EU Common Energy Policy and the main obstacles for its efficient implementationThe European Union is the world’s largest importer of energy resources. Formation of a common energy policy is one of the most important issues on the daily agenda of the Member States, probably because coal, gas and oil remain the dominant energy sources for the Union despite its efforts to develop renewable energy. Adoption of the second package of directives that called for opening of the gas and electricity markets for all customers in 2007 became the acme of common efforts. Moreover, ratification of the Lisbon Treaty in 2009 endowed energy policy with the clear legal basis. Despite the importance of the subject, the idea of common energy policy remains a very sensitive issue for each member state that make the idea of common policy unattainable.

Division between the preferences of Eastern and Western European states as well as between the major EU powers remains the major  challenge for establishing a European wide mutual strategy. Each Member State has its own emphasis on the role of energy resources within the scope of its policy, economy and security. This reason can be considered as the major one because absence of unification results in chaotic debates about common energy future of the Union.

 

Background of the EU energy policy

The history of the common energy policy of the EU started with the Treaty establishing the European Coal and Steel Community in 1952. That treaty was ratified by six European states, Belgium, Germany, France, Italy, Luxembourg and the Netherlands, and was focused on the establishment of a common energy market. Six years later, the establishment of the European Atomic Energy Community (EURATOM) pushed European integration towards nuclear power. The Arab oil embargoes imposed in 1967 and 1973 exposed the lack of unity between the European states on the issue about of energy security supply. The embargo was imposed on the UK, West Germany, the Netherlands and Italy; however, other states were threatened at the same time. It was the most illustrative case showing the lack of common approach that made the EU member states realize  an urgent necessity of forming a common energy policy focused on the security of supply (Barnes, P. and Hoerber,T., 2013).  

The most notable energy policy achievement came in 2009 when the Third Energy Package was adopted. This package introduced unbundling of the policy of energy supply and network distribution that allowed to eliminate the borders and improve collaboration between the Member States. The Lisbon Treaty, coming into force in 2009, endowed the EU with the power to develop European energy policy and highlighted the necessity of solidarity and cooperation between the Member States for ensuring sustainable energy supply of the Union.

Finally, the idea of the Energy Union was proposed with the aim of enhancing security of energy supply, building a single internal energy market, and augment energy efficiency. A new team of 28 Commissioners appointed in 2014 introduced a new position of Vice President for Energy Union who has to deal with the formulation of a common EU energy policy. Energy Union is supposed to exert positive influence on the European energy security through guaranteeing sustainable supply; moreover, this structure is supposed to link the energy policy with the suppliers and transit countries, helping to render diversification policies more efficient.

Despite all the achievements, the Union cannot yet speak with one voice on external energy policy issues, most probably because national interests prevail over those of the union. 

 

Priorities of some Member States do not correlate with the preferences of the Union

Since the ratification of the European Coal and Steel Community Treaty, the most important challenge to the elaboration of the efficient common energy policy has been a divergent approach of different European States to this issue. Throughout the last 60 years, each European country has been viewing energy policy as part and parcel of its own national security not subject to common solutions. Decision-making is mainly intergovernmental and states prefer to ratify bilateral agreements with their energy suppliers instead of establishing a unified strategy under the EU.

Due to the lack of its own energy resources, EU has always paid high attention to its energy security policy, which is based on sustaining of a stable energy supply from exporting countries and developing additional projects aimed at greater diversification. Nevertheless, there is a considerable diversity in the level of energy demand and energy dependence among the states. As a result, most of the times national interests gain the upper hand, forestalling such a common approach. Not all the 28 Member States are experiencing acute demand in oil and gas due to the reliance on alternative energy, such as nuclear, coal, shale gas, in the domestic market. For instance, France mainly puts its bet on nuclear power because it has a share of 42% in the national energy production while in Poland, the substantial share of energy consumption is held by locally produced coal (Gault, 2004). Today, there are four main energy suppliers for the EU: Russia, Norway, Central Asia and the Caucasus countries, and OPEC countries. Among the EU countries, there are differences in energy import dependency. Nevertheless, there are differences in the energy import dependency. While Cyprus and Malta completely depend on energy import, Poland and UK are quite self-sufficient. What is also important to mention is that while in some states dependence on energy import is growing, other members have reduced their needs. For example, during the last 8 years, energy demand in the UK has increased by almost 30% whereas in Latvia, it has fallen by 16%.  Therefore, it is not an easy job to define in what direction the overall EU demand is moving.

Inequality of energy demand divides states, probably because countries that are more energy dependent are not willing to follow the standards and restrictions proposed by less dependable countries. At the same time, those countries that feel free from the suppliers support the policy of diversification in order to justify their own proposals regarding additional supply resources that are required for the European energy security. This division among the members because each state pursues an  independent approach to energy policy and endorses only those plans that would enable them to play a leading role. Classical realism can be  very useful in explaining states’ behavior. Matters of national interest and national power determine the foreign policy priorities of the states and influence their decisions. Each Member State of the European Union supports the policy if their national interest prevail, sonostate would agree on a compromise if it reduces the level of power they currently possess. Hence, self-interested policy of the EU Member States remains the main obstacle for a common energy policy response to be formulated. For example, France is among the largest energy consumers; however, its  dependence on import is relatively modest (46.1%). Since 2006, France has reduced itby almost 5% owing to developing nuclear power. France has ever been sustaining an independent policy in this sphere where Electricite de France and Gaz de France-Suez Gulf Power are the two giant companies dominating the sector. The French government disposes of 58 nuclear power reactors and nuclear power is established as the ultimate source of electricity, thus, achieving an advantage in terms of low electricity generation cost (Birchfield V.L., Duffield. J.S., 2011). 

