Energy & Environment policy: between power politics and alternative power sources
01 December 2007
Political context
The conference focused on two interlinked challenges for Europe: energy security and climate change. The PES resolution of December 2006 stated that it is high time to commit to ambitious targets regarding energy and climate, since high energy prices and the evident consequences of the changing climate underline the urgency of a new energy strategy for Europe and the planet. This conference aimed to facilitate setting the social democratic energy and climate agenda by:
- increasing awareness on the importance of energy and environment
- assessing the impact of power politics on energy relations and finding alternative power sources
- identifying the main challenges and possible solutions for shaping environmental friendly societies with secure energy supplies
- creating synergies and strengthened international cooperation by bringing together social democrats from the EU and neighbourhood countries
Energy security is a important issue in Ukraine. Russia sends some 80 % of its gas exports to Europe via Ukraine, while Ukraine depends on Russia for more than one-third of its gas needs. Initially Ukraine received its gas for a heavily subsidised $50 per 1,000 cubic metres, but in March 2005 the Russian gas company Gazprom announced its intentions to increase the gas prizes to market rates of $230 per 1,000 cubic metres. Ukraine objected and in return demanded higher transit fees for Russia’s gas exports to Europe. The countries were unable to come to an agreement and on 1 January 2006 Gazprom cut all gas exports to Ukraine to pressure the negotiations. After great media interest and political discussion, the EU and the U.S. stepped in and helped to reach a compromise. On 4 January, Gazprom continued the gas supply to Ukraine. An accord was signed on 11 January, agreeing to raise gas prizes to $95 per 1,000 cubic metres, and also raising the fees for transportation of gas through Ukrainian territory for the next six months.
These developments made the EU aware of its energy security problem and its dependency on Russia. Therefore it is strengthening its ties with countries in Central Asia, the Middle East and in its neighbourhood that have energy resources. Moreover, in order to make energy supplies form these countries more feasible the Nabucco pipeline project was initiated. This pipeline will be connected with the Tabriz-Erzurum pipeline, the South Caucasus Pipeline and the planned Trans-Caspian Gas Pipeline.
Recent reports and natural disasters have shown that climate change is more and more becoming a pressing problem that requires worldwide solutions. The solutions that are proposed differ from country to country, from biomass to nuclear energy. In order to tackle the problem of climate change we need to find alternative energy sources which do not create new problems and are applicable in the long term.
Report
1 December 2007, Kyiv, Ukraine
During the morning session of the conference energy and power politics were the central topics. The main question was: “How to achieve secure energy supplies at predictable and affordable prices?”. The conference was opened by Ms. Kirsten Meijer, senior project manager of the European Forum and chair of the morning session. Then Dr. Stefan Chrobot, Director of the Friedrich Ebert Stiftung in Ukraine who was chair of the afternoon session, stated his opening comment.
First Mr. Libor Rouçek, Member of the European Parliament for the Socialist Group, took the floor. According to him there are several topics that are important to Ukraine and the EU. The first one is the rising oil and gas prices; Ukraine and the EU are too dependent on others for their energy needs. The second topic is global warming and climate change.This topic is intertwined with the energy discussion. He also stated that there is no magic formula, or policy or one dimension solution for this issue. During the EU summit in March it became evident that not enough attention is being paid to energy saving and that there is a huge potential of resources, like water, wind, solar and biomass energy that can be used to deal with this issue . The goal was set in March to save up to 20 percent of energy use in 2020. On nuclear energy there is no agreement within the EU, this is the same for the social democratic fraction. However, big world players are developing it, so it would be a big mistake for the EU to stay behind. He also spoke about the diversification of the energy needs of the EU, since the EU imports around 75 percent of its energy needs. The EU look at Central Asia, the Middle East and Africa. Alternative pipelines should be build. The European Neighbourhood Policy (ENP) has an energy dimension and Ukraine and Azerbaijan are important in this respect. The infrastructure in the EU stayed behind, especially in new member states, and it should be strengthened to complete the internal market. Mr. Roucek stated that membership of the EU is not realistic for Ukraine in the foreseeable future, because of the EU enlargement fatigue. But this does not mean that closer cooperation cannot be developed. This is evident in the Common Economy and Energy Space. Russia is seen by many as a threat, but according to Mr. Rouçek it should not be viewed this way. Russia is going through a transformation and this may not always be the transformation we like to see, especially in regard to human rights. The EU is striving for a strategic partnership with Russia; economy, nuclear weapons, global warming are all problems that cannot be solved without Russia. The EU should see Russia as a partner not as an enemy, because what is the alternative?
