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Sunday, June 8, 2008

European politics in energy, 04

In this edition:
  • Commission stands by 'Gazprom clause'
  • Electricity users want revamp of EU carbon market
  • Pressure mounts ahead of key energy vote
  • EU-Iraq energy deal taking shape
  • EU energy chief seeks boost in nuclear investments
  • EU manoeuvring for non-Russian gas supplies
  • Calls grow for EU to 'suspend' biofuels push
I'd say this is rarely interesting post. Check the commentaries,please. And the articles, of course. Because I think they are rather interesting for people interested in the way energy politics is heading for.

Commission stands by 'Gazprom clause'

18 April 2008

A reciprocity clause in trade and investment is necessary to prevent a massive sell-out of strategic EU energy assets to foreign companies such as Russia's Gazprom, a senior Commission official insisted at a debate on energy liberalisation this week.

The conference, on 16 April, heard Marie-Christine Jalabert, deputy head of unit for electricity and gas at the Commission's energy directorate, defend the EU executive's approach to reciprocity in energy trade.

"We have one goal: to prevent a possible non-EU company from putting the assets on the market," Jalabert toldexternal the conference. "If a company wants to buy shares in a transmission system operator on the stock market, they have to prove to the regulator that their government has the same kind of governance for requests from our own countries."

Jalabert acknowledged, however, that the proposed clause is controversial among EU countries that have sealed bilateral deals with Russia in an apparent rush to secure their long-term gas supplies. "A lot of member states are not yet in favour; the position is not clear within the Council. Germany is not in favour, Austria neither, so it's still open for debate in the Council."

Paul Rübig, an Austrian MEP from the centre-right EPP-ED group, the largest in the European Parliament, said he was "not a big friend" of the reciprocity clause. He argued the EU should instead "concentrate on making its internal market work" as the size of the EU market, with 500 million consumers, gives it sufficient clout in its dealings with large suppliers like Russia.
Rübig also suggested that bilateral deals to secure Russian gas are in the interest of all parties. "A pipeline is like a marriage," Rübig said in an audio interviewexternal

Poland has strongly criticised Germany for securing a deal on a planned Baltic Sea pipeline because the project will bypass Poland, which is heavily dependent on Russian gas.

EU energy ministers are expected to vote on the Commission's proposals to further liberalise energy during a meeting on 6 June but there are deep uncertainties as to whether an overall agreement on the package can be reached (EurActiv 17/04/08).

A source close to the EPP-ED group told EurActiv that a majority was starting to emerge in Parliament to delay full liberalisation of the gas market due to the geopolitical sensitivity of the matter. source My comment: I don't why this nonsense continue. Europe continue to consider Russia for an enemy, Russia is obviously ok with that and the battle goes on. Personally, I think the whole approach is wrong. Ok, let's put those limitations and reciprocity, I'm fine with them. They are needed in order to secure fair trading. But from then on, we ought to start thinking in terms of a win-win situations, not in terms of win-loose situations, because this will only make both sides miserable, no matter who wins.

Electricity users want revamp of EU carbon market

18 April 2008

Europe's industrial energy users are proposing significant changes to the EU Emissions Trading Scheme in an effort to avoid paying higher electricity prices. But the Commission and electricity producers say the plans would undermine the EU's carbon market and send the wrong signals to consumers.

EU energy consumers, including both industries and households, could save up to €85 billion per year if the EU Emissions Trading Scheme (EU ETS) is revised, the International Federation of Industrial Energy Consumers (IFIEC) told a seminar in Brussels on 17 April.

Instead of subjecting all energy producers to full auctioning of CO2 emissions permit as of 2013, as currently proposed by the Commission, a certain number of free permits should be handed out based on a 'clean production' benchmark, according to IFIEC. Such a benchmark would be established based on the level of CO2 released for every unit of electricity produced, whereby 'dirtier' production above the benchmark would need to be offset through the purchase of emissions rights. (YES!!!)

In addition, IFIEC proposes that free allowances be given for the actual amount of electricity produced rather than on the basis of historical production or so-called grandfathering. This would reduce "electricity costs for end-users in the order of, on average, 10-30% of industry's electricity bills and 5-20% of household bills," found a studyPdf external conducted for IFIEC by the environmental consultancy Ecofys.

As part of the proposed revision, national authorities would be able to withdraw free emissions permits after they have already been issued. IFIEC argues this would remove the possibility for energy producing firms to reap excessive profit.

During the previous EU ETS trading period (2005-2007), many of Europe's large energy firms were given more CO2 emissions allowances than necessary, which contributed to a collapse in the market price of CO2 and allowed energy firms to make billions in 'windfall' profits by passing non-existent CO2 compliance costs on to consumers, according to IFIEC.

