EU forced to confront the energy question

As events continue to escalate in Crimea the two-day summit of EU leaders that begins today in Brussels will be dominated by the topic of Ukraine. But there are other issues on the agenda.

EU heads of state had been scheduled to discuss for the first time the new energy and climate change package unveiled by the European Commission two months ago, which sets out the EU's plan for energy policy after 2020.

It is a contentious issue. The commission has proposed an overall carbon emissions reduction target of 40 per cent and a 27 per cent target for renewable energy by 2030. But the proposal, which is at an early stage in the EU policy process, stops short of imposing mandatory national targets on countries for renewable energy, a significant departure from the current framework.

Environmental groups have criticised the move to exclude national targets. They contend that the EU is bowing to the concerns of member states, such as the UK, which favour a move towards shale and nuclear, arguing that the EU's commitment to renewable energy is too costly and is damaging competitiveness.

Pricing dispute
The situation in Crimea has threatened to overshadow the discussion on energy, but it may enhance it. The crisis in Ukraine has given the subject of EU energy policy added urgency.

Energy is central to EU-Russian relations, with about 30 per cent of Europe's gas coming from Russia. Memories of 2009, when Russia reduced the supply of gas into Ukraine over a dispute about pricing, are still fresh.

A paper this week by the Centre for European Policy Studies, a Brussels think tank, argues that Europe is much better prepared for potential short-term supply disruptions than it was five years ago. It says that while Russia and Gazprom are highly dependent on the EU market, with about 53 per cent of Russian gas exports worth an estimated $24 billion (€17.3 billion) going to the EU, Europe's internal gas market has integrated since then.

Today less than 50 per cent of Russian gas exports to the EU pass through Ukraine, compared with 80 per cent in 2009 and the EU has access to other liquified natural gas (LNG) sources as well as piped gas from Norway, the paper states. The quiet conviction among EU officials that Russia needs the EU market more than the EU needs Russia has so far kept the threat of any immediate risk to gas supply off the table.

Nonetheless, the crisis in Ukraine has forced the EU to engage in a deeper assessment of its energy interdependency with Russia.

Energy security
Monday's meeting of EU foreign affairs ministers saw a number of countries, from Hungary to the Baltic states, raise the issue of energy security, with EU leaders expected to discuss the broader ramifications of the Ukraine crisis on EU energy policy today.

Individual member states are already trying to reduce their dependence on Russian gas exports with Lithuania, for example, building its own offshore LNG plant. The EU, in the context of the ongoing EU-US trade association talks, is also pressing the US to open up its LNG energy supplies for export.

The developments in Ukraine could also have a profound effect on the debate surrounding the 2030 climate package – the policy framework for climate and energy proposed by the European Commission.

Countries that oppose the introduction of mandatory national renewable targets, such as the UK and Poland, have argued that the crisis in Ukraine highlights the need for Europe to have its own secure, indigenous supply of energy, such as shale gas, nuclear and, in Poland's case coal, though others argue that renewables should be developed as an alternative source of energy to Russian gas.

Although leaders are unlikely to make any substantive progress on consolidating a position on the new EU energy package this week, the Ukraine situation is likely to significantly shape the debate in the coming months.

Germany, France and Denmark have pushed for climate change to be included on the agenda for June's EU summit, while others have suggested that a substantive discussion may be delayed until after the summer, when the new European Parliament and commission are in place.

In the meantime, the impasse with Russia is likely to inform the debate which hitherto has been characterised by many as a battle between environmentalists on the one hand, and the interests of big business on the other.