EU Energy Policy Update from APCO Worldwide

After the final session of the 2009-2014 parliamentary mandate was brought to an end on 17 April in Strasbourg, MEPs and would-be-MEPs alongside the candidates for President of the European Commission are now fully in campaign mode until EU voters go to the polls during 22-25 May. The next European legislature will have the challenging task of redefining the EU climate and energy policy which, thanks to a range of recent events on both the energy and climate front, has been propelled from being a concern of just a few to a front page issue.

Sustainability, cost competitiveness, security of energy supply, renewables’ share of energy portfolios and the new European Energy Union are all buzz words mentioned and discussed by candidates for the European Parliament and the Commission presidency alike. But others are active, too: a long list of interest groups and coalitions — some industry-based and some publicly funded NGOs — have also been on the campaign trail for months, asking for pledges to commit to tackling climate change (Climate Action Network), supporting EU policies that ensure Europe’s use of natural resources stays within the limits of One Planet (World Wildlife Fund or WWF Europe) or stopping energy waste in buildings (Renovate Europe), to name a few examples.

Come late May, we will know how many of the MEP candidates who signed various pledges made the right strategic moves to win their seats. How it will colour them once parliamentary work commences and how that in turn plays into the overall future direction of the EU’s energy and climate change policies, to be debated again by EU Energy Ministers in June, remains up for debate.

To read more about the upcoming elections and the possible impact on Energy & Environment, please click here. You can find that and coverage of other key sectors on our blog.

Energy in Europe

Slovakia and Ukraine agree on reverse gas flows

On 26 April Commission President José Manuel Barroso, Slovak Prime Minister Robert Fico, and Ukrainian Energy Minister Yuriy Prodan signed a Memorandum of Understanding (MOU) to enable reverse gas flows from Slovakia to Ukraine. Starting in October 2014, Slovakia will export 3.2 billion cubic meters of gas to Ukraine. Although the reverse gas flows will supply Ukraine with Russian gas, this gas will be cheaper than gas directly supplied from Russia. After tensions between Russia and Ukraine escalated last month, Gazprom raised the price of gas by 80 percent to $485 per trillion cubic meters (tcm), making it one of the most expensive in Europe. On 6 April, Prime Minister Arseniy Yatsenyuk stated that this price hike was unfair and Ukraine would not pay it. The MOU will now offer Kiev leverage vis-à-vis Moscow, putting it in a stronger position to deal with a possible gas shut off.

Energy and fight against climate change become cornerstones of EU-Africa partnership

More than 60 EU and African leaders and a total of 90 delegations met in Brussels on 2 and 3 April at the 4th EU-Africa Summit. The summit, entitled ‘People, Prosperity and Peace’, was seen by many observers as a step towards turning the EU-African relationship from one that is mainly focused on aid and development cooperation to a fully working business partnership. Enhanced cooperation in the areas of energy and climate change is among the key elements of a roadmap to frame EU-Africa relations for 2014-2017, which was agreed upon at the summit. Special emphasis will be placed on the development of sustainable growth through partnerships in the energy sector. As an example of the potential for Africa, a UNEP report published on 15 April highlights that for Kenya alone, its transition to a green economy could produce major economic benefits — equivalent to an estimated USD 45 billion by 2030 — as well as greater food security, a cleaner environment and higher productivity of natural resources.

Read more…
European Commission: EU-Africa Ministerial Statement on Climate Change
European Commission: EU-Africa summit
European Observer: EU Africa summit, time to end preconceptions?

European Parliament approves new rules for pressure equipment

On 16 April the European Parliament voted in favour of the Pressure Equipment Directive which streamlines and simplifies the rules for pressure equipment products. The Pressure Equipment Directive covers a sweeping range of products including industrial equipment such as heat exchangers and storage vessels. Businesses will be the main beneficiary since the EU will cut red tape and introduce more coherent legislation. Clearer responsibilities for manufacturers, importers and distributors will also be put in place. The Directive has come at a time when stakeholders have been asking for more comprehensive and less bureaucratic legislation as well as similar legislation across Member States.