The next speaker was Mr. Ian Boag, Head of the European Commission Delegation to Ukraine. The cooperation between Ukraine and the EU takes place on two levels. First, on the level of traditional sources, for example by introducing EU models in Ukraine. Second, there is a need to foster the area of energy alternative sources, for example plans to reduce energy use. The ENP aims to bring Ukraine as close as possible to the EU. In December 2005 a “Memorandum of Understanding” was signed between the EU and Ukraine, it is actively pursued and implemented. This memorandum is committed to help Ukraine to develop an energy sector, make independent regulations and a roadmap for energy efficiency. For example the memorandum monitors nuclear safety aspects, since there is no export to the EU if safety regulations are not held up. An agreement on support for the coal energy sector will be signed next year, it will also cover safety issues, the need for this can be seen when taking the recent mine disaster into account. On the financial side, the EU is bringing all kinds of financial bodies and agencies together for financing the energy infrastructure in Ukraine. With regard to the civil service, twinning is used to transfer knowledge and experience and there are several plans for twining in the energy field. The EU assists with bringing Ukraine into international organisations in the energy sector, like the Energy Community. And the EU is making an effort to help Ukraine and Russia with their cooperation, for example with new negotiations between the parties.
Mr. Grzegorz Gromadzki, Director International Cooperation of the Stefan Batory
Foundation and the co-author of the “Energy Game” report, first spoke about the ENP countries and energy relations. The countries of the ENP are the common neighbourhood of Russia and the EU. However, EU policy is far less involved in energy matters than Russia. There is no common energy policy within the EU, it will be build in the next years but this will be a long process. Russia does have a well thought out energy policy towards its neighbours. According to Mr. Gromadzki the EU should involve neighbouring countries in EU energy policies and build a common energy and gas market. So far only four countries have received a proposal to become member of the Energy Community, other eastern European ENP countries should also be invited, since it is also a form of integration policy. The EU member states have different approaches, there is no common position when it comes to energy policy. The companies of member states show little interest in CIS transit countries, except for Azerbaijan. The reasons for this is the lack of transparency in the energy sector. Companies have the idea that this sector is only for Russian companies and they want to avoid a struggle with them. The unresolved dilemma is whether the neighbours should be integrated into the Russian or the EU system. The conflicts between Russia and Ukraine and Belarus are affecting the energy supplies to the EU, therefore new pipelines are build. If more transit countries can be avoided while building these pipelines, the energy supply security will increase. Mr. Gromadzki stated that there are three scenario’s for the future: 1) Accept Russia’s dominance; 2) Create a common management of the pipelines in the transit countries, the only question is: who will lay down the rules?; 3) Gradual integration of ENP countries in the common energy market of the EU. The third scenario is the only scenario that would ensure long-term investment in ENP countries by the EU. It would be impossible for the EU to strengthen ties with these countries without energy cooperation and this scenario will give the EU a stronger negotiation position in the energy talks with Russia. However, this third scenario also depends on the enthusiasm of the transit countries. There are conflicting views coming from these countries.
Mr. Sergei Kondratiev, of the Institute for Energy and Finances, spoke about the Nabucco pipeline initiative in relation to the pipelines that already exist. According to him, the issue that arises in this respect is the following. The existing capacity of pipelines is sufficient, this means that building more pipelines could lead to overproduction. This is only done for the policy of diversification, which brings up the question: how economically efficient is this plan? Mr. Kondratiev stated that oil and gas will keep their strong position in the future, it is difficult to replace them. Due to the influence of nuclear energy the price of uranium is also growing. He mentioned that it is necessary to start thinking about energy efficiency. On the one hand the EU is dependent on Russia for energy supplies, but on the other hand Russia is dependent on the EU as an export market. Mr. Kondratiev stated that competition and liberalisation can optimise current supply but not long term supply, because of long term contracts there is an exploration of new projects, this development will not take place if those contracts were not signed. This can be seen in the postponement of the exploration of new gas sites in Russia due to lack of investment. He stated that the Russian energy sector is not a pressure system, Gazprom is a market economy company, it does not follow government instructions.
