Europe’s Energy Union. Foreign Policy Implications for Energy Security, Climate and Competitiveness

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Series Details March 2016
Publication Date March 2016
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In a Research Paper published in March 2016 by Chatham House, the author Thomas Raines and Shane Tomlinson say that by addressing structural divisions between EU member states, the proposed Energy Union could have a beneficial effect on the EU’s capacity to conduct a unified and effective foreign policy.

Plans for an EU-wide Energy Union are taking shape, following the European Commission’s adoption in February 2015 of a ‘Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’. The strategy underlines the EU’s ambition to attain ‘secure, sustainable, competitive, affordable energy for every European’.

The initiative seeks to transform energy markets and energy/climate policy across the EU. Its goals include cross-border coordination and integration in energy security, supply, market operations, regulation, energy efficiency, low-carbon development, and research and innovation.

There is an important foreign policy aspect to the Energy Union concept, given the imperative of managing security and supply risks in Europe’s neighbourhood and further afield. By addressing structural divisions between member states, the Energy Union could have a marked beneficial effect on the EU’s capacity to conduct a unified and effective foreign policy.

Development of the Energy Union presents abundant challenges, however. Policy and legislative changes will need to be coordinated across 28 countries. Variations in EU member states’ attitudes to security and energy policy may lead to differences in, or clashes between, priorities.

The wider context is also complicated. Interrelated challenges rooted in broader policy issues include the partial transition to low-carbon energy, and concerns over competitiveness relative to other major economies.

The current EU approach to energy security and infrastructure focuses on natural gas. This ‘gas first’ approach risks crowding out other responses to the energy security challenge. It could result in the creation of ‘stranded assets’, if the future gas demand on which investments are predicated does not match projections. A narrow focus on new gas infrastructure could also impede development of other dimensions of the Energy Union.

The markets for coal, oil, gas and renewables are changing significantly. The shale oil and gas ‘revolution’ in the United States has altered the economics of hydrocarbon fuels, and the plunge in oil prices since mid-2014 is causing energy businesses in the EU to reassess investment plans.

The EU is rapidly expanding the use of renewable energy. Dramatically falling prices for renewables will challenge traditional energy utility business models. How the Energy Union enables market access for new business models will be key to determining future energy trajectories.

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Chatham House: Research: Europe’s Energy Union: Foreign Policy Implications for Energy Security, Climate and Competitiveness
Chatham House: Expert Comment, 14.04.16: EU Must Avoid Prioritizing Gas in Energy Security Push
EurActiv, 14.04.16:[Opinion]: EU must avoid prioritising gas in energy security push

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