This opinion article was first published in EurActiv
Europe is battling its biggest energy crisis in a decade. While drivers are suffering pain at the pump gas prices have increased fivefold. A low oil price would have boosted our economy by 100 billion. Instead the energy crisis is ruining the recovery and hurting millions of families.
How did this happen? And why is the Commission adding fuel to the fire by declaring gas green?
Let’s start with gas. Demand for gas has increased globally. At the same time Europe’s most important gas supplier, Russia, is limiting gas supplies. The reason for this is political. As the Russian ambassador explained: if only the EU would stop treating Russia as an adversary “things [would] get resolved easier”. Cheap energy for good behaviour. The Ukrainians know all about that.
The dynamics in the oil market are similar. Demand for transport fuel didn’t drop as sharply as expected during COVID19 – it only fell 15% in Europe in 2020 – and is now on the rise again. The OPEC+ cartel, including Russia and the Middle Eastern states, are conspiring to keep supply levels tight, as if the world was still in lockdown. Europe pays the price.
Some have argued the energy crunch is caused by our reliance on renewable power. This is nonsense. Without clean power (38% of European electricity generation was renewable in 2020) we’d be more exposed and prices would be even higher.
The real issue is that we import 97% of our oil and 90% of our gas, with Russia our main source of imports. The real issue is the sway Russia and cartels like OPEC+ have over global energy prices. We are at their mercy. Simply saying this out loud would be a start. Here’s an opportunity to reach out to Europeans that don’t care so much about climate action and the Green Deal but do care about ruinous heating and fuel bills.
Why do we hear so little about this? Maybe our leaders feel energy dependence is just a fact of life? Or perhaps they hope all of this blows over if we just approve Nordstream 2?
The EU Commission’s response was the ‘Energy Toolbox Communication’ (who invents these titles?!). The document, and response of EU politicians’, has been deeply technocratic. It barely mentions Russia and Gazprom. Worse, the Commission just announced it wants to promote the use of gas in the Energy Transition by labelling it as green in the sustainable finance taxonomy.
What is going on here? What are the Commission and EU leaders playing at? We are being ripped off by fossil fuel cartels. The answer to extortion is not to beg or to appease. The answer is to cut our dependence on these cartels.
How we talk about this matters. But so does policy.
We are currently paying a huge premium on fossil energy. Call it the Putin Tax. But not everyone is paying this tax. If you live in a well insulated house, have access to renewable power and drive electric, this energy crisis barely affects you. We need to make sure all Europeans get to that place as soon as possible. That means we don’t postpone things like tighter electric car mandates for carmakers until 2030. It means we need to have a fresh look at how we’re spending hundreds of billions of recovery funding. Insulation, heat pumps, renewables and electrification. That’s where the money should go.
As importantly, we should scrap any plans to create new, avoidable demand for gas. Shifting ships and trucks to LNG, or powering part of our industry or planes on fossil gas-based hydrogen is terrible energy policy – it’s bad for the climate too. Labelling gas as green in the ‘gold standard’ Sustainable Finance Taxonomy, well that’s just insane. Whether it’s from a climate or energy security point of view, we need to cut our reliance on fossil gas. In that context, the Commission’s plans are an outrage which will hopefully meet furious political and legal resistance.
Nobody in the world has so much to win, or lose, in the battle against the economy’s oil and gas addiction as Europe. This is a time for leadership, not for appeasement or mixed signals to Russia and the oil and gas industry.