to Kiev.

 

The new infrastructure would diminish Russia’s role in the portfolio of EU gas providers. However, it would not reduce EU energy dependence from authoritarian regimes, as gas for the Southern corridor would be bought predominantly in Azerbaijan and, potentially, Turkmenistan. Additional reliance on LNG would not be unproblematic either, due to the cost and environmental impact of the transportation and regasification of liquefied gas from distant countries such as the US and Qatar. Moreover, potential US exports of LNG would be more profitable in the Asian markets, where demand and prices are higher than in Europe. Unsurprisingly, US President Barack Obama stated that US supplies will reach the world market, rather than go directly to Europe.²⁸

 

The Energy Union package recommended that member states should be able to rely on their neighbours in gas supply crises. However, it did not include a plan for joint gas purchasing, which was a key element of Tusk’s initial proposal. This was largely due to the stance of some member states, such as Germany, which highlighted how joint purchasing would run against the liberalisation of gas markets.²⁹ The representatives of the gas industry (Eurogas) and of gas traders (European Federation of Energy Traders) also opposed collective gas purchasing, on the grounds that it would undermine prospects for a competitive energy market.³⁰ Hence, the package only stated that the Commission would assess voluntary demand aggregation mechanisms for gas purchasing in crisis situations or for member states depending on a single supplier. Some experts argue that East-Central European and Balkan countries could set up joint gas purchasing.³¹ However, even leaving aside technical difficulties, it is not sure that such a regional mechanism would be sufficient to extract cheaper prices from Russia.

 

Furthermore, the Commission asked to be informed about intergovernmental agreements (IGAs) on gas supplies with third countries from an early stage of negotiations, so that it can review them and make sure they comply with EU rules and goals. This request follows a dispute between the Commission and six member states that signed IGAs with Russia for the construction of the South Stream pipeline, a project for shipping Russian gas to Southeastern and Central Europe via the Black Sea. In December 2013, the Commission declared that the IGAs breached EU law.³² Most likely, the Commission’s request to screen IGAs will cause friction with member states that are keen to retain their prerogatives in energy deals with non-EU partners.

 

The Energy Union package mentioned only briefly the controversial question of unconventional gas and oil exploitation in Europe. It argued that unconventional fossil fuels could contribute to decreasing import dependency for states that choose to invest in them, after having adequately assessed public acceptance and environmental risks. Due to its ecological hazards, environmental organisations have criticised harshly shale gas extraction and some member states (most notably France) have banned it.³³ Furthermore, estimates of shale gas deposits in East-Central European EU member states have been revised downwards and companies such as Chevron have abandoned exploration, suggesting that there will be no repetition of the US shale gas revolution in Europe.³⁴ Nonetheless, other EU members (notably the United Kingdom and Poland) and some lobby groups are trying to ensure that EU policy prioritises shale gas development. Pro-shale lobbies have become dominant in relevant EU technical and advisory panels, notably the EU Joint Research Centre’s European Science and Technology Network on Unconventional Hydrocarbon Extraction. The ensuing decision of prominent environmental organisations to walk out of this network highlights that shale gas development remains highly controversial in the EU. It will be difficult for the Energy Union project to simply circumvent the issue.³⁵

 

While differentiating energy sources and suppliers would reduce overreliance on single countries, building an internal energy market would even out domestic prices and provide further supply security. In order to achieve this, the Energy Union package has set a minimum interconnection target of 10 percent to be met by 2020. This means that, by 2020, all member states must be able to transfer at least 10 percent of their installed electricity production capacity to their EU neighbours. The Commission has produced a separate Communication outlining how this target can be achieved, thereby confirming that it is an immediate priority.³⁶ Linking the remaining energy islands – notably the Baltic states and the Iberian peninsula – to the main electricity and gas network is considered particularly urgent.³⁷

 

The question of governance was also addressed. Establishing adequate governance mechanisms is essential for the implementation of the Energy Union. The Commission recommended the full implementation of the Third Energy Package, a set of rules liberalising the energy sector and unbundling energy production from distribution. Most importantly, it advocated the strengthening of the Agency for Cooperation of Energy Regulators (ACER) in order to enable it to oversee the development of the internal energy market. Until now, ACER has focused primarily on assisting national energy regulators, but the Commission seems to be planning to transform it into the main governing body of the Energy Union.³⁸ If this is indeed the Commission’s intention, member states’ acceptance of the new role of ACER will be essential for its successful functioning.