European Parliament supports compulsory Country of Origin labels

The European Parliament voted in favour of introducing compulsory country of origin labels for all non-food goods on 15 April. The General Product Safety Directive will now have to be approved by the Council, which remains divided on the issue: the southern bloc led by Italy have welcomed this proposal while other countries such as Germany and the UK feel that this extra bureaucratic hurdle will further damage European competitiveness. Countries have complained that these compulsory rules are anti-free-trade and protectionist and might damage global supply chains and add an extra financial burden on businesses, especially small and medium enterprises (SMEs). If approved, the regulation will include tougher penalties and blacklisting for firms that infringe on these rules. For goods manufactured in several countries, the country of origin will be the one where it underwent “the last substantial, economically justified processing”. Stakeholders in Europe also remain divided on this issue with strong opposition from business associations such as Eurocommerce, which has stoutly regretted the outcome of the vote in Parliament.

Environment & Climate Change

IPCC climate report sets the alarm bells ringing

The latest report from the UN Intergovernmental Panel on Climate Change (IPCC) shows that climate change is already having substantial effects on our economies and societies and could further deteriorate if governments do not implement stronger policies. The report, published on 31 March, stresses the need for strengthened cooperation to keep average global temperature increases below 2 C° in order to curb the worst of the climate change effects. Risks for Europe include increased flooding and, at the same time, significant reductions in water availability. Immediately after the report was published, the European institutions expressed their concern with Connie Hedegaard, EU Commissioner for Climate Action, declaring that it is high time to get serious when dealing with climate change. Further, on 16 April, the European Parliament plenary endorsed new rules to ensure the technical implementation of the Kyoto protocol. After some years of relative lull, fighting climate change has come back to the top of the agenda. UN Secretary-General Ban Ki-Moon urged European leaders to come up with a common strategy to fight climate change during his visit to Brussels on 2 April, where he helped increase the political weight of climate change.

Parliament supports new rules for alternative fuels infrastructure across Europe

On 15 April the European Parliament voted in favour of new EU rules to ensure the setting up of alternative refuelling points across Europe. Member States will have to introduce minimum levels for refuelling and recharging stations across Europe as well as common standards for the development of these fuels. Commissioner Vice-President Siim Kallas stated that the vote was a “major innovation and a milestone in the roll-out of clean fuels in Europe”. However, this position clashes with the European Parliament’s continual delays of the vote on the biofuel reform. Nevertheless, the vote has not been received with the same enthusiasm by all stakeholders. In particular, the European Petroleum Industry Association (EUROPIA) regrets that setting up refuelling infrastructures is mandatory for Member States.

New rules on illegal shipments of waste adopted

MEPs voted yes to the Illegal Shipments of Waste report on 19 April. The regulation forces Member States to include a minimum number of physical checks in their inspection plans and give national inspectors more power. Rapporteur Bart Staes (Greens/EFA, Belgium) expressed his satisfaction with the result, stating that the EU will now be prepared to deal more efficiently with illegal waste (25% of which still does not comply with EU legislation). Most stakeholders welcomed the new legislation although the European Federation of Waste Management and Environmental Services (FEAD) expressed its discontent with the “shift of the burden of proof; from the competent authority to the person carrying out the shipment”. The Council still needs to approve the regulation which is expected to be applied from 1 January 2016 onwards.

Read more…
European Parliament press release: Illegal waste shipments: Environment Committee backs plan to step up checks
BBC: Parliamentary debate

Renewable Energy

Competitive bidding processes to replace feed-in tariffs for renewables

After three rounds of consultation, the European Commission announced the long-awaited new Environmental and Energy State Aid Guidelines (EEAG) on 9 April. They will replace the existing guidelines on aid for environmental protection that entered into force in 2008 and set out the conditions under which state aid in the field of environmental protection and energy can be declared compatible with the EU internal market. Making the internal energy market more competitive and legislation more simple and comprehensible is at the core of the guidelines, according to the Commission. The new guidelines foresee the gradual integration of renewables into the internal electricity market, replacing feed-in tariffs with competitive bidding processes. While stakeholders such as representatives of high energy intensive industries welcomed the Commission’s decisions, others like environmentalist campaigners believed that the guidelines would allow for increased pollution from heavy industry.

