‘Tumultuous’ is the word that comes to mind when I look back at 2022. I never expected to see a war in Europe and to live through a dramatic energy crisis. Combined with extreme weather events, it really felt at times as if we were all collectively experiencing the limits of a system that has been dysfunctional for far too long.
Europe’s addiction to oil and gas imports, especially from Russia, was not something new. But in 2022, the true cost of this dependence became real for everyone. Prices of gas, electricity and oil went through the roof. The EU rushed in different directions to find quick fixes for the crisis, notably under its ‘RePowerEU’ initiative. But how far are we from a really secure, clean and fair energy system for transport?
Whereas the EU launched intensive campaigns to push EU consumers to reduce gas and electricity consumption, the same didn’t really happen for oil. Many countries actually adopted expensive fuel tax cuts, which benefited the richest motorists and prevented a decrease in oil demand.
We showed that a combination of ambitious measures could help the EU to reduce its oil consumption by one third by 2030 and that other solutions existed to support lower income households. T&E’s dedicated tracker on fuel tax cuts gives a good overview of the problem.
In the middle of the crisis, there was also the collective realisation of an unfair energy system, where oil majors make tremendous profits out of high prices, while Europe’s citizens suffer. The Commission made a proposal and EU governments agreed that oil and gas companies should pay a minimum 33% “solidarity contribution” on their windfall profits. This exceptional measure is welcome but the potential revenues of €25 bn from the windfall tax are minor compared to the €30 bn ‘gift’ made through fuel duty cuts, which propped up demand for oil.
The war also triggered huge distorsions on food markets with prices of key food crops increasing dramatically. In that tense context, we revealed that the EU still burned daily the equivalent of 19 million bottles of best cooking oil, such as rapeseed or sunflower oil, for biofuels and the equivalent of 15 million loaves of bread every day.
The Commission expressed its support to countries reducing the share of food crops used in biofuels, for ‘easing pressure on the markets for food and feed commodities’. Unfortunately, EU decision-makers largely failed to limit further crop based biofuels under the EU’s fuel framework, the Renewable Energy Directive (RED). They did however exclude palm and soy based biofuels immediately. Because of the Ukraine war and extreme weather events, prices are expected to remain much higher than pre-pandemic levels for some time.
A positive development in 2022 has been greater support for renewable electricity as a transport fuel under the RED, as part of a push to boost clean alternatives and reduce oil dependence. Following a Commission proposal, renewable electricity will now have to be credited like any other transport fuels to meet renewables targets in each EU country – not just biofuels as it is today. It will also help the business case for setting up recharging points and refuelling stations. The final RED trilogues should rubber stamp the system in 2023, finally moving away from liquid fuels towards electrons. 2022 also saw the EU up its hydrogen ambition, announcing a hydrogen bank and increasing targets for hydrogen production. Renewable hydrogen and e-fuels will have a key role to play in decarbonising sectors like aviation and shipping when produced sustainably.
The EU is pushing cleaner alternatives like renewable electricity and renewable hydrogen in transport – that’s good news. But without ambitious measures for reducing oil demand and phasing-out unsustainable biofuels, it will be difficult to shield Europe’s transport system from the turbulence of global energy and food markets in the future. Instead of fixing the roof while the sun was shining, Europe will have to escape its dependence on fuel imports in a time of crisis. At least now we know what is at stake.