EU's global warming policy blazes a trail

By Ed Crooks
Published: May 28 2009 03:00

It has been a long while since "Old Europe" was at the frontier of anything very much. But in energy and environmental policy it has blazed a trail that many other economies are now following, most notably the US under Barack Obama, the president.
David Buchan, a former energy editor of the Financial Times and now a senior fellow at the Oxford Institute for Energy Studies, has produced one of the first books to map out this uncharted territory.
In an admirably concise but comprehensive 214 pages, he covers all of the salient features of the new landscape for European energy.
His book will be indispensable for anyone who wants to understand the progress the industry has made in the past decade, and where it is likely to go in the next.
The framing narrative is the story of how the European Union's politicians and officials tried to forge collective approaches to meet three often conflicting challenges: competitiveness, energy security, and climate change.
Many of the EU's attempts to meet those challenges have failed. Initiatives to agree concerted policies for energy security, or to set common standards for nuclear power, have made little headway.
In its drive to tackle the threat of global warming, however, the progress made by the EU has been impressive. European policies such as the carbon dioxide emissions trading scheme and targets for the use of renewable energy are being taken up all over the world.
If there is ever a global framework for cutting greenhouse gas emissions, a system like the European ETS is likely to form the basis of it.
In many ways, the EU was ideally placed to rise to the challenge of global warming. Unlike the US, its governments have generally shared a view that the problem deserves serious attention, and many European countries have a tradition of pre-emptive action to address environmental concerns.
Even so, climate change has emerged as the central issue in European energy policy only relatively recently. Mr Buchan's story begins with the drive for energy liberalisation that began in 2005, following ineffectual earlier attempts.
That campaign is now just about finished, through the legislative route at least. The attempt to break up the large incumbent energy suppliers that also own their electricity and gas transmission networks - "ownership unbundling" as it is known - faced implacable opposition from countries such as Germany and France that were determined to defend national energy champions.
Their resistance meant the attempt to force unbundling through legislation was probably always doomed to failure.
Attempts at collective action on energy security have, if anything, been even less effective. EU member states have been determined to preserve national powers over energy supplies. As Mr Buchan observes: "Outside suppliers know this, and are only too happy to exploit it."
Brussels has been reduced to generally fruitless exhortations in its attempts to forge a concerted response to challenges such as Russia's dispute over gas with Ukraine, a key transit country for the EU's imports.
Russia gets a chapter to itself, which it deserves as "the EU's most important but most difficult energy partner". Mr Buchan does not give in to the fatalistic view that all the EU can do is take its gas and oil imports on Russia's terms, and trust in the Kremlin's commitment to preserving good relations with its customers.
He argues: "The EU as a whole can do more to assure its energy security. And it must do more." In the long run, he says, the best policy for securing energy supplies is the same as for tackling climate change: the "low-carbon revolution", to end Europe's dependence on oil, gas and coal.
Energy savings, renewables and nuclear power will all have a role to play. The emissions trading scheme, which rewards low-carbon energy, is at the heart of the strategy, and Mr Buchan concludes that "for all its early trials and errors", the ETS works.
The EU has gone for a "belt and braces" approach: setting targets for emissions reduction, energy efficiency and the use of renewables which are in danger of conflicting. But Mr Buchan concludes that the multiple targets and subsidies are needed to ensure success. "In normal peacetime, policy failure is not catastrophic," he writes. "But climate change is more like war: you don't have time to return to the drawing board."
Copyright The Financial Times Limited 2009