 

The Commission’s communication defines energy efficiency as “an energy source in its own right”.³⁹ It identifies the transport and building sectors among the most critical ones, highlighting that 75 percent of the European housing stock is energy inefficient. As the majority of EU gas imports are used for the heating and cooling of buildings, improving their energy efficiency would reduce both costs and dependence on external gas suppliers. As for the transport sector, 94 percent of transport relies on oil products, of which 90 percent are imported. As the Commission noted, making the sector more efficient and decarbonising it – particularly through the electrification of road and rail transport – would help break the oil dependence. However, the 27 percent target for energy efficiency in the 2030 climate and energy framework is not binding, hence member states will have little additional incentive to address the issue.

 

By contrast, the fourth goal of the Energy Union, decarbonising the economy, is likely to meet with at least some success, as member states have agreed to a binding 40 percent reduction in greenhouse gas emissions by 2030. Reforming the Emissions Trading System (ETS),⁴⁰ which regulates the EU market of carbon emissions, could assist the EU in meeting the target and in developing renewable energy. In particular, the cap of allowed carbon emissions should be adjusted to the 40 percent target. This would have an impact on the price of emissions and provide incentives to invest in renewables and green technologies. At the moment, the carbon price in the ETS is very low due mostly to an oversupply of emissions permits, which was caused by an overestimation of future emissions when the ETS was set up in 2005.⁴¹

 

The Energy Union package also states that the EU should become “number one in renewables”. However, besides arguing that energy markets and grids have to be fit for renewables,⁴² it does not add much substance to the debate on how this should be achieved. It simply recalls the 27 percent target of the 2030 framework, without addressing either the uneasy question of its implementation at national level or the fact that the target itself is modest and should be revised upwards.⁴³Research and innovation in renewable technologies, energy storage, smart grids and sustainable transport are all essential in order to decarbonise the economy and achieve EU climate goals. The Energy Union package stresses this in its fifth dimension. However, this section leaves some ambiguity, which could be exploited by member states that are reluctant to decarbonise their economies and invest in renewables. In particular, the package argues that the EU should invest in “clean fossil fuels”, a contradictory statement: burning fossil fuels pollutes by definition (one can only argue that some pollute less than others, but none is “clean”).

 

Furthermore, the Commission emphasised carbon capture and storage (CCS), a technology that allows carbon emissions to be captured and stored before they spread in the atmosphere. The use of CCS in the power and industrial sectors is considered “critical to reaching the 2050 climate objectives in a cost-effective way”.⁴⁴ However, CCS technology is expensive and private investments will not suffice to finance it.⁴⁵ Hence, CCS may distract public funds from renewables and delay the transition to a low carbon economy. It can also foster unrealistic hopes about making electricity generation from coal environment-friendly and therefore have the indirect effect of propping up the coal sector.⁴⁶

 

Creating the Energy Union will take time and come up against numerous challenges. In the short run, funds will have to be found to finance the thirty-three infrastructure projects that the European Energy Security Strategy identified as essential to improve supply security and market integration. The Commission hopes that private investments will pay for most of the new infrastructure. However, if private investments are not forthcoming, a selection of the most urgent projects will be necessary and the EU will have to allocate more public funds (for example, from the new Investment Plan).⁴⁷ A high degree of intra-European solidarity will be necessary, as the most urgent infrastructural projects will have to be implemented in poorer member states, in Eastern and Southern Europe. In order to reconcile the Energy Union with the EU’s climate goals, the Commission should fund first and foremost projects that boost energy efficiency and the production and trade of renewable energy.

