January 10, 2007
Europe

UPDATE: Nuclear, Renewable Energy At Heart Of New E.U. Policy

The European Commission on Wednesday called for a “new industrial revolution” via increased investment in renewable energy and nuclear power to combat climate change and curb Europe’s energy dependency.

The proposals come as concerns over Europe’s energy security are making headlines as a bitter dispute between Russia and Belarus has disrupted the transit of oil supplies to Europe.

The commission’s proposals are based on a forecast that the region’s energy imports will jump to 65% of consumption by 2030, when 84% of gas and 93% of oil will come from overseas, and sets out ways to reduce the block’s dependence on Russia and other suppliers.

As its main measure, the paper proposes a 20% reduction in greenhouse-gas emissions from the European Union’s energy consumption by 2020 and calls for a sharp increase in the use of renewable and biofuels.

“This objective will enable the E.U. to measure progress in re-directing today’s energy economy towards one that will fully meet the challenges of sustainability, competitiveness and security of supply,” the commission said.

Experts on energy security welcomed the move.

“This potential heralds a new phase. There are some real teeth in those proposals,” said John Mitchell, an energy security expert at Chatham House. He stressed that for the first time the commission has gone into great detail about the policies needed to reach the overall goal.

The commission also underlined nuclear energy, still taboo in many European countries, but long embraced by France, as an important part of its new policy. It called for an analysis of nuclear energy in Europe and a work sheet for a plan to increase its use.

Companies such as France’s Arevacould benefit from a policy shift toward nuclear generation. Its shares rose 3.9% in Paris early afternoon trading.

Nuclear energy is seen providing 30% of Europe’s energy needs by 2050. Renewables such as wind power would provide slightly more than a fifth and have already been adopted in countries such as Denmark and Germany.

The politics of power

The current dispute between Russia and its former Soviet disciple Belarus over taxes on crude-oil transit between the two countries has once again shed light on the importance of the energy debate, especially as a similar tussle involving Ukraine occurred last year.

The disruptions have drawn the eye of Europe’s political leaders.

German Chancellor Angela Merkel, who has just taken over the E.U. presidency, on Wednesday stepped up the pressure on Russia to end the spat, publicly warning it that its behavior is damaging its reputation as a reliable supplier.

The BBC reported on its Web site at midday Wednesday that Belarus said it had found a compromise deal in the row with Russia.

“The Russian episode, even though it hasn’t disrupted oil markets, is a signal in that it has been sufficient to get Merkel to raise the issue of nuclear energy in Germany,” Mitchell said.

The strength of Germany’s ecological parties in politics has made nuclear energy a taboo topic there.

So far, the markets have shrugged off the geopolitical threat to supplies, focusing instead on the unusually warm winter in the U.S. and strong inventories.

Echoing Merkel’s comments, the white paper said it is crucial that Europe modifies its energy policy, and not only for environmental reasons. “The concern is not only about climate change, it is also about Europe’s security of energy supply, economy and the well being of its citizens,” the commission said.

Mitchell said the measures proposed on Wednesday were an improvement because they listed concrete policy steps, which he said would make it easier to gain political backing.

“When these policies are too vague, they can’t get off the ground,” Mitchell said.

Tighter monitoring of E.U. energy giants, competition enforcement

In a report released separately, the commission stressed its commitment to increasing competition between Europe’s energy behemoths such as France’s EdFand Germany’s Eon (EON) .

It said it has found that “consumers and businesses are losing out because of inefficient and expensive gas and electricity markets.”

Among the main problems, the commission cited high levels of market concentration, vertical integration of supply, generation and infrastructure and “possible collusion between incumbent operators to share markets.”

To reduce the incumbent’s perceived monopolist strongholds on national markets and facilitate the entry of new players, the commission said it wouldn’t hesitate from pursuing individual cases under competition rules.

By Aude Lagorce

Dow Jones Newswires

nasdaq.com


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