7 July 2022
This blogpost series by the European Liberal Forum engages with policymakers, industry experts and academics to contribute to a better understanding of how to shape the “Road to net-zero” in the context of the EU sustainable transition.
By Ricardo Silvestre, International Officer at Movimento Liberal Social and ELF Associate Fellow
The attack and invasion of Ukraine, a sovereign nation, and a rightful member of the international community, by the Russian Federation in the beginning of 2022, validates one of the main concerns for neorealist when thinking about the relationship between states in an international anarchical order: economic interdependence, particularly when based on energy dependence, originates a security dilemma. One of the well-known examples of the recognition of this kind of dilemma came in October 1973, after the outbreak of the Yom Kippur war, when the Organization of Petroleum Exporting Countries enacted a ten-day embargo on the sale of crude oil, which paralyzed part of the western world. On the other hand, economic interdependence is considered, for example by liberals, as an engine for ‘social development and for the maintenance of peace between countries. Still, such benefits are not a guarantee of solidity, due to the constant tension between dependence and maximization of State security. Realists also believe that military decisions will disregard economic benefits, regardless of the extent of the interdependence, where great powers resort to offensive actions to ensure their integrity and security. The stability and correct functioning of this form of interdependence is even more in danger when one of the States, or group of States, are totalitarian regimes, non-reliable actors, with illiberal policies that undervalue human rights and freedoms of their own citizens. This has been the position of Russia, especially after President Putin assumed power, with an inclination to see the country as “surrounded” by hostile forces, increasing the security dilemma, being real or imagined.
The European Union, historically, has been a client of the energy giant to the East so to access energy, being natural gas or crude. Given the current context, the future of the Union is related to the capability of its Member States to keep their industry operational, to ensure economic growth, and to provide comfort to their citizens. However, it is becoming increasingly pressing that those needs should not be dependent on a country like the Russian Federation, that as a precedent of stopping natural gas transport, of military interventions in neighbouring countries, and the disruption of democratic processes and elections in western liberal democracies. Yet, it took a large-scale attack on a European country, with aspirations to join the family of liberal democracies, and even to enter the European Union, to a renewed urgency, from European politicians to legislators and to regular citizens to call for a restructuring of the energy market within the Union. As the oil crises of 1973 led to increases in fuel efficiency, the attack on Ukraine increased the need to create solutions to the dependence of fossil fuels from Russia, so that dependence can end by 2030. To reach this objective, the European Commission proposed the REPowerEU plan to: increase the resilience of the Union’s energy system; diversify the gas supplyply; growing imports of liquefied natural gas (LNG); generate a greater volume of production and imports of biomethane and renewable hydrogenen; reducing the use residential fossil fuels, buildings and industry; enhancing energy efficiency; developing the use of renewable energies and electrification of the energy grid; and solving the problem of lack of infrastructure. This after the already introduced NextGenerationEU fund, the €750 billion euros package with 37% of the budget for projects relating to the European Green Deal, that include renovating and building new infrastructure, developing environmentally friendly transport and logistics, strengthening the Just Transition Fund to help companies pursue new economic opportunities, investing in renewable energy projects including solar and wind, and “launching a clean hydrogen economy in Europe”. This type of hydrogen, also known as green hydrogen, gets the name due to be produced using renewable sources, and is considered to be the future of energy and a way to invest in the sustainable growth of the Union, with the European Commission creating the European Clean Hydrogen Alliance, with investments of around 430 billion euros by 2030. Also mentioned in the REPowerEU plan it is liquefied natural gas (LNG), which can play an even bigger role in the European Union’s energy mix, although it is not a net-zero energy source. Natural gas dependency in the Union was 83.5 % in 2020, and in fifteen Member States, that value reached 90%. The European Commission estimates that natural gas imports will grow by around 20% by 2040.