German cabinet approves renewable energy reform

On 8 April, the German cabinet approved the reform of Germany’s Renewable Energy Sources Act (Erneuerbare Energien Gesetz – EEG). The new law, which still needs to be discussed by both the German Bundestag and Bundesrat, is expected to enter into force on 1 August. The reform aims to make the Energiewende more affordable by scaling back the feed-in-tariff for renewables. While numerous stakeholders expect the reform to slow down the growth of renewable energy generation in the short-term, the government is confident that this is the right way to increase the share of electricity generated from renewable fuel sources to 40-45 percent of total generation by 2025 and to 55-60 percent by 2035 (from current levels). The environmental NGOs Greenpeace criticized the reform for being too industry friendly and harmful to climate. Further, Germany and the European Commission also reached an agreement regarding the exemption of energy-intensive companies from the EEG surcharge. In December last year, the Commission had launched an investigation to examine whether these exemptions were compatible with EU state aid rules. With the agreement, Germany will be able to continue to exempt energy-intensive companies from the EEG surcharge; however, a cap of 4 percent of gross value added for the EEG surcharge will be set on industrial energy users and 2.5 percent for heavy industry users. This agreement is in line with the new rules for state-aid guidelines adopted by the Commission in April which now allow Member States to subsidise energy-intensive companies in 68 sectors in order to protect them from rising electricity prices resulting from increased renewable energy.

Energy Markets

Poland lobbies for creation of EU energy union

French President Hollande has backed Polish Prime Minister Donald Tusk’s call for a European energy union to end dependency on Russia. On 21 April, Donald Tusk set out in an op-ed the concrete points to achieve such an energy union, which should include a single body charged with purchasing gas supplies and the collective negotiation of gas deals with Russia. Amongst other recommendations, Mr Tusk also urged Europe to make full use of fossil fuels. Tusk also met with the German Chancellor Angela Merkel to garner German support for the plan. While Merkel was sympathetic to the plan, she did not embrace the proposals for increased use of fossil fuels. EPP candidate for the European Commission, Jean Claude Juncker, already expressed his support for Donald Tusk´s proposal, while stressing the need for more renewables in the energy mix. The proposal will be discussed with European heads of state and government at the European Council on 26 – 27 June.

Bulgaria and Commission meet to discuss South Stream pipeline

Last month, due to tensions in Ukraine, Energy Commissioner Günther Oettinger announced delays in talks with Russia over the South Stream pipeline project. In addition to the tension with Russia, the construction of the pipeline was further delayed this month by a dispute between Bulgaria and the European Commission.Commissioner Oettinger accused the Bulgarian government of introducing amendments to their national energy act to change the status of the gas pipeline so that it becomes a gas grid interconnector. This would exempt the gas pipeline from the EU Third Package on energy liberalisation, allowing a single operator to construct the entire gas pipeline through Bulgaria. Nevertheless, the Bulgarian authorities announced on 24 April after meeting the European Commission that the construction of the South Stream route through Bulgaria will start next month.

First ever UK-Poland shale gas study commissioned

The British and Polish governments have commissioned an independent study on the potential impacts of shale gas and its implications for the whole of the EU. UK Business and Energy Minister, Michael Fallon, has declared that Europe should take advantage of its indigenous resources to improve its energy security. Also, UK and Polish governments, champions for shale gas development in Europe, believe that shale gas has the potential to provide their countries in particular with greater energy security, growth and jobs in addition to the EU in general. A previous report commissioned by the UK government on the impact of a shale gas supply chain estimated that utilizing the domestic fuel source could create 64,000 jobs. The study will be published before the end of the year.

Read more…
Blog Department of Energy & Climate Change: Michael Fallon announces UK-Poland shale study
Department of Energy & Climate Change: Getting ready for shale gas – supply chain estimated to be worth billions as new environmental measures announced

APCO in the News

The future of energy in a transatlantic world

On 10 April APCO Worldwide sponsored The Future of Transatlantic Trade conference in Paris, which was co-hosted by The Washington Post and European Voice. How the energy sector might be affected by the free trade agreement was a key issue of the discussion, especially after the recent events in Ukraine. Trade Commissioner Karel De Gucht argued that legally-binding rules on open markets for trade and investment in energy would benefit everyone. However, as Philippe Maze-Sencier, executive director at APCO Worldwide, noted during his presentation at the conference, the European Commission’s position might change after the EU elections on 25 May. Maze-Sencier also emphasised that the political context in the lead up to the EU elections and US midterm elections might have a significant impact on the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Other participants also noted that imports from the United States could ease the European reliance on Russian energy since it would allow direct trade between both blocs. Currently, American export facilities must get a “public interest” approval from the Department of Energy if their importers are in countries which have no Free Trade Agreement with the United States. Therefore, TTIP could revolutionise this market and open the field to increased energy imports from the US. The fifth round of the TTIP negotiations will take place in Washington from 19-23 May.

