Committee on Industry, Research and Energy
by Matilde Scatizzi (IT)
Case study & introduction
As the Russo-Ukrainian conflict started, it became clear to the European Union that relations with Russia would deteriorate substantially on several international matters. This means that Europe has now to face a transition from depending on Russian natural gases by 40% to no longer having Russia as a reliable energy partner. This new phase out of Russian energy greatly impacted Europe’s energy supply, and the EU is now risking an energy shortage emergency.
This, combined with the climate crisis that the world is facing, pushed EU’s competent bodies to pay particular attention over the way in which Russian energy is replaced, in order to reach the goal set by the Green Deal of zero net emissions by 2050 with an interim target of 55% emission reduction by 2030.
However, as the winter approaches, establishing new energy sources becomes more and more pressing. Europe is looking into making investments in renewable energy sources such as solar and wind-powered, but unfortunately they alone cannot make up for the Continent’s energetic demand and therefore ensure energy security. This is due to the environmental and geographical differences of the Member States, as some countries are fitter to employ renewable energy plants than others. Another source of energy that is still being debated within Europe is Nuclear Energy which the European Commission, earlier this year, has proposed to be defined as “green”.
Key problems
Europe’s energy import dependency rate surpassed 60%, meaning that more than half of EU’s energy needs were satisfied by foreign producers. Such a high foreign dependency is one of the reasons that led Europe to struggle to meet its energetic demands after taking the decision to cut imports from its main energy supplier, Russia. The second and third main energy suppliers are Norway and Algeria; nevertheless, and despite their great energetic contributions, they cannot substitute Russia for the amount of energy supplied.
Russia typically exports Europe’s natural gas by pipeline and, as Russia slashed flows, exports fell to 40% of the pipeline capacity in June, and to 20% in July. The gas that arrived in Ukraine was then shared mainly with Austria, Italy, Slovakia and other east European States, but Ukraine has said that this pipeline will be temporarily shut down, allegedly blaming Moscow and saying that the flow of gas will be shifted elsewhere.
Moreover,on the 29th of September, Sweden has found two major leaks in the Nord stream pipeline which is used to supply gas from Russia to Germany, likely caused by underwater explosions. NATO has reputed this incident as “deliberate, reckless and irresponsible acts of sabotage” while Russia responded to the accusations as “predictable and stupid” and decided to shut down the pipeline for an indefinite amount of time.
Ukrainian State energy Major Naftogaz stated that he plans to boost natural gas production, thus accumulating enough fuel to supply for Europe’s next season, but as proved by many analysts’ researches, this is unlikely to happen since the country’s gas reserves are low, and Ukraine has always been unsuccessful in increasing domestic production. Europe however is not only importing: in 2020, the EU produced around 42% of its own energy, mostly from petroleum products1 (including crude oil) (35 %), natural gas (24 %) and renewable energy (17 %).
1 Petroleum products are fossil fuels (usually in liquid state) and include crude oil and all products derived from it
Key stakeholders and measures in place
The Directorate-General of Energy (DG ENER), led by Kadri Simson, is part of the European Commission, the EU body responsible for bringing forth proposals on legislations, financial packages and other impactful measures. The DG ENER holds the responsibility of energy supply and security throughout the European Union.
The European Commission has been particularly active in taking measures against the lack of energy supply. First, it demanded reduction in gas usage in order to save it and store it in the joint storage; second, they are trying to diversify away from Russian fossil fuels towards other reliable suppliers, such as the United States, Norway, Azerbaijan, and Algeria. The European Commission has also presented the REPowerEU Plan, which aims at ending the EU’s dependence on Russian fossil fuels and tackling the climate crisis through different actions such as energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy.
However, Russian manipulation of the gas market has spillover effects2 on the electricity market. To tackle this issue, the Commission has decided to put forward a set of 5 measures: savings of electricity, proposing a cap on the revenues of companies that are producing electricity with low costs but have high prices on the market thus achieving enormous revenues, a solidarity contribution for fossil fuel companies, support to energy companies to allow them to cope with the volatility of the markets, and lastly, lowering the cost of gas.
The Member States are the countries that belong in the European Union. The EU as an organisation has to lay out the general and macro plan and course of actions regarding the energetic transition, but then Member States are tasked with the responsibility of adapting said plan to their own unique socio-political atmospheres and represent the interests of their citizens.
Therefore, each Member State is taking a different stance on the matter: for example, Italy and Spain have decided to tax those energy companies profiting from the increase in energy prices and use the money raised to help its citizens pay the bills, while Germany has pledged to lower the value-added tax on natural gas from 19 to 7 per cent until the end of March 2024, in tandem with two aid packages (for a total of EUR 30 billion), to help citizens with the rising prices.
European citizens are the most affected stakeholder when it comes to price increase and energy shortages , but there are so many ways with which they can save up electricity and gas in their daily life. Many tips have been given by the European Commission: for example, just by reducing temperature by one degree, 7% of the energy used for heating in the EU can be saved. Moreover, choosing the lowest suitable temperature to wash clothes and switching off devices, such as printers and old game consoles.
Third-party energy suppliers purchase either electricity or gas from generators and sell the access to it to businesses in the areas. The key suppliers to Europe are Russia, Norway, the United States, and Algeria which mainly export fossil fuels. Norway, for example, has decided to export 122 billion cubic meters of gas to Europe, which is 8% more than in 2021, to help deal with the energy emergency, unfortunately this is still a low amount in comparison to the 155 billion cubic meters supplied by Russia in 2021.
2 Spillover effect is when an event in a country which has an effect on the economy of another, usually more dependent country.
Task
Dear delegates, in order to kick-off some pre-session work, I would like all of you to think and try writing four ideas of possible solutions to this problem, which we will then discuss all together. To achieve a better knowledge of the situation, and most importantly understand how Europe started to depend on Russian gas, watch this video, and while doing that try to point out some important facts to reflect on.