As a fifth speaker Mr. Leonid Zaiko, Director of the Analytical Centre “Strategy”, took the floor. According to him Belarus can be seen as an example for the other countries in the region as to what will happen if the energy prices double. In Belarus the energy price shock did not influence the economy. Mr. Zaiko mentioned that Gazprom is interested in the transport network in Belarus and has increased its prices to create a powerful position in which it can offer a transition period in exchange for a stake in the transport network. The monopoly position of Russia in the energy market gives the country an instrument to play a special role in the energy market. He also said that the government of Belarus plays a important role in regard to the energy market. For example, it forces people to set up gas furnaces when the gas prices are rising, the question is, why people would be forced to do this? President Lukaskhenka is not taking advice from anyone, there is doubt that there will be serious changes in the energy structure in Belarus. The global trend in the energy sector are higher prices, the influence of India and China is substantial in this development. Mr. Zaiko also stated that we should step away from the idea of huge power generators, we should use local ones since they are more efficient, this can be seen when you consider limiting the loss of gas for example. People should be made to find their own solutions locally.
After Mr, Zaiko, Ms. Maryna Luzhykova, President of the Regional Strategic Studies Foundation, also expressed her views on the energy relations issue. She stated that the EU is interested in the stability of Russia, since this makes it easier for the EU to rely on Russia. The West has an interest in a long term cooperation with Russia and tries to achieve a reliable energy supply. However, it is also looking to strengthen ties with other regions, such as Central Asia or the Middle East, for energy supply, as part of the diversification policy. Ms. Luzhykova told the conference that Gazprom is expanding its services, it is trying to offer the EU electricity besides gas. Ms. Luzhykova mentioned that it is said that people do not agree with the independence claim of Gazprom, the government is thought to be in control. However, if the EU does not allow Gazprom in their market, Russia is not going to sign energy treaties. The cooperation between Russia and the EU continues, however not happily. And the common neighbours are confused as to what their role is in the relations between Russia and the EU. At the end Ms. Luzhykova stated that organisations such as the FES are important because they build bridges, force sides to listen to each other and find a common position.
After these speeches there was room for some questions of the participants. The first question regarded renewable energy. Mr. Andriy Konechenkov, Chief Editor of “Green Energy” magazine and of the Green Party of Ukraine, had a question for Mr. Boag. He asked if there is a EU programme for renewable energy in Ukraine. Mr. Boag stated that there is, renewable energy is one of the five elements of the memorandum and there are also environmental programmes within the framework of Tacis. The next question referred to the lack of transparency: “is there a policy from the EU side to activate/motivate ENP countries to be more transparent on state monopolies in energy?”. This is in fact the case, there are clear rules and they should be fulfilled by new members. The EU strives for the liberalisation of the energy market. The third question regarded the issue of Ukraine joining the energy market; will there be a possible situation where Ukraine has negotiations about this with the EU? According to Mr. Boag is the EU seeking to become partner of Ukraine and other neighbouring countries. The EU companies will have negotiations with companies from neighbouring countries. The companies are free to do what they want within the EU laws and governments can stimulate them but they cannot force them. The fourth question was addressed to Mr. Roucek. Whether the programme of the Socialist Group should have a component about energy education? Mr. Roucek answered affirmative, many things start with education and the EU link of energy and environment should be brought across to the children. The consumer needs to be educated and this should be a part of the socialist programme. After this question was answered Mr. Kondratiev took the floor and stated that Russia is following the international trends, which means that other countries have access to the industry and the role of EU countries in this respect is very important. Mr. Zaiko also added to the discussion by saying that the leaders of Belarus have contacted Russia and are willing to embrace a partnership, however Belarus did not get a response from Russia. Russia does not need Poland or Belarus, because without Russia’s gas these countries only have pipelines and it can easily build a new pipeline.
During the last part of the morning programme there was room for the representatives of social democratic parties from the region to share their views on the topic. Mr. Vitaly Shybkho, International Secretary of the SPU, stated that Russia plays a key role in the double standards that are arising in the energy sector in the transit countries. The relation with Russia should be build on a market economy system. Ukraine should reconstruct abilities to save energy in houses and other buildings. He also stated that Ukraine should become WTO member and build its EU relations to an official cooperation and take into account that this will affect the relation with Russia. However, the leaders of Ukraine do not always understand that they can set up alternative organisations. The social democratic vision according to Mr. Shybko is that the state should develop transparency and polish the legislation. The mine accident shows that there should be a change in safety legislation. Other parties are populistic about energy relations, they use it to get elected into parliament and afterwards they will forget all about it. Mr. Nikolaj Statkevich, leader of Narodnaya Hramada, stated that President Lukashenko has good relations with Russia and without this he could not remain in power. Economic reforms are therefore unlikely since they will reduce the power of the president. Mr. Statkevich stated that Belarus needs a market economy. Then Mr. Anatashkevich took the floor and expressed his views. According to him Belarus does not have the environment that could create energy saving mechanisms. Belarus uses a lot of energy and is vulnerable for the increase of energy prices. The strategy of his party is a conceptual approach, the West en Russia are strategic partners and to cooperate with these partners it requires reforms. Next, Mr Jamie Reed, Member of Parliament of Labour, shared his views. He stated that liberal free market cooperation needs to exist between Russia, the EU and the transit countries and transparent price setting is needed. He also stated that fuel poverty has come up in the United Kingdom, which makes the search for alternative energy sources and a more transparent energy market even more urgent.