 

For the same purpose, European institutions should resist pressure from interest groups and member states to shift the focus of the Energy Union towards fossil fuels. According to recent media analyses, large fossil fuel companies successfully lobbied the European Commission to limit the ambition of the EU’s 2030 climate targets.⁴⁸ In the run up to the deal on the targets, the multinational oil and gas company Royal Dutch Shell conducted a joint and successful campaign with a few member states, led by the United Kingdom, to prevent binding targets for individual member states on energy efficiency and renewable energy. However, if the EU wants to meet its goal of cutting greenhouse gas emissions to 80 percent below 1990 levels by 2050, binding targets for renewables and energy efficiency will have to be agreed.⁴⁹

 

In order to level energy prices and create a truly integrated energy market, national fuel mixes should be coordinated, the interconnection of national energy systems should be higher than the current 10 percent target and subsidies to national energy industries should be phased out.⁵⁰ Doing this will not be easy, as member states will most likely defend their national industries and the prerogative to determine their energy mix. This prerogative has solid legal foundations, as it is enshrined in article 194 of the Treaty on the Functioning of the European Union (TFEU).⁵¹ According to the TFEU, member states and the EU share competence on energy policy.⁵² Hence, the Energy Union will have to be implemented in close coordination with member states. Their political will and support is essential for its functioning. However, conflict between the Commission and member states is to be expected with regard to the Commission’s request to screen intergovernmental agreements on energy supplies with third parties before they are concluded. Hungarian Prime Minister Viktor Orban has already argued that this would constitute a “major problem” and hinder national sovereignty.⁵³

 

Another potential risk is that the rhetoric of some EU leaders concerning the Energy Union aggravates political confrontation with Russia. Tusk’s initial proposal reflected this problem. Moreover, potential Russian objections to the mechanisms of the Energy Union (such as reverse flows or aggregated gas purchasing) could worsen political tensions. Due to contractual obligations between EU and Russian companies, the EU’s growing dependence on energy imports and the competitiveness of Russia’s fossil fuel exports, it can be estimated that Russia will remain a key supplier of the EU at least until 2030.⁵⁴ Hence, Brussels will have to pursue a fair business relationship, while ensuring that its internal market rules are respected. At the same time, the EU should not develop new energy dependencies on other authoritarian states (such as Azerbaijan or Qatar), nor expect to receive gas from the US at discount prices, as it will have to compete for it with Asian countries. Furthermore, current low oil and gas prices are putting the further development of the American shale industry into question, which could become unprofitable and consequently experience drastic cuts in production.⁵⁵ If this happens, there may be no US shale gas to export.

 

 

Overcoming the numerous obstacles to the implementation of the Energy Union will be very demanding. The weak commitment of EU member states to integrating the electricity and gas markets and to coordinating national energy policies has hindered the implementation of previous Commission strategies, such as the 2006 Green Paper on energy.⁵⁶ The Ukraine conflict and the debate on the effects of climate change have built momentum behind the Energy Union and the EU’s decarbonisation agenda. However, their successful implementation is far from certain.

 

The Conclusions of the European Council on the Energy Union, held on 19 March 2015, reflect the challenges that will arise in the coming months.⁵⁷ The document is a balancing act between the interests of different member states, as well as between those of member states and the Commission. For instance, the Council simultaneously calls for reinforcing the transparency of agreements to buy gas from external suppliers and for guaranteeing the confidentiality of commercially sensitive information therein. The Conclusions emphasise both the need to strengthen the security of gas supplies – including recourse to indigenous resources, which can be read as encompassing shale gas extraction – and the development of renewable energy and climate-related technology. The order of priority of these objectives is not specified (even if strengthening gas and electricity infrastructure appears first on the list), which leaves policy options and the very nature of the Energy Union open to future debate.

