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Energy Union

In February 2015, the European Commission presented a blueprint for a future Energy Union.This is a welcomed move towards ensuring secure, sustainable and affordable energy that is vital for European industry and for the EU’s 500 million consumers.

Europeans have long suffered from high energy prices, which are a burden on households and reduce our industry competitiveness in the global marketplace. The battle against high energy prices should be an absolute priority for the EU, as industry fights to maintain a strong European base that creates jobs and growth.

A common policy could help unify markets for different types of energy, thus reducing the burden of energy costs for industry and consumers. While this idea has been around for a long time, it has gained momentum due to the unrest on the EU’s eastern border, which has lifted energy security up the EU agenda.

Refiners – as both users and processors of energy – have a particular interest in keeping energy supplies secure and competitively priced. FuelsEurope is therefore pleased by the Commission’s objective to make progress towards an Energy Union.

The Commission’s blueprint, released on 25 February 2015, is a non-binding document outlining a wide range of initiatives to foster an EU-wide energy policy allowing for a free flow of energy throughout the European Union. It consists of five main aspects, called “dimensions”, to underline their close interconnection: enhancing EU supply security; building a single, competitive energy market; increasing energy efficiency; reducing pollution by decarbonising the economy; and boosting renewable energies through investment in R&D.

On 18 November 2015 was issued the first State of the Energy Union Report, 9 months after the adoption of the Energy Union Framework Strategy. This report is welcomed by FuelsEurope as it is an important instrument to identify progress made and next steps for the achievement of the objectives of the Energy Union which should be delivered in 2016.

Potential improvements to the Energy Union

A thorough analysis of the proposal does however show that the Energy Union falls short in a number of ways, and potential improvements could help achieve the goals more effectively.

First, the role of petroleum products in the EU’s energy mix should be recognised. In one sense, it is understandable that the Commission make little mention of these: the EU already has an effective internal free market for our products. Over the years, our members have developed a highly reliable, flexible and interconnected supply system for oil and refined petroleum products. But the Commission pays little attention to the essential role of petroleum products in the European economy. Worse, the blueprint dismisses them as “old technologies.”

Currently, petroleum products supply over 90 per cent of the energy used in EU transport. According to the International Energy Agency (IEA), the EU will still need petroleum products for many years, and by the Commission’s own analyses, EU petroleum refining is very innovative and employs highly skilled labour.

Second, the Commission should place greater weight on market-based systems. Of course, regulations such as the emissions trading system (ETS) have a role in boosting energy efficiency, but the greatest contributions to efficiency and carbon dioxide reduction come from technologies that can compete on their merits without distortive mandates and subsidies.

Third, there is a huge gap between much of the vision for the future laid out by the Commission and the current reality of energy use. The transition will be a long one. It is therefore essential to describe how energy costs can be lowered during this phase, not just at the end of the transition. Without an assurance of competitive energy prices in the EU during this transition, industries will be reluctant to invest in Europe, thus harming the prospects for job creation.

The refining industry is highly innovative and has long experience of improvements in efficiency and energy saving. It would therefore welcome the opportunity, together with the European parliament and Member States, to complete the Energy Union.

 

Related Publications:

Position Paper - Recommendations on Energy Union

Press Release - STATE OF THE ENERGY UNION: a welcome update, but no recognition of the role of petroleum