The discussion continued and the strategic position of Ukraine was considered. It was mentioned that Ukraine is in a unique position to coordinate the relation between Russia and Belarus. It was also mentioned that Ukraine aims for market liberalisation in 2014, the reforms will start next year. Furthermore, on the topic of energy, it was stated that Ukraine lacks energy laws, this is a reason why the development of energy policy is minimum. Moreover, it was stated that Ukraine did not make use of the low energy prices when they were provided to the country. In Ukraine all oil refineries are in private hands, these people never invested any money in renovations, there was no modernisation of the plants. Gradually switching to European prices is the only correct way for Ukraine to deal with this situation.
After the lunch the afternoon programme started. During this session energy and a clean environment were discussed. The central question was: “How to make energy policy more environmental-friendly in order to tackle climate change?”. The first speaker was Mr. Andriy Konechenov. He spoke about energy efficiency and the percentages that we can gain when it comes to energy efficiency. He also addressed the issue of nuclear energy. He stated that all sources of energy should be used, including nuclear energy. However, the safety of the production of nuclear energy has to be improved. In the EU countries there is a lot of support for creating legislation on this topic. If Ukraine wants to be part of the EU, it should follow the European standards in this area. He spoke about the introduction of small decentralised power plants and the lack of attention of political parties on the subject of alternative energy sources.
The second speaker of the afternoon programme was Mr. Yuriy Scherbak, Director of the Institute of Sustainable Development. He stated that in the report of the European Environmental Agency of 2007 it was stated that the transit region, makes big contributions to environmental problems. Ukraine is not the highest developing country, but it does have high hothouse gas emissions. The consumption structure is distorted. This is a Soviet legacy, and there is an addiction to gas consumption. Although Ukraine is an economical dwarf it has high emissions. Mr. Scherbak also spoke about the fact that energy is related to the grey economy, to criminality. Furthermore, energy production is related to health problems. Then he addressed the question on how to overcome these problems. There is a need for a change in ideology of the governance and of the development of society. Whatever government there is, sustainable development should be imposed. Next he addressed the issue of coal. The conversion to coal is difficult, it cannot be extracted at the price that is now being paid for it. There is also the issue of social responsibility to make sure that the safety of the mine workers is ensured. The recent mine accident makes this evident. After that he addressed the issue of nuclear energy. There is a need for an agreement with the EU, however this cannot be done on the issue of nuclear power since Germany will not participate on this area. The switch to a more conscience approach of energy saving needs to happen throughout the whole society, from households to the industry. The prices of energy need to be raised to market prices, the industry will operate efficiently if that happens.
Ms. Maryna Luzhykova also contributed to this part of the programme. She made the participants aware of the fact that nobody spoke about the people who live in the regions were the energy is extracted, the people who are affected by this are usually minorities. For example, at the region where oil is extracted in the north of Russia, the diseases among women is four times higher than in other regions. The businesses must share the responsibility for these affected groups, however compensation for these people is never mentioned.
During the discussion that followed, it was stated that Ukraine needs legislation on renewable energy and that the responsibility must be shared between producers and the consumers of energy. Ms. Svetlana Golizova, stated that creating more legislation is a social responsibility. She also mentioned that the gas negotiations are almost like a soap. A question was asked about which activities the Green Party of Ukraine has, to make the green idea known? The party does not have a seat in the parliament, however it does have a lot of environmental programmes, for example on replacing gas with biomass. A new programme is developed regarding agricultural waste, since Ukraine has a higher production of waste in comparison to other countries. It was also mentioned that the discussion should not be left to the people who produce energy. They have different reasons for seeking alternative sources. The production of coal was also mentioned. Cheap coal is still available in Poland, however Germany will stop producing coal in 2020, since coal is one of the dirtiest types of fuel. When searching new energy sources, the accessibility should not be the only factor that is taken into account, but also efficiency and whether this form of energy production is cleaner. In Belarus energy loss is a big problem, energy efficiency is needed, however the industry is only enthusiastic to produce more energy, not to save more energy. This means that structural changes are needed, the people need to be motivated to be energy efficient.
