3 december 2013

[4C note: The following letter to the editor of the Financial Times was circulated on the Climate Action Network's CAN-E list on December 5, 2013.]

"Politically incorrect" 2030 energy policy is best choice for EU

From Mr Jörgen Henningsen. The Financial Times, December 3, 2013

Sir, You are correct in claiming ('EU must improve its aim on
energy',editorial, December 2) that present EU energy policy towards 2020 is far from optimal, and that mistakes of the past should be avoided in the policy for the period towards 2030 to be decided next year. However, prescribing the right medicine requires a correct diagnosis. On this point you are less convincing. Fatih Birol, the chief economist of the International Energy Agency, and others have recently pointed out that shale gas production in Europe is unlikely to close more than marginally the gap between natural gas prices in the EU and the US (as well as Russia, the Middle East and other major producers). Since oil and coal prices are basically global, the only energy 'source' on which EU energy policy can have an impact is electricity. And in addition, of course, it can have an impact on CO2 emissions.

If the main objectives are to reduce CO2 emissions and at the same time
avoid excessive electricity prices, then the emissions trading scheme (ETS)
is not the right, universal, answer. Until now the ETS has had virtually
no impact on CO2 emissions, nor, more importantly, on long-term investment
decisions. So far the political level in the EU has been unable to decide,
or even to propose, the means necessary to make the system work according
to intentions. Unfortunately, there is little reason to expect the next
year(s) to change this. The only element of the EU energy policy that has
demonstrated discernible progress is renewable energy policy, which you
discard as too expensive. It is true we have seen a number of renewable
projects with higher costs than are justifiable, but that should not
discredit renewable energy in general. And you seem to ignore the fact that
electricity with low variable cost pushes prices down since today's
electricity prices reflect primarily variable rather than overall cost.

Energy-intensive industries' concerns that future high electricity prices
will impact negatively on competitiveness are justified. However, the main
danger does not come from offshore wind energy, but from the liberalised
electricity market itself. In order to replace ageing power plants during
the coming decades, electricity prices will have to rise towards €100/MWh
in order for the markets to obtain what they consider a necessary return
on investment (except for coal-fired plants in a market with low CO2
prices, a development unacceptable for climate reasons).

However politically incorrect it may sound, there is reason to believe that
a 2030 energy policy based on the following three elements – pursuit of
energy efficienncy and of renewable energy development, a ban on new
coal-fired power plants (or sufficiently strict CO2 emission limits) and
the dismantling of the ETS – wwould deliver greater CO2 reductions and
cheaper electricity prices than any idea so far advanced by the European
Commission – or by your editorial.

Jörgen Henningsen, Copenhagen, Denmark

Formerly European Commission negotiator on Climate Convention and Kyoto

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