HIGH LEVEL ENERGY MEETING
15 DECEMBER 2014
The High Level Transatlantic Energy Group convened for the second time on December 15, 2014 in Brussels, Belgium. This round of dialogue, hosted by Jean Pierre Clamadieu, Chairman and CEO of Belgian chemical company Solvay and Nicolas Saverys, Chairman and CEO of Belgian shipping company Exmar, sought to engage participants in an open and frank discussion about transatlantic energy cooperation and the impact that Russia’s occupation of Ukraine has had on European energy security. Meeting participants included senior government policy makers from both the EU and U.S., private sector energy industry leaders, think tank representatives, and other high-profile individuals, notably Vice President of the European Commission for Energy Maroš Šefčovič and General Jim Jones, President of Jones Group International.
Recommendations and Goals:
Safe and secure energy in Europe will be dependent on an integrated European energy policy, a fresh commitment to diversification, a reduction from unreliable suppliers (particularly Russia) and an invigorated commitment by the United States and Europe to expeditiously foster energy trade and commerce.
Since the economics of current U.S.-Europe energy commerce do not currently favor exports from the U.S. and Canada, to the EU, both sides of the Atlantic will need to establish mechanisms to foster trade and ensure that imported natural gas, and perhaps oil, can be distributed efficiently throughout Europe. The removal of legal, financial, technical and bureaucratic obstructions is essential to facilitate a new dynamic and strategic energy relationship across the Atlantic.
Sharing of cutting edge technology for developing, extracting and distributing carbon, nuclear, and renewable energy resources (including in the automotive industry) must be a critical part of the U.S./Canadian and European agenda. The emphasis must not be only on production, but also on consumption.
The North-South report (Completing Europe–From the North-South Corridor to Energy, Transportation, and Telecommunications Union) could be one of the platforms for an emblematic project.
We should agree to work with the Center for Transatlantic Relations, as an overall coordinator, and the EU, European, U.S., and Canadian governments, industry, and other relevant stakeholders to convene a series of meetings (virtual and in person), to identify and scope out the necessary suite of policies required to frame economic, political and logistical issues, and challenges associated with attaining the above stated goals and to recommend an economically and politically responsible path forward.
In the coming months, we want to develop a game plan that articulates substantive and tangible proposals for addressing each of these goals, and how we might achieve them through advocacy with key government and industry officials.
We are on the cusp of fundamentally changing the way energy is produced, distributed and traded across the Atlantic, which can create a far more diverse range of resources and greater number of energy providers. But we continue to be hampered by the lack of a clear strategic vision to articulate that energy cooperation between the U.S./Canada and Europe is a fundamental component of the security relationship. Moreover, we have created a burdensome and overwhelming slew of bureaucratic, political and economic restrictions that threaten the future energy security of Europe. With the rise in natural gas and oil fracking in the United States and related interests in expanding exports, the U.S. has an opportunity to provide alternative supplies to Europe and extricate countries from Russia’s stranglehold. However, ensuring exports are distributed efficiently across the European continent, via interconnectors, smart grids and new technologies that increase efficiencies, will be essential.
The EU has perhaps the most demanding energy legislation in the world as wells as pricing mechanisms that include so many additional levies that investment in the European energy sector has become unpredictable and unprofitable. The subsidies have not even begun to tackle the climate versus energy debate, despite being the stated purpose, and have also put European industry at a significant disadvantage on the international playing field. The lack of international investment has created voids in the market that have been filled by Russia, a country that does not play by the rules.
Despite plummeting oil and gas prices, Russia is still waiting in the wings. The Russian Government is eyeing part of the pipeline in the north-south corridor and is aware that lower prices may increase Gazprom’s market share and render significant damage to the renewables sector. Europe had learned that cash is king and may lean toward what is cheapest: Russian gas and coal. As a result, there could be additional supply vulnerability as a result of falling oil prices and this in turn could leave the EU with fewer options. Europe needs a common gas policy that does not automatically set the purchase of Russian gas as its default position.
The EU leadership needs to turn a page on pricing and competition and needs to do so without creating unnecessary bureaucratic layers; it also needs to stop fragmentation of energy policies because of the economic schemes that result in redundant and expensive infrastructure. (If political leadership demonstrates will, the private sector will follow). The EU needs to undertake a serious review of pricing mechanisms in an effort to stabilize the market and make it more competitive, and that market must be diversified across carbon, nuclear and renewables. Shutting options out will only lead to greater instability in the future.
The market should not be seen by stakeholders as being pushed by Brussels, but rather as being in the national interests of all EU members. Member states are engaging in more and better regional cooperation, born out of frustration with the lack of bold innovation and the bureaucratic roadblocks in Brussels. Some see the U.S. more engaged in Central/Eastern Europe energy matters than is the EU. While regional cooperation is a positive first step, the level of integration does not go far enough and may still result in regional action that undermines a safe and secure energy policy for all of Europe.
The Obama Administration should have higher level participation. This could start with a counter to OPEC (Saudi Arabia in particular), which is now drowning the U.S. market with increased output further driving down gas and oil costs, with the goal of potentially bankrupting smaller U.S. producers. The logical union would be a Canada-Mexico-U.S. energy union, one that more accurately reflects the economic and political realities of the world in which we live. This would stabilize prices and weather the buffeting effects of using energy as a security weapon.
The United States needs to take the EU-U.S. Energy Council more seriously. It has been “too quiet.” The U.S. needs to understand and treat the security of its allies as integral to its energy priorities; right now the Energy Council is viewed as just another ineffective bilateral organization and this needs to change. Moreover, the private sector needs to be an integral part of this conversation, because it will inevitably be a major part of the solution. American innovation, research and development, and energy supplies are seen in Europe as a stabilizing factor and Russia is seen as disruptive. U.S. industry needs a signal from government and banks that investment in the European energy sector (nuclear, gas, renewables) is supported and that cooperation and sharing of information is a part of the overall U.S. government strategy.