But Eurelectric, which represents the EU's electricity industry in Brussels, says "there was no over-allocation of allowances to the power industry in phase one of the ETS. The electricity industry was the only sector to be short overall on allowances to meet the targets set", Chris Boothby, the organisation's head of communication, told EurActiv. "The reason for the price collapse during phase one was largely over-allocation to energy-intensive manufacturers", he said.

Eurelectric also argues that IFIEC's proposed changes to EU-ETS would not send the right price signals to consumers, leading to higher energy use and CO2 emissions.

The Commission has also expressed its opposition to the IFIEC proposal, despite a November 2007 European Court of First Instance judgementexternal which found that the Commission was wrong to keep German authorities from withdrawing emission permits that had already been placed on the market.source

My comment: I find the new idea awesome! It's great, it just should be put into action not only for electricity industry, but also for the energy-intensive sector. The idea is so good, I can't describe it with words. It actually stimulate industries to go Green in difference with the stupid allowances which obviously serve nothing at all. I think maybe using it as an alternative can be even better-make the prices of the allowances HIGH and then give free permits for factories and plants that are really green. And here we go, we have a working and competitive market for carbon allowances!

Pressure mounts ahead of key energy vote

17 April 2008

The Commission's controversial proposals to complete the liberalisation of the EU gas and electricity markets are entering a critical phase as Parliament prepares for a decisive vote in May. But the tight schedule is now leading some to speculate that an agreement could be delayed.

Background:

In its third liberalisation 'package' proposals unveiled on 19 September 2007, consists of:

  • Forcing big energy firms to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production ('Ownership unbundling'), or;
  • allowing them to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.

France and Germany have vehemently opposed the plans and formed a blocking minority with support from six other member states (Austria, Bulgaria, Greece, Luxembourg, Latvia and the Slovak Republic).

Together, they tabled an alternative proposalPdf – called the 'third way' – which, they argue, would guarantee a similar result by introducing safeguards to ensure the independence of energy grid operators (EurActiv 01/02/08).

MEPs on the European Parliament's Committee on Industry, Research and Energy (ITRE) are gearing up for a series of key votes in May that will pave the way for the full House to adopt a definitive position on the Commission proposal during a plenary vote in June.

But with just weeks left before the vote, tension is building as no consensus is emerging, leading to intense speculation as to whether a compromise can be reached with member states represented in the EU Council of Ministers.

Tight schedule

EU heads of state and governments agreed to a tight schedule at their last summit in Brussels, saying that the 27-member bloc should try to reach a political agreement at a meeting of the Energy Council on 6 June. France, which on 1 July assumes the rotating EU Presidency for six months, would then fine-tune the details before the end of the year.

A 'fourth way' emerging in Parliament?

Earlier this month, the Parliament's Internal Market and Consumer Protection Committee (IMCO) gave an example of such kind of unpredictability.

In a non-binding opinion on 8 April, it gave its backing to the group of eight, saying that EU countries should be offered other options than just ownership unbundling. "To achieve an internal market for energy, we need to allow member states to choose whether they want to implement the European Commission unbundling proposal, or the 'third way', said MEPs Nickolay Mladenov and Andreas Schwab, who drafted the proposal for the centre-right EPP-ED group, the largest in Parliament.

And in a move that surprised many observers, the committee proposed allowing EU countries to adopt the 'third way' and review the situation after a period of six years.

However, the outcome of the IMCO vote seems unacceptable to the Commission with one senior official telling EurActiv it would de facto delay any meaningful reform for another six years. Moreover, the committee backed this approach only for the electricity sector but was unable to reach the same agreement for the gas sector due to opposition from the liberal democrats (ALDE).

Postponement 'inevitable'

The eight countries opposed to the Commission's plans are confident of their negotiating position since they hold a blocking minority in the Council. And the deep uncertainty surrounding the outcome of votes in Parliament, combined with a tight schedule that leaves little time for finding compromises, is leading some to speculate that the whole package could be put on ice.

But the Commission seems reluctant to find a compromise at this stage. "It is up to the Council and Parliament to decide what to do about the 'third way'," said Ferran Tarradellas, Commission spokesperson on energy. He said the Commission would not bow to pressure: "We can always withdraw our proposal if the outcome of the negotiation is not acceptable to us"

Piotr Zalewski, a spokesperson on energy for the European Parliament's industry committee (ITRE), said the window of opportunity to reach a compromise is "far too narrow" as such kinds of negotiations usually take "a very long time". Asked whether the vote in Parliament could be delayed, he said "that would be inevitable".

