The EU’s Energy Union: Towards an Integrated European Energy Market?

Written by | Wednesday, June 10th, 2015

Marco Siddi (The Finnish Institute of International Affairs)

The proposal to create the Energy Union is part of the long-term strategy of the European Commission which is trying to respond to the economic and political problems related to Europe’s weakened competitiveness, characterized by high energy prices and insufficient diversification of resources. What are its other aspects and objectives? To a certain extent, the Energy Union should complement the EU’s climate and energy policy until 2030, which aims to reduce greenhouse gas emissions and produce more energy from renewable resources. This inter alia means the reduction of fossil fuels consumption, on whose imports Europe’s prosperity currently depends. One of the pillars of the Energy Union is the decarbonization of the economy, which has a great potential as the Member States have committed to a 40 percent reduction of greenhouse gas emissions. In addition, the Union seeks to advance its objective to increase the energy efficiency of European households.

The cornerstone of the strategy is the enhancement of energy security. This shall be achieved by building new pipelines from Central Asia to Europe, hubs of liquefied natural gas (LNG) in Central and Eastern Europe and in the Mediterranean, and by adding new LNG storage sites with the possibility of using “reverse flows”, thus sending the gas wherever it is convenient in times of crisis. This solution will lower the dependency on Russia, though arguably not on other authoritarian regimes. The gas would be purchased from Azerbaijan and prospectively from Turkmenistan. Moreover, the transport from distant regions and regasification are expensive and environmentally unfriendly. The creation of an internal energy market would further strengthen security and level the prices of energy throughout Europe. One of the Commission’s objectives is to bring the Member States to transfer at least 10 percent of their installed electricity production to their EU neighbors by 2020. This will be overseen by the Agency for Cooperation of Energy Regulators.

At the moment, the Commission is facing many challenges, whether it is fund-raising for new infrastructure, finding a compromise among the Member States concerning the coordination of their energy mixes, or controlling intergovernmental agreements regarding energy supplies from third parties. If it doesn’t manage to overcome these obstacles, the Energy Union will remain but another (only partially implemented) energy package, on the long list of European cooperative efforts that have failed to materialize.

(The study can be downloaded here)

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