 

If the Commission consistently supports an agenda prioritising solidarity, renewables and sustainable development, there will be good prospects for an integrated and fully functioning energy market with lower prices, a greener energy mix and reduced reliance on external energy suppliers. Boosting the production of renewable energy and investing in energy efficiency would greatly contribute to the EU’s energy security, as these are the only factors that can make the EU self-sufficient in the long term. Through an emphasis on efficiency and renewables, the Energy Union could also help the EU achieve its 2030 climate policy goals, or even make them de facto more ambitious. In this respect, it is important that the Commission presented – as part of the Energy Union package – a communication on preparing the EU’s negotiating position for the UN Framework Convention on Climate Change in Paris.⁵⁸ It is essential that the EU participate in UN climate change summits with a single position and a strong, coherent delegation. This allows the Union to maximise its influence and profile itself as a leader in climate change policy.⁵⁹

 

EU leadership, the political will of member states to coordinate their energy policies, environmental awareness across the Union and the availability of sufficient funds to implement infrastructure projects will be the key determinants of success. If any of these are missing, the Energy Union may develop into a simple ‘repackaging’ of existing arrangements and fail to deliver a united energy market.

 

Marco Siddi is Senior Research Fellow at the Finnish Institute of International Affairs (FIIA), Helsinki, and Research Associate at CRENoS, University of Cagliari.

 

¹ European Commission, A Resilient Energy Union.

² Tusk, “A United Europe”.

³ Directive 2009/72/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity, published in OJ L211/56; Directive 2009/73/EC concerning common rules for the internal market in natural gas, published in OJ L211/94; Regulation 714/2009 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity, published in OJ L211/15; Regulation 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks, published in OJ L211/36; Regulation 713/2009 of the European Parliament and of the Council establishing an Agency for the Cooperation of Energy Regulators, published in OJ L211/1.

⁴ Keating, “Orbán Criticises Commission’s Plan”.

⁵ Buchan, Europe’s Energy Security, 5; Carrington, “UK Defeats Fracking Regulations”; Neslen, “Poland on Road to EU Court”; Jacobsen and Crisp, “EU leaders Adopt 'Flexible' Energy Targets”.

⁶ European Commission, Member State’s Energy Dependence 2014, 6-8.

⁷ Eurostat, “Simplified Energy Balances - Annual Data”, 17 April 2015, http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nrg_100a&lang=en.

⁸ Denmark is the only EU member that produces more energy than it consumes. European Commission, Member State’s Energy Dependence 2014, 6.

⁹ Vice-President for Energy Union Maroš Šefčovič, opening speech at the Energy Union Conference in Riga, 6 February 2015.

¹⁰ Political instability in North Africa following the Arab Spring, particularly the civil war in Libya (an important energy supplier for some EU member states, notably Italy), further complicated the overall security of EU energy supplies. European Commission, Member State’s Energy Dependence 2013, 138-9.

¹¹ Eurostat, “Statistical Analysis of EU Trade in Energy Products, with Focus on Trade with the Russian Federation”, 17 April 2015, http://ec.europa.eu/eurostat/statistics-explained/index.php/Trade_in_energy_ products. More precisely, 49% of EU natural gas imports in gaseous state come from Russia; however, if liquefied natural gas imports (LNG) are included, the share of gas imports from Russia is 41% of the total (Russia does not export LNG to the EU).

¹² At the end of 2014, Lithuania launched a floating LNG terminal, which allows the country to import gas from other regions. This terminal could also supply the Latvian and Estonian markets, but the lack of infrastructure, the closure of the Latvian market (which is still dominated by Gazprom) and Estonia’s pursuit of its own LNG terminal have hindered cooperation thus far. Dudzinska, “A System of Unconnected Vessels”.

¹³ Dickel et al., Reducing European Dependence, 3-11 ; European Commission, Member State’s Energy Dependence 2014, 118.

¹⁴ For an account of the origins of Europe’s dependence on Russian gas, see Högselius, Red Gas.

