There are also security concerns. Europe’s dependency on foreign suppliers of energy reducesits diplomatic clout (something that was highlighted in the recent Ukraine crisis). Followingthe recent uprising in Kiev and subsequent regional turmoil, British trade bodies warnedthat the supply of gas could be compromised, with the British Ceramic Confederationwarning that:“The problems in Ukraine reinforce the need for the Government to ensure theUK has extra gas storage capacity and a requirement to hold adequate safetystocks. Uncertainty over supply has led to terrible price volatility in the pastand will do so in future, leading to harmful effects on manufacturing andinvestment and a possible loss of jobs.”- British Ceramic Confederation 149Concerns have also been raised by the House of Lords who have warned that “The UK isnot directly dependent on Russian supplies but in an integrated market we would not beimmune from shortages or price increases across the European Union”. 150Reducing the burdens faced by European energy suppliers shouldn’t just be consideredan economic necessity; it should be seen as an essential component of Europe’s security.Dependency on other countries also means that the EU’s commitment to combatingclimate change is thrown into question, as many states don’t comply with the same highgreen standards as those found in Europe. 1514Changing the situation“Europe’s carbon and energy markets are dysfunctional.”- The Economist 152As shown above there is very little confidence in EU energy policy among commentators:it is incredibly expensive and despite decades of work the EU has not yet managed tocomplete the Single Market in gas or electricity (see section 2.4). On top of this, certain energymeasures, in particular the Large Combustion Plant Directive, have imposed significant costson the UK, adding to many firms’ compliance costs. Europe’s Energy Intensive Industrieshave already started to leave for cheaper locations and jobs losses are starting to mount.Energy Policyand the EU149 British Ceramic Confederation, Press Release on turmoil in Ukraine could spark energy crisis for UK Industry, found at 150 House of Lords Economic Affairs Committee, The Economic Impact on UK Energy Policy of Shale Gas and Oil, p. 17, May 2014,found at 151 It is easy to exaggerate the difference between EU and other countries green credentials. Certain reports have stressedthat in many ways the EU and the US have very similar systems and that industries transferring between the two may becarbon neutral. However, it is clear that other states are much more lax when it comes to EU law. See D. Buchan, Costs,competitiveness and climate policy: distortions across Europe, p.5 found at 152 “Europe’s energy woes”, The Economist, 25 January 2014, p.3244
Despite these problems, the EU’s current policy agenda seems to be ‘more of the same’.Current proposals from the European Commission focus on completing the Single Market,with specific proposals for more regulation and harmonisation with a view to improveinterconnectivity. It should also be remembered that, while important, interconnection onits own does not guarantee that prices will fall; as President Barroso admitted in a recentpresentation when looking at the impact of EU proposals, “energy costs [are] to rise in allscenarios”. 153 The recent 2030 framework for climate and energy policies unfortunatelyfailed to address the EU’s failings, instead introducing a new renewables target of 27 percent (though as of yet there hasn’t been new binding targets on member states) and onlyoffered a review of the energy efficiency directive, looking at “policy measures at the EU andnational levels”. 154The problem with EU regulation in recent years is that it has been based on a number ofassumptions, assumptions which, in the words of the House of Lords, “have been proveninaccurate”. 155 In particular the EU’s belief in the mid-2000s that there would be a global dealagreed at Copenhagen (in which the EU would play a major role) to tackle climate changenever materialised. At the same time the period 2005-14 has seen major changes in theglobal markets: economic recession has brought the price of carbon down while the shift toshale gas in the US has, at least in the short to medium term, revolutionised and revitalisedfossil fuel industries that had previously been seen as endangered. EU policy decided in themid-2000s is already well out of date, yet it is very hard for the UK to opt out of or modifythese laws.In many respects the global shift towards green technology and the decreasing costs ofclean energy will encourage investment in green technology regardless of the decisionof policy makers. Across the world there has been a noted decline in the costs of cleanenergy. To take just one example, according to research from the financial firm Lazard Freres& Co. the levelised cost of electricity for wind and solar installations across the US has fallenby over 50 per cent in the past four years. 156 The falling costs of green technology meanthat, in many ways, market dynamics will encourage a more effective investment in greentechnology regardless of EU action.This final chapter demonstrates British business’ desire for a new deal and looks at theways renegotiation could change the current, unsatisfactory situation. Big changes canbe secured via both short term changes in the way EU works and longer term changeswhich would involve changing the EU’s Treaties. Such long term changes would allow forexisting laws to be reviewed and would clarify the limits of the EU’s power, giving memberstates greater safeguards to protect their energy policies and energy mixes from future EUregulation. Such long term changes would also give member states the chance to reassesstheir membership of EU programmes like the EU Emissions Trading Scheme, something thatgroups such as Open Europe have long advocated.153 European Commission, Energy Priorities for Europe: Presentation of J.M. Barroso to the European Council, 22 May 2013, found at154 European Commission Climate Action, information found at 155 Lords European Union Sub Committee, No country is an energy island, p. 9, 2 May 2013, found at 156 Lazard, Levelized cost of Energy Analysis - Version 7.0, August 2013, found at 45
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