Can Europe Make It?

The environmental and economic case against Donald Tusk’s energy union

Some European leaders, such as Polish PM Donald Tusk, are using the Ukraine crisis as a pretext to revive national fossil fuel industries in defiance of EU emissions targets.

Marco Siddi
3 July 2014
Canadian company Talisman Energy drilling for shale gas in Szymkowo in Poland

Canadian company Talisman Energy drilling for shale gas in Szymkowo in Poland. Michal Fludra/Demotix. All rights reservedLast April, at the height of the crisis between Russia and the west over Ukraine, Polish Prime Minister Donald Tusk published an article in the Financial Times calling for the formation of an EU energy union. According to Tusk, reducing the EU’s dependence on Russian fossil fuels would be the primary aim of the union. Unsurprisingly, given current tensions between the European Union and Russia, several EU leaders and commentators endorsed Tusk’s proposal. Very few, however, took a more critical look at its substance and feasibility.

Tusk is the Prime Minister of a country that relies almost exclusively on coal for electricity production and has consistently lobbied for upholding the status of coal in the EU energy mix. Coal is the most polluting fossil fuel in terms of carbon dioxide emissions. Plans for burning more coal in the future stand in clear contradiction with the EU Commission’s roadmap for cutting greenhouse gas emissions by 80% by 2050. This information alone would be sufficient to caution anyone against uncritically supporting any energy-related proposal coming from Poland. Instead, even Green politician and former German Foreign Minister Joschka Fischer supported Tusk’s plea.

And yet, it is enough to read the Polish Prime Minister’s proposal to understand what he was getting at. Admittedly, Tusk’s suggestion to create a European body that would buy gas for the whole EU seems sensible, as it would strengthen the Union’s overall contractual position vis-à-vis exporting countries. However, creating such an institution would not be easy. Many national energy companies in EU member states have already signed long-term contracts for the purchase of Russian gas; for instance, the German E.ON and the Italian ENI have contracts with Russian state giant Gazprom that are valid until 2035.

Gazprom has recently accommodated some major demands of its key customers in large EU member states; last May, for example, it agreed to sell gas to ENI at (lower) spot market prices rather than to stick to oil indexation. Hence, at the moment there is no real urge for large EU member states such as Italy and Germany to surrender control of their energy policy to a European body, particularly as traditionally different national interests and stances towards Russia may distort or prevent the functioning of such an institution.

The most problematic aspect of Tusk’s proposal, however, concerns the development of domestic energy sources. While completely disregarding renewable energy, the Polish Prime Minister argued that the EU should make full use of its fossil fuel resources, including coal and shale gas, and should import liquefied natural gas (LNG) from as far as the US and Australia. This is the fundamental flaw in Tusk’s energy union: it is only about fossil fuels and focuses particularly on those with the worst environmental impact.

Due to complex geology and the lack of know-how, the extraction of shale gas in Europe would be much more complex and expensive than in the US - where production skyrocketed in the last few years. European gas basins are smaller and located at greater depth, where temperature and pressure are higher. The costs of extraction would therefore be larger. Indeed, test drillings in Poland and Hungary – which were thought to have considerable reserves of shale gas – were so disappointing that several companies (mostnotably ENI and Exxon Mobil) decided to abandon the whole enterprise. Under these circumstances, shale gas extraction would become profitable for private companies only if it is supported by large public subsidies. This would most likely imply a diversion of limited state funds away from renewable energy development.

Furthermore, shale gas extraction requires large quantities of water. In the US, this resulted in water shortages and a large rise in water prices in the areas where shale gas is extracted. In Europe, with higher population density and limited water supplies, the impact might be even worse. Due to the controversial technique of hydraulic fracturing (or “fracking”: essentially, breaking sedimentary rocks with water at high pressure and chemicals), large quantities of water would be contaminated with methane and other chemical substances.

Tusk’s suggestion of importing US or Australian LNG is no more environment-friendly. A large fleet of LNG carriers would be necessary in order to transport significant amounts of gas to Europe, with a corresponding increase in maritime traffic, transport-related pollution and the risk of accidents. In addition, many more LNG ports and regasification terminals would have to be built in Europe, further escalating costs and the environmental impact. The availability of sufficient US shale gas for both domestic consumption and export to Europe is also questionable, particularly in the long run. In Europe, US shale gas would almost certainly be sold at higher prices than in the US market due to both the cost of transportation and the business interests of American exporting companies.

Hence, in its current form, Tusk’s proposed energy union is to be rejected on economic and above all environmental grounds. Its exclusive focus on heavily polluting fossil fuels contradicts EU plans for the transition to a low-carbon economy, including the latest Commission proposal to reduce greenhouse gas emissions by 40% and increase the share of renewables in total EU energy consumption to at least 27% by 2030. If implemented, Tusk’s energy union would benefit only the fossil fuel industry, to the detriment of Europe’s environment and citizens.

By exposing once more the EU’s dependence on Russian gas, the Ukrainian crisis could be a stimulus for the Union to reconsider its reliance on fossil fuels and set more ambitious targets for renewables and energy efficiency. Instead, some European leaders are using it as a pretext to support their old, national fossil fuel industry and investments in highly controversial shale gas development. If the EU is serious about its climate policy, it must reject these proposals and focus available resources on renewable energy.

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