However, he did not rule out the possibility that an agreement in second reading could be reached before the end of the Parliament’s legislature, in April 2009. "It will all begin to fall into place in May," Zalewski said. source

My comment: Hmmm, tough times we're living in. I don't know where my heart stays. Yeah, I don't like the 6 years delay, obviously, it's a nonsense. I kind of like the unbundling idea. But it's a problem for energy producing countries. Although I must say forcing a company to sell of a part of its business is kind of weird. Probably not wrong in the light of anti-monopolist policies, but still, I can see why companies and especially governments are not comfortable with it. I hope the bill is signed however because it will be bad for the EU if it's delayed. And after all, it could be interesting to see what will happen in any case. Maybe they can come up with some valuable third option...

EU-Iraq energy deal taking shape

17 April 2008

The EU is finalising a new energy deal with Iraq following a visit by Nouri al-Maliki, the country's prime minister, to Brussels this week. The agreement is part of EU efforts to diversify its energy supply, but there are doubts about how much the EU can realistically decrease its dependence on Russia.

A memorandum of understanding could be signed within weeks, Barroso said.

In a separate meeting with EU Energy Commissioner Andris Piebalgs, Iraq's oil minister Hussain al-Shahristani also pledged to supply Europe with five billion cubic metres (bcm) of natural gas annually, which could be delivered via the EU's planned Nabucco pipeline.

The agreements with Iraq follow a pledge made last week by Turkmenistan to supply the EU with 10 bcm of gas annually (EurActiv 15/04/08), and are seen as part of a wider effort to diversify the EU's gas supply in order to wean the bloc off its dependence on Russian gas.

But the amount of non-Russian gas the EU can likely secure in the coming decades is "very, very small", Kieren McNamara of the International Energy Agency (IEA) told EurActiv. In addition, new information has emerged that Gazprom is investing more in supply-side infrastructure, McNamara said. Such moves would allay earlier concerns expressed by the IEA that Russia is not making sufficient investments in new gas and oil fields (EurActiv 01/02/08).

The Kremlin is also set to implement new laws that will require the capturing (rather than flaring) of gas during the extraction of oil, according to McNamara. Up to 60 bcm of gas could be obtained annually in this way, significantly more than the total amount of gas the EU can hope to obtain from Iraq and Central Asia combined, he said.

The EU currently relies on Russia for 42% of its gas supplies, and there are growing public concerns about the threat of the Kremlin leveraging its position as the dominant supplier in order to 'blackmail' the EU for political purposes.

But pushing for EU energy security without giving a central role to Russia would be a "big mistake", both politically and from an energy market perspective, says Thomas Gomart, head of the EU-Russia programme at the Institut français des relations internationales (IFRI). The EU "cannot avoid Russia," he said. source

My comment: Haha, Nabouku, that's starting to sound like a joke. Do they like really believe this project could be completed in time to make things work? Because I don't believe it. I think this move is more a bluff than actually reality. Because let's face it, Iraq isn't a stable supplier. It's barely a country in the moment. Again, Europe really should start dealing with Russia, it's simply not other option in the moment. Not an option that can replace Russia. Simply there isn't. So let's be real and stop with that idioticism. Not to mention that Iraq is US controlled. Does EU really consider Russia a worst partner than USA. I can't believe that!

EU energy chief seeks boost in nuclear investments

16 April 2008

The European Commission will examine ways to facilitate investments in nuclear power plants, said Energy Commissioner Andris Piebalgs, emphasising the role the technology can play in combating climate change.

Speaking at a European Nuclear Assembly conference in Brussels on 15 April, Piebalgs highlighted the "substantial investments" required for the EU to replace its ageing nuclear power plants – many of which will reach the end of their lifespan before 2030.

Fresh investments are also vital to maintaining the safety and security of nuclear plants, which in turn is crucial to securing public and political acceptance for the industry's long-term future, he stressed.

He also called on national authorities to introduce safety regulations that facilitate public acceptance without hindering investment. Strengthened cooperation between member states on issues related to safety and security of installations and the treatment of nuclear waste is also needed, he noted.

Nuclear power already provides more than a third of the EU's energy needs, said the commissioner, pointing to its particular advantages as a "stable and reliable" source of energy, "relatively free" of price fluctuations.

"Nuclear energy is part of the new energy mix of the European Union and will remain so. It will definitely help to address the three goals that we are always talking about: not only sustainability, not only less CO2, but it will also help with the security of supply," he said.

But the technology remains highly controversial in several countries. While France and Finland rely heavily on it, others like Austria, Ireland and Sweden formally oppose it, mainly due to concerns about the risk of accidents or improper waste management.

Recently, the Commission has started to speak out more strongly in favour of nuclear, departing from its traditionally "agnostic" stance on the issue which leaves the decision on whether or not to use nuclear energy up to member states. source

My comment: Well, that was pretty obvious. Nuclear power is the best way out of energy dependence. That's all I can say. It really is the best way! As for the safety concerns, that should lead to more investment in security than more investment in gas

EU manoeuvring for non-Russian gas supplies

15 April 2008

10 billion cubic metres of natural gas are set to flow from Turkmenistan into EU markets as of next year, it emerged on Monday, and the EU may clinch a deal for Iraqi gas later on this week.