Read more:
APCO Forum TTIP in the City of Lights
Washington Post The Future of Transatlantic Trade
European Commission The Future of TTIP – The Benefits and How to Achieve Them

European Parliament calls for binding reduction targets for plastic bags

In its April plenary session, the European Parliament adopted a text on reducing the use of plastic bags across Europe, introducing more stringent measures than originally laid out in the European Commission’s proposal. Unlike the Commission, the EP backed binding reduction targets for plastic bags less than 50μm thick. Member States would have to reduce their consumption by 50% by 2017 and by 80% by 2019. Ultra lightweight bags less than 10 μm thick are exempt, but should be replaced within five years by other materials, i.e. recycled paper bags or biodegradable and compostable bags. Further, the amendments include mandatory charging for plastic bags offered in food shops and a recommendation to also charge for bags in the non-food sector. In terms of implementation, it will be up to the Member States to define their own national concrete strategy. Measures could range from tax levies to marketing restrictions or even national bans. While environmental groups generally welcomed the vote as a “significant step” towards better environmental protection, the European plastics industry voiced serious concern over the proposed legislation.

For further information on stakeholder reactions and timeline, please see the full comment on the plastic bag vote on APCO Forum .

European Parliament candidates must choose energy and climate to be chosen themselves

This year, the political transition is not expected to be ”business as usual”. The electoral contest comes at a moment of uncertainty and instability for the European Union, with the effects of the global economic crisis that commenced in 2008 still very much being felt. Over the past five years, EU leaders have strived to prevent a complete collapse of the European single currency, but they have done so at great cost to public finances and personal popularity. A return to real growth still seems some way off. Millions of people across EU Member States have lost their jobs, and public confidence in the EU is severely shaken.

Enter energy and climate change. For a while now, energy and climate has been central to the narrative of MEPs on both sides of the political aisle in terms of how to dig Europe out of its persistent slump. To some, a more ambitious EU energy and climate policy is just what the doctor ordered: it will decrease Europe’s foreign energy dependency, create jobs and make industry more efficient, thus more competitive on a global scale. To others, Europe’s insistence on energy and climate change reforms is one of the things that is hindering growth. For example, many have stated that forcing member states and industry alike to invest in renewable fuel sources and other clean energy solutions is driving up both energy prices and production costs, making it impossible for European manufacturers to compete at anything resembling a level playing field.

Read the complete article as it appears in the Diplomatic Courier.

News from the APCO Network

French environment and energy policy to become tougher after Royal’s appointment

Following the last municipal elections and what many pundits described as a “debacle” for President Hollande’s majority, Prime Minister Jean-Marc Ayrault was replaced by former Minister of Interior Manuel Valls in a large government reshuffle that saw Ségolène Royal being appointed as Minister of Ecology, Sustainable Development and Energy, a position she already held back in 1993 under President François Mitterrand. Ségolène Royal is the fourth Ecology Minister since President François Hollande took office, showing how difficult handling this portfolio has become in France over the past two years.

From a political standpoint, Ségolène Royal’s appointment was perceived favourably by ecologist associations and NGOs, which considered it a strong indication that President Hollande intends to pursue his commitments towards a clean energy transition and a major political move following the decision of the ecologist party not to take part in a Government led by Manuel Valls. Indeed, Ségolène Royal will carry more political weight than her predecessors. A former candidate for the 2007 and 2012 Presidential elections, she is a very strong and recognized political figure with a traditionally aggressive approach to ensure that her views prevail. In 2011, during the socialist party primary for the Presidential election, she offered strong views regarding energy issues, making promises such as if she was to be President, France would exit nuclear energy within 40 years and would reduce the part nuclear energy holds in the French energy mix by 50 percent before 2020. Royal has already started the build-up of the French offshore wind capacity, and her department is preparing a new tender for marine energy.