The most important division in the energy policy preferences of the states are visible between the Eastern and Western countries of the union. After the biggest EU enlargement in 2004 and 2007, Europe admitted ten new members highly or partially dependent for energy supply from Russia. These countries were part of the Soviet Union for at least 50 years and tied with Russia by the pipelines operated since that time. Russia’s energy monopoly in the Eastern Europe currently looks rock-solid due to its rich energy reserves, the availability of established pipeline infrastructure and the lack of genuine rivals. Currently, it holds a 39%share of EU's gas import and a 33% share of the crude oil import. Despite the fact that technical cooperation on energy matters has been deepening,European governments are still divided in their attitude towards Moscow due to the enormous variance of its importance as a supplier between Member States (Youngs, 2009, p.79). Richard Youngs in his book on the EU energy security divided European states into three groups,according to the degree of their dependency on Russian gas. The first group consists of such states as Sweden, Spain, Portugal, Belgium, Ireland, the UK, and the Netherlands that are only marginally relying on Russian energy, the amount of imported gas being below 5 per cent. The next three Member States, including France, Germany and Italy belong to the second group and have medium dependency on Russia. The rest of the countries are very strongly reliant on the Russian energy. Moreover, Finland, Latvia, Lithuania and Slovakia get virtually all their energy from Russia.

The Russia-Ukraine gas dispute during 2006-2009 served a signal for Europe calling for an immediate mutual advance towards the policy of diversification but the EU Members are divided in their understanding of whether it should be an issue of a mutual response or a matter of individual discretion. Obviously, countries in the Eastern Europe, especially Baltic States fully support the idea of common energy policy in order to bypass Russia’s dominance over their energy security policy,while Western countries without such an acute problem prefer individual approach (Birchfield, V. and Duffield J., 2011).

Germany is one of the few countries inclined to close integration with Russia. It is enough to recall the Nabucco project that was supposed to deliver gas from Central Asia and the Middle East through a new pipeline to Europe. That project was bolstered by many states, especially in Eastern Europe since it was a great chance to diversify energy supply sources for the EU. However, Germany showed more interest in the Nord Stream project that delivers gas from Russia to Germany through the two parallel pipelines under the Black Sea and makes Germany the major distributor of Russian gas within Europe. The first line of the pipeline was launched  in 2011 and in 2013, Nord Stream transported 23.5 bcm to Germany, while its peak yearly capacity is 55 bcm (International Energy Agency data). Obviously, this project is not in favor of the Eastern European states because it passes by the Baltic States and Poland, preserving their dependence on the transit countries. Therefore, a discord between the Member States on the Nabucco project was a good example of the European countries’ inability to be unanimous about their preferences (Zavadckyte, 2010).

The EU members promote their own interests based on the zero-sum game theory whereby any gain by one state is considered as a loss for another. In 2006, Gazprom negotiated a share with the companies in Belgium, Austria, France, Italy, Hungary and Germany. This share was given in return for an agreement to concentrate on bilateral rather than multilateral cooperation on behalf of the Union. Such demeanour leads to a growing division between the Member States and a lack of policy coherence. Nowadays, Russia’s government is playing member states off against each other in order to prevent the formation of a common response by the Union which could deal a blow to the monopoly of Gazprom.   

In 2007, Hungary signed a bilateral agreement with Russia regarding the Blue Stream project that would guarantee sustainable supply. Obviously, this agreement was heavily criticized by other states; however, Hungarian officials declared this policy to be a reaction to the shortage  of solidarity amongst the states members beyond what could already be on a common energy policy. After some days, Bulgaria and Greece agreed with Russia on supply through a Trans-Balkan pipeline. At the same time, Poland and Lithuania vetoed ratification of any new energy agreement between the EU and Russia. Therefore, the absence of a common stance concerning the position of Russia as the main energy supplier and self-interest of each Member in bilateral agreements slowdown the process of the formation of a single approach.

 

Conclusion

In general, strong differences between the EU Member States remain the major obstacle for the establishment of a common energy policy since the beginning of negotiation process after the end of the Cold War. The absence of a supreme institution dealing with energy policy of the European Union leads to the policy whereby national interests prevail in decision-making process. Self-interested pursuit of the role of the main distributor within the union or obtaining  the biggest shares for the national oil companies in each project increases the tensions between the Member States and divide their opinion on the issues regarding a common energy policy.

Furthermore, Russia’s ability to use energy as a political leverage against Eastern European States and Germany influences the policy of the Union. Huge energy reserves and insistence on bilateral cooperation with many European states will continue to have negative impact on the formation of the EU common policy. Divergence  in energy dependence on Russia as well as a diverse approach to the idea of energy integration with this country will prevent the Union from working out a coordinated voice in the matters of  external energy policy.

 

 

References: 

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