¹⁵ In 2013, oil and natural gas sales accounted for 68% of Russia’s total export revenues; the European Union was the destination of most of Russia’s exports of natural gas, crude oil and petroleum products. US Energy Information Administration, “Oil and Natural Gas Sales Accounted for 68% of Russia’s Total Export Revenues in 2013”,http://www.eia.gov/todayinenergy/detail.cfm?id=17231.

¹⁶ Price differentials in Russian gas sales to EU member states are illustrated in Loskot-Strachota and Zachmann, Rebalancing the EU-Russia-Ukraine Relationship, 4.

¹⁷ Destination clauses also existed in contracts with Western European companies, but were removed in the 2000s. Sharples,Special Report, 6-9.

¹⁸ Oroschakoff and Hirst, “Brussels vs Gazprom”.

¹⁹ Kovacevic, Impact of Russia–Ukraine Gas Crisis, 10-15; Pirani et al., The Russo-Ukrainian Gas Dispute, 53-6.

²⁰ Sharples and Judge, “Bulgaria and Macedonia Hardest Hit”; Siddi, “EU members cannot Afford Confrontation”; Siddi, “Winners and Losers”.

²¹ Mihalache, “South Stream is Dead”.

²² Levoyannis, “Greece: Russian Backdoor”; Greece will also host the Trans-Adriatic Pipeline, an EU-supported project that will transport gas from the Greek-Turkish border to Albania and Italy.

²³ On climate negotiations in the UN, see Vihma, How to Reform Climate Negotiations.

²⁴ Eurostat, “Europe 2020 Indicators – Climate Change and Energy”, 11 August 2015, http://ec.europa.eu/eurostat/statistics-explained/index.php/Europe_2020_indicators_-_climate_change_and_energy.

²⁵ Only France and the Netherlands failed to achieve – by a narrow margin – the interim goals for renewables; European Commission, Renewable Energy Progress Report.

²⁶ Crisp, “27 Member States hit with Legal Action”.

²⁷ At the moment, work for the Southern corridor is focusing on the Trans-Adriatic (TAP) and Trans-Anatolian (TANAP) pipelines, which channel Azeri gas as far as Italy, via Georgia, Turkey, Greece and Albania.

²⁸ Sartori, “Geopolitical Implications”, 79-80.

²⁹ German Government, “German Non-paper on the Energy Union”.

³⁰ Buchan, Europe’s Energy Security, 3.

³¹ Interview with an expert at Centre for European Policy Studies, Brussels, 3 February 2015.

³² Work on the pipeline was later stopped due inter alia to the Ukraine crisis.

³³ For a good summary of this criticism, see : Flues and Simon: “A Slow Costly Road to Nowhere”.

³⁴ Mihalache, “No Shale Gas in Eastern Europe”.

³⁵ Crisp, “Fracking Advisors Controlled by lobbyists”.

³⁶ European Commission, Achieving the 10% Electricity Interconnection Target.

³⁷ Ibid., 13.

³⁸ Crisp, “ACER as Energy Union Supervisor”.

³⁹ European Commission, A Resilient Energy Union, 12.

⁴⁰ See Wyns, ”Lessons from the EU’s ETS”.

⁴¹ Vogler, “The Challenge of the Environment”, 367.

⁴² This relates to the inherent variability of energy production from renewable sources; power grids have to be adapted to allow for the quick allocation of renewable energy across the market.

⁴³ According to the Commission’s impact assessment, a share of 27% of renewables in energy production is the minimum to achieve a 40% reduction in greenhouse emissions. Cf. Zachmann, “Elements of Europe’s Energy Union”, 3.

⁴⁴ The EU’s roadmap for 2050 states that the Union should cut its emissions by 80-95% compared to 1990 levels; see European Commission, Energy Roadmap 2050.

⁴⁵ Levänen, Turning Point in EU’s Climate Policy, 5.