There is a need to “ensure that all Member States have access to liquefied gas markets”, and this has been translated into concrete actions, like the agreement for investments in LNG terminal at the port of Świnoujście in Poland, and elsewhere in Krk in Croatia, Gothenburg in Sweden, Shannon in Ireland, and Vasilikos Bay in Cyprus. European ports with the capacity to accept tanker ships carrying LNG also need to have a distribution network to transit the energy to the other Member States that don’t have a maritime entry point. This is the case of Świnoujście, that after the energy crisis of 2009 saw a considerable investment from the Polish government and the European Union to allow passage of natural gas to the Baltic countries, Czech Republic, and Slovakia. The same can be said of the port of Sines in Portugal, or the ports in the north and south of Spain, which can make an important contribution to the supply of natural gas to the centre of Europe. Germany announced, because of the Russian aggression, and not long after the attack, the construction of new LNG terminals in Brunsbüttel and Wilhelmshaven. This is one of the possible solutions to the security dilemma resulting from receiving 23% of the natural gas in the Union via Russia, 12.8% via Ukraine and 10.3% via Belarus. Another important mention in the REPowerEU plan is the need to address infrastructure bottlenecks. This was, for example, mentioned by the Portuguese Prime Minister during the informal summit of Heads of State and the Government of the European Union, in Versailles, in the spring of 2022, when he stated that “it is essential to increase interconnections and definitively overcome the barrier that has existed in the Pyrenees”. The “barrier” prevents the Iberian Peninsula from being a bigger contributor for energy needs in central Europe, making this region of the European Union an “energy island”, due to the insufficient number of distribution routes to the rest of Europe. The NextGenerationEU fund already includes investments for pipelines, LNG and natural gas infrastructure, which can be included in Projects of Common Interest, in the scope of intervention of the Connecting Europe Facility, and the European Bank for Reconstruction and Development.
The European Union assistance to our European neighbors, that hopefully will create the conditions for them to be full members of the Union, and the achieving of energy independence to decrease the security dilemma, should be couched in liberal solutions, particularly when thinking about investments in energy markets of this magnitude. Some of these solutions regarding the nascent hydrogen market are presented elsewhere. However, others do emerge from the creation of such impressive financial mechanism, mainly fighting corruption, the need for transparency, and fairness in distribution of funds supported by the European Union institutions, and also by the Member States, via their Recovery and Resilience Plans. There could be a tendency to centralize management and application of the funds in national governments, something that historically has been observed in some of the countries in the Union. Hence, there is a need to ensure that other stakeholders, apart from the State are included to achieve the energy transition in the European Union, with the private sector playing a crucial role in the areas of labor, construction and operation of equipment and infrastructure, and development of secondary supply chains. Fiscally, there should be incentives to private partners with reduction of taxes and fees, while at the same time, the elimination of fossil fuels subsidies. Another important initiative is to have the Member States working together to find common interests and joint ventures regarding the construction of an interconnected energy market. Some examples already exist, and they should be multiplied. In 2014, the European Commission warned that “cooperation is the key to cope with supply interruption” and that “EU countries and neighbouring countries envisage a wide range of measures to mitigate the impacts of a supply disruption”, but “plans are often too much limited to the national market and resort too quickly to interventionist measures”, and that “a market-based approach should be the guiding principle, with non-market measures (i.e. the release of strategic stocks, forced fuels switching and demand curtailment) only kicking in when the market fails”. After the lack of urgency to respond to what was seen, almost ten years ago, as a major problem, it is time for the European Union to make inroads for a net-zero carbon society. This will also bring the benefit of stopping supporting dictators, despots, and authoritarian regimes, being from the Russian Federation, Venezuela, or Saudi Arabia (to give some obvious examples), with their history of parochial policies, human rights abuses, and actions that aim to weaken and disrupt liberal, democratic, progressive societies.
Ricardo Silvestre is the International Officer of Portuguese think-tank Social Liberal Movement and an Associate Fellow at ELF. He hosts the Liberal Europe Podcast, and is the author of think pieces and scientific articles. Ricardo holds a Ph.D. in Philosophy and a Master’s degree in International Relations.
DISCLAIMER: Published by the European Liberal Forum. The opinions expressed in this publication are those of the author(s) and do not necessarily represent those of the European Liberal Forum.