Energy security in the European Union: How can the trading system help?

Prof Dr Rafael Leal-Arcas asks whether a solution for energy security can be found through the international trading system.

energy-flameUntil the entry into force of the long debated, but finally ratified in 2009 Lisbon Treaty, there was no express provision for the development of a common energy policy at the European Union (EU) level. The pre-Lisbon Treaty period was characterized by EU-level energy policy developments being an incidental function of the EU’s ‘environmental protection,’ ‘internal market’ and common commercial policy mandates. This position gradually shifted in the new millennium as a number of factors such as the increasing dependence on external energy sources, the lack of EU influence on the energy supply side and the potential failure of the EU to meet its climate change obligations under the Kyoto Protocol led to the recognition of the need for a pan-EU policy aimed at ensuring long-term energy security.

The entry into force of the Lisbon Treaty in 2009 represented a turning point in the structure of EU energy policy governance. Firstly, it marked the shift of energy policy from being an exclusive EU Member State subject to one upon which EU Member States and the EU possess ‘shared’ legislative competence. This means that both the Union and its Member States can “legislate and adopt legally binding acts” in the area of energy policy. However, EU Member State competence is limited to the extent that the Union has not exercised or has decided to cease exercising its competence.

Secondly, and more crucially, a separate section (Title XXI) on energy was included in the form of Article 194 of the Treaty on the Functioning of the European Union (TFEU). This provided that the Union would act in a ‘spirit of solidarity’ between EU Member States to “(a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; and (c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and (d) promote the interconnection of energy networks.”

The EU needs to diversify its energy supply
The European Union has to rely on energy-rich countries for its energy needs. Since the EU is energy-dependent, it is necessary to propose models for enhanced governance of energy trade to promote energy security. The aim is to find ways so that this can be encouraged normatively. The expansion of the Energy Charter’s membership to countries in the Middle East and North Africa and to the Economic Community of West African States may be an avenue to enhance EU energy security through the creation of an infrastructure that will enhance international, long-distance trade in energy. Also, the promotion of sustainable energy use abroad may, in the long run, contribute towards EU energy security indirectly by making more efficient use of energy resources globally. This could be achieved through a variety of means that the European Commission has contemplated in successive communications.

When it comes to nuclear power, the situation between EU Member States is divided. Whilst less polluting than hydrocarbons in terms of CO2 and other greenhouse gas (GHG) emissions, nuclear power is also harmful to the ecosystem. France leads with 76% of its electricity derived from nuclear power, followed by Lithuania and Slovakia at 70% and 55% respectively, whilst the Netherlands derives less than 4% of its electricity from nuclear power. EU Member States decide what to do with nuclear power.

Shale gas and shale oil will revolutionize world energy politics and economics. Irrespective of whether environmentally acceptable extraction technologies and political consensus for the extraction of unconventional sources of fossil fuel in Europe can be found, the EU will not be able to avoid its impacts on global energy markets and will have to adapt EU internal and external energy policies accordingly.

EU reliance on Russia
The EU relies heavily on Russia for its energy security. Let me give you two facts: First, the European Union imports 53% of its energy; and second, 6 EU countries depend 100% on Russia for their gas. Imagine for a moment if any one of the EU’s energy suppliers were cut off. Many of the EU’s energy suppliers are politically and economically fragile. This makes the EU vulnerable, as we saw in the recent Russia-Ukraine gas disputes. In addition, EU companies pay more for energy than their competitors. All of this has consequences for the EU’s economy and quality of life. So, the EU urgently needs to diversify its energy supply.

The need for a single EU energy market: How would it work?
We need to explore future projects to enhance energy security. How can the EU diversify its energy supply to improve its energy security? Energy security remains a vital issue for the EU, even more so in the wake of the events that unfolded in early 2014 in Ukraine. The EU’s already fragile position in the international energy arena in terms of supply security appears to be more uncertain than ever after umpteenth fall out with its historic energy supplier, Russia. This situation is untenable and calls for swift and decisive action to adequately tackle the issue once and for all. The creation of a single EU energy market through integration of energy networks in the EU should be the next step.

A way forward is through the so-called European Energy Union. The aim is to make it easier to trade energy inside the EU. In the past, there have been divisions between EU Member States when trying to draft a unified energy policy. The European Energy Union tries to rectify this deficiency.


Rafael Leal-Arcas is Professor of European and International Economic Law, Jean Monnet Chair in EU International Economic Law and Director of Research, Queen Mary University of London, UK.


leal-arcas-energy-sec
Energy Security, Trade and the EU
: Regional and International Perspectives, by Rafael Leal-Arcas, Costantino Grasso and Juan Alemany Ríos is out now.

Read chapter one free on Elgaronline.

 

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