⁴⁶ Stephens, “Carbon Capture and Storage”; and interview with an expert at the European Policy Centre, 3 February 2015.

⁴⁷ European Commission, “Investment Plan”, http://ec.europa.eu/priorities/jobs-growth-investment/plan/index_en.htm.

⁴⁸ Neslen, “Shell Lobbied to Undermine Renewables Targets”.

⁴⁹ European Commission, Energy Roadmap 2050.

⁵⁰ As for the interconnection target, the Commission itself admits that “The completion of the internal electricity market, notably ending the isolation of electricity islands, secure energy supplies for all consumers and a greater share of electricity generation based on variable renewable energy sources require more than 10% interconnection capacity” and that a 15% target should be pursued for 2030; European Commission, Achieving the 10% Electricity Interconnection Target, 15.

⁵¹ Article 194 of the TFEU stresses the right of a member state “to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply”.

⁵² Energy policy is listed in Article 4 of the TFEU as one of the competences shared by member states and the EU.

⁵³ Gotev, “Energy Union a Threat to Hungary”.

⁵⁴ Dickel et al., Reducing European Dependence, 71.

⁵⁵ Crooks, “The US Shale Revolution”.

⁵⁶ European Commission, Green Paper.

⁵⁷ European Council, “European Council Conclusions on Energy Union”.

⁵⁸ European Commission, The Paris Protocol.

⁵⁹ Arguably, the EU leaders’ agreement on the EU 2030 climate goals in January 2014 stimulated US President Barack Obama to launch negotiations on reducing carbon emissions with China; see Carafa, “The US-China Climate Agreement”, 11.

• 1. Buchan, D. Europe’s Energy Security – Caught between Short-term Needs and Long-term Goals, Oxford Energy Comment. Oxford: Oxford Institute for Energy Studies, 2014.
• 2. Carafa, L. “Is the US-China Climate Agreement a Game-changer?”. The International Spectator, 50, no. 1 (2015): 8–14. [Taylor & Francis Online]
• 3. Carrington, D. “UK defeats European Bid for Fracking Regulations”. The Guardian. 14 January 2014.
• 4. Crisp, J. “27 Member States Hit with EU Legal Action over Energy Efficiency”. Euractiv, 26 March 2015.http://www.euractiv.com/sections/energy/27-member-states-hit-eu-legal-action-over-energy-efficiency-313293.
• 5. Crisp, J. “Commission’s Fracking Advisors Controlled by Lobbyists, Claim NGOs”. Euractiv, 16 April 2015.http://www.euractiv.com/sections/energy/commissions-fracking-advisors-controlled-lobbyists-claim-ngos-313815.
• 6. Crisp, J. “Leak Names ACER as Energy Union Supervisor”. Euractiv, 26 February 2015.http://www.euractiv.com/sections/energy/leak-names-acer-energy-union-supervisor-312309
• 7. Crooks, E. “The US Shale Revolution”. Financial Times, 24 April 2015.
• 8. Dickel, R., E. Hassanzadeh, J. Henderson, A. Honoré, L. El-Katiri, S. Pirani, H. Rogers, J. Stern, and K. Yafimava. Reducing European Dependence on Russian Gas: Distinguishing Natural Gas Security from Geopolitics, OIES Paper 92. Oxford: Oxford Institute for Energy Studies, 2014.
• 9. Dudzinska, K. “A System of Unconnected Vessels: the Gas Market(s) in the Baltic States”, Energypost, 2 July 2015.http://www.energypost.eu/system-unconnected-vessels-gas-market-baltic-states/.
• 10. European Commission. Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Renewable Energy Progress Report. Brussels, COM (2015) 293 final.
• 11. European Commission. Communication from the Commission to the European Parliament and the Council. Achieving the 10 Percent Electricity Interconnection Target. Making Europe’s Electricity Grid Fit for 2020. Brussels, COM (2015) 082 final.
• 12. European Commission. Communication from the Commission to the E