The Turkmenistan deal, agreed last week between the EU's External Relations Commissioner Benita Ferrero-Waldner and Turkmen President Gurbanguly Berdymukhammedov, is part of a wider EU 'outreach' strategy to Central Asia and the Caspian region, home to some of the world's largest known reserves of natural gas (EurActiv 11/04/08).

With Europe's dependence on (mostly Russian) natural gas imports expected to reach 85% by 2030, the EU has been anxious to diversify its natural gas supply sources.

Turkmenistan's guarantee of 10bn cubic metres annually is "not a vast quantity" compared with the EU's total yearly gas needs of approximately 500bn cubic metres, but it is still a "very important first step," Ferrero-Waldner told the Financial Times.

Details of how the Turkmen gas will be brought to EU markets still remain foggy, however.

The EU hopes to transport the gas across the Caspian via a new mini-pipeline and to feed it into the bloc's flagship Nabucco pipeline, which - when completed - will run through Turkey directly into the EU, bypassing Russian territory (EurActiv LinksDossier).

But there is opposition to the plans from other Caspian states and from Russia, an influential player in the region, which has secured its own supply contracts with Turkmenistan (EurActiv 14/05/07).

A separate 'political agreement' for Iraqi gas could also be agreed this week as part of an official visit to Brussels by the country's Prime Minister Nuri al-Maliki. While no supply quantities or specific guarantees are foreseen, the EU is keen to secure a supply of Iraqi gas for Nabucco. source

Calls grow for EU to 'suspend' biofuels push

14 April 2008

The EU must suspend its target of raising the share of biofuels in transport to 10% until a more comprehensive scientific study on their environmental risks is carried out, the European Environment Agency has said. The warning came as the World Bank joined the chorus of criticism against increased biofuel production.

In March 2007, EU leaders committed to raising the share of biofuels in transport from current levels of around 2% to 10% by 2020, following growing concerns over rising oil prices, energy security and climate change.

The goal was then translated into legal proposals, presented on 23 January 2008 by the Commission, as part of a broader Directive on renewable energiesexternal .

The draft directive introduces a range of "sustainability criteria" for biofuels to counter growing concerns about the risks related to their mass production, including deforestation, hikes in food prices and water shortages.

The EEA report finds that biofuel production for vehicles based on first-generation technologies – produced from food and feed crops – "does not optimally use biomass resources with regard to fossil energy saving and to greenhouse gas reduction".

While it says technologies for direct heat and electricity generation should be preferred because they are more competitive and environmentally effective, it insists that any biomass utilisation must go hand in hand with energy efficiency improvements.

The Committee also warns that the amount of land required to meet the 10% target exceeds that available in the EU without harming the environment. While imports can help, it points to the "accelerated destruction of rain forests" that can already be witnessed in some developing countries due to increased biofuel production.

The damning opinion comes one day after the publication of a new report by the World Bank, which suggests that biofuel production has played a key role in pushing global food prices up by 83% over the three years. It also blames higher energy and fertilizer prices, a weak dollar and export bans for the recent food price hikes that have sparked outbreaks of violence in a number of developing countries in the past weeks.

France is also pushing its EU partners to respond by putting agriculture back at the top of the bloc's agenda. French Agriculture Minister Michel Barnier said he will use a meeting of EU Agriculture Ministers today (14 April) to come up with a "European initiative on food security" throughout the world.

Rob Vierhout, secretary general of the European Bioethanol Fuel Association (eBio), insists that existing scientific assessments show the 10% target to be "absolutely manageable" without unsustainable pressure being put on soil, water and biodiversity, even if it is entirely based on domestic production.

He warned against dropping the 10% target, saying this would simply shift the EU away from biofuel use while countries like the US and Brazil, which do not necessarily produce to the standards envisaged by the EU in its sustainability criteria, continue their production.

He further stressed that while increased biofuels production "of course does have an impact on food prices," the current hikes "did not come around because of biofuels". Rather, he pointed to the change in lifestyle of hundreds of millions of people in China and India and bad weather as the main causes.

The European Commission's environment spokeswoman Barbara Helfferich also told EurActiv that the Commission continues to believe the 10% target is achievable, but stressed that this will be done "alongside the sustainability criteria and the promotion of second generation biofuels". source

My comment: I will point out again that the reason for the soaring prices of food are: higher energy and fertilizer prices, a weak dollar and the price of oil and gas that is essential for the food transport. And then it comes the biofuel! But I'm strongly Pro-sustainability requirements. That is the most important!

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