EU’s Energy Model Needs a Rethink

In its drive towards a low-carbon economy, the EU must strive towards more ambitious CO2 reduction targets while being cautious about the risk of decreasing its energy competitiveness in the immediate future, said the European Economic and Social Committee (EESC) in its opinion on Energy Strategy 2011-2020 adopted at its December plenary session. The opinion is a response to the European Commission’s request for contributions to its work on a medium term energy strategy.

The future EU energy security strategy relies on three interrelated cornerstones: security of supply, low carbon economy and energy competitiveness. However, the EESC deplores the fact that energy competitiveness has not been given sufficient attention, which might have a number of negative consequences. Achieving a low carbon economy will in the medium term make Europe more competitive in the world but its immediate result might be the relocation of businesses and jobs outside Europe, warns the EESC.

The necessary transformation of the energy sector should start with proper pricing that includes not just production costs but also takes into account the costs of damage to society, eg resulting from the emission of pollutants, says the EESC. In the same vein, production and consumption subsidies that artificially lower its cost and uphold demand should be scrapped. Saved money should instead be channelled into research and innovation, and subsidies should support the uptake of new low-carbon and energy efficiency technologies until they become profitable, argues the EESC.

Investment in and the promotion of renewable energies have to be maintained and increased as many of these technologies are not likely to become competitive on the market by 2020. However, these efforts must be coupled with the development of the European electricity network so that it becomes fully able to accommodate energy from different sources, conventional as well as renewable ones, and cope with intermittent supply from renewable energies, says the EESC.

Consumers and businesses need not only to know how they can use energy more efficiently but also be concretely encouraged to do so. This is why they have to receive appropriate information about what they can do and get incentives to undertake these actions. Moreover, as prices are likely to be higher than in the past and the less well-off might be the hardest hit, poorer and vulnerable people have to receive assistance for complying with energy efficiency measures.

Last but not least, in the continuing absence of a comprehensive global deal on climate change the EU should consider an early move towards a 25% reduction by 2020. Firstly, this would secure some of the transformational benefit of adopting a tighter target as soon as possible. Secondly, it would, following the rather positive outcome of the UN climate talks in Cancun, retain the negotiating benefits of having a further 5% still to offer to encourage other countries to up their emission reduction targets as well in the run-up to the climate summit in South Africa next year.

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