During the afternoon programme there was also room for the representatives of social democratic parties to address the conference on alternative energy sources. First, Mr Jamie Reed took the floor. He spoke about the approach of Labour in this perspective. The UK government has created a climate change bill and this matches the approach of Labour which seeks to find possibilities for green energy and sustainable development. The UK government has been creating laws regarding energy sufficiency, for example there is a law that requires an overview of the energy sufficiency of a house when it is for sale. According to Mr Reed, climate change is a social democratic issue, since it hits the poorest people first and the worst. If it was left to the market climate change would not be tackled, intervention of the state is needed. Mr. Reed stated that there are three activities the EU could do with regard to climate change, it could: 1) significantly raise fuel tax; 2) provide incentives to use renewable technology and 3) reduce the emission to the maximum percentage. However, the first activity has proven not to be very efficient in the UK. Climate change is a difficult topic for a political party. Citizens expect to see the changes on the issues they vote on, however policies on climate change do not have immediate visible effect. The problem is finding effective visible solutions and awareness of the consequences of climate change and of energy policies. Mr. Reed further stated that there is no substantial difference between energy, economy and environmental policy, this issues are interlinked. When speaking about alternative energy sources Mr. Reed mentioned that renewable energy, like wind and water, will not produce enough energy, this is why nuclear energy must be used. Nuclear energy is clean, secure and reliable according to Mr. Reed. If Ukraine does not make use of nuclear energy, it will face higher prices, more emission and more dependency. Mr. Reed finished this statement by saying that the world shares a moral obligation to fight climate change.
After Mr. Reed’s statement the discussion turned to the use of alternative energy in Belarus. In Ukraine, Russia and Belarus there is a concrete development of technology for renewable energy sources like biomass facilities. It was mentioned that in order to change the dependency of Belarus on Russia, renewable energy need to become a major source of energy in the future. Several ideas and possibilities for renewable energy were shared, especially the use of biomass was mentioned. Mr. Reed informed the participants of the conference that when societies start to make more use of biomass as an alternative energy source, the problem of energy security could be replaced with a problem of food security. Land prices will explode and commodities will become very expensive.
Conclusion
There is a common challenge when it comes to the lack of energy security and climate change since it will affect all of us. It does not just affect the EU or the countries outside the EU, everybody should work together to find a solution for these problems.
However the solutions for these problems differ per country or region. While the EU countries are increasingly focusing on fossil taxes, Ukrainian and Belarusian citizens face rising gas prices as a result of power politics and liberalisation. It is evident that the region of the transit countries, which includes Ukraine and Belarus, is caught between Russia and the EU. The current policy of the EU, that consists of avoiding the transit countries when it comes to energy transport, makes this even more clear. If the EU is committed to strengthen its relations with the transit countries, it should create a policy on energy and energy relations that is clear and concrete. At the moment the member states are too divided on the topic, which stands in the way of a common energy policy and further cooperation with the EU neighbours. This is contrary to the position of Russia, which has a well thought out energy policy and is strengthening its power over the energy sector of the transit countries.
When it comes to alternative energy sources there are several different approaches. The region of transit countries has a lot of agricultural waste which it can use as a source for alternative energy. Biomass is regarded as an important alternative for oil and gas. However, it raises the issue of food security. Land prices will rise and commodities will become very expensive. The conference also made clear that there is a huge potential for energy efficiency measures in the transit countries. Changes can be made in households up to the energy industry itself and could substantially lower the costs of energy use in the region. These countries have high emissions and relatively small economies. The inefficient use of energy is a Soviet legacy that needs to be changed. Not only because of the increase in energy prices, but also because of the high emissions.
EU countries are tackling climate change by investing in a wide range of renewable energy sources. For example, in the UK nuclear energy is regarded as an important alternative for the current energy sources, it is considered secure and clean. Nevertheless, the Tsjernobyl disaster is not forgotten and uranium, used for the production of nuclear energy, is also a non renewable source.
Social Democrats should make the social side of the energy question a central focus point. It is unacceptable that mineworkers die in unsafe mines, this need to be prevented by creating proper legislation. Social Democrats should also support the people in the transit countries that are hit by the rising gas prices. And attention should be paid to the second generation fuels, with regard to the relation between biomass and food security The PES is currently working on the programme for the 2009 European elections and we hope that they will take these conclusions into account.
Report: Tessel van Westen, intern European Forum for Democracy and Solidarity
Reactions
ProductivityPosted: Thursday 03 July 2008 - 07:43:34
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