In the coming months, she will have the difficult task of conducting an energy transition in France. Nearly 10 months after the national debate on energy transition ended, the government still hasn’t followed through on what was described as “one of the most important pieces of legislation of this Presidency” by François Hollande in September 2013. After numerous reports, a draft of legislation should be presented to the Cabinet in June. Further, Ségolène Royal, has made public a list of 27 actions that her department will carry out in the next few months, including the disclosure energy transition law. This will start major political debates especially since stakeholders unanimously deplored the lack of ambition showed by the recommendations resulting from the debate on energy transition.

At the European level, she has already attracted strong criticism from European partners when she announced her willingness to overhaul the “Ecotaxe” — the implementation of which started demonstrations and strikes last November in France — and to replace it by a system in which only foreign carriers coming into France would have to pay a specific tax, a measure that would breach EU regulations.

Ségolène Royal will definitely add some new momentum to French energy policy. However, considering the difficult political state of President Hollande’s majority, it is still unclear whether this dynamic will translate into major shifts in the French approach towards energy transition and whether or not it will have a strong impact at EU level.

Beyond Europe: A focus on Nuclear & Wind Drive China’s Shift to Clean Energy

China’s President Xi Jinping’s March visit to Europe has seemingly revived clean tech cooperation following last year’s heated solar panel dispute. Xi witnessed the signing of two major energy deals: a nuclear cooperation agreement between China General Nuclear Power Group and Électricité de France (EDF) and a deal regarding wind energy between Siemens, China Huaneng Group, and Shanghai Electric Power.

Back in China, the clean energy sector is thriving. With seven out of ten of the world’s most polluted cities, the Chinese government is fully committed to environmental clean-up. The government has set an ambitious target to increase the use of non-fossil fuel generated energy to 15% of total consumption by 2020, from nearly 10% in 2013. Wind and nuclear power are expected to be key drivers of this growth,

Nuclear generation was temporarily halted in China after the 2011 Fukushima nuclear incident. However, China’s top leadership is pushing nuclear energy this year, with promises to expedite the approval of major nuclear projects along China’s coast. China currently has 18 operational nuclear power plants with 30 under construction and aims to expand the percentage of nuclear-generated power in from 2 percent to 6 percent of total energy generation by 2020.
Due to significant government support, China has the world’s largest wind energy market, boasting 27 percent of the world’s installed capacity. China is accelerating infrastructure construction with a focus on Ultra High-Voltage projects for better connection to the grid. China is also seeing the expansion of offshore operations with a target of 30GW of offshore wind power generation capacity by 2020 (currently at 428 MW), supported by an expected government Fit-in-Tariff.

This push has several key implications for European businesses looking to grow in China. First, the government’s plan to substantially increase the share of nuclear and wind power should yield significant opportunities due to incentives which will be created for private investment. However, given China’s past enthusiasm towards “indigenous innovation,” these preferential policies may be biased toward domestic firms.

Second, while China’s top leaders are actively pushing development of these sectors, many national-level policies depend on local-level implementation. Many regions still favour economic growth over environmental reform, requiring an understanding of local leaders’ motivations and development plan direction.

Finally, China will look to international expertise to meet these goals. Chinese officials will welcome advice and training from experienced foreign companies, offering an opportunity to help guide industry development and policy implementation (although foreign firms must remain aware of the government’s proclivity to “re-innovate” foreign technology).

Given the above, it is not surprising foreign businesses rarely succeed in China without a well-constructed government relations strategy. Success in these sectors requires extensive research and proactive government engagement to ensure European businesses benefit from China’s fast expanding clean-tech market.

Events

May

7: The Outlook for energy: A view to 2040. How will the world meet the global energy challenge? (Brussels)
Organiser: CEPS – Centre for European Policy Studies

7-8: ICERE 2014 International Conference on Environment and Renewable Energy (Paris)
Organiser: ICERE

8-9: Smart Grid World Summit 2014 (London)
Organiser: Smart Grid World Summit

10: “Let’s Clean Up Europe” (Brussels)
Organiser: European Commission

13: Energy Subsidies: To be or not to be (Brussels)
Organiser: Friends of Europe

June

3-5: Green Week Conference 2014: Circular economy – saving resources, creating jobs (Brussels)
Organiser: European Commission

3-5: Renewable energy world Europe – Navigating the Power Transition(Berlin, Germany) (Cologne)
Organiser: Renewable energy world

23-27: EU sustainable energy week (Brussels)
Organiser: European Commission