The New Industrial Revolution
July 04th 2007

Andris Piebalgs, European Commissioner for energy, sets out the argument for action and the opportunities for Europe if we take the lead in both dealing with climate change and security of supply

As a father of three and a former schoolteacher, I’ve always been amazed at the way children look at the world. Unlike adults they see possibilities, rather than limitations. To children, the world can seem a scary place, but it’s also a place of unlimited potential.

Today, we need to see the world through the eyes of a child.The ‘scary’things that are happening are global warming, the unrestrained growth in world energy demand and Europe’s increasing dependence on just a few energy suppliers. At the same time, I am convinced that we are on the cusp of a new industrial revolution in energy…if we have the foresight and fortitude to grasp the opportunity.

The world is facing a massive energy and environmental challenge, a challenge that is particularly acute for Europe. It has been estimated that world energy demand is set to increase by more than half by 2030, and that demand for oil alone is expected to grow by over 40% during this period.Europe already imports half of its energy, and this is forecast to rise to nearly two thirds by 2030 unless action is taken.

Two Visions of Europe’s Energy Future: Dirty, vulnerable,weak Clean, comfortable and competitive The potential effects of Europe’s dependence on imported energy are serious. If oil prices rose to $100 per barrel by 2030, the EU’s annual energy import bill would increase by 170 billion or an additional 350 out of the pocket of every EU citizen. Europe is particularly vulnerable to a price shock, and as the International Energy Agency states, “the ability and willingness of major oil and gas producers to step up investment in order to meet rising global demand are particularly uncertain.”

While the economic impact of Europe’s reliance on energy imports may be cause for concern, the security consequences could be dire. Oil and gas reserves are increasingly controlled by the national monopolies of just a handful of countries, and recent actions by some of these monopolies suggest that energy security is an issue with geopolitical overtones. Diversification of Europe’s energy supply base is an urgent priority. Growing energy consumption is not just a threat to Europe’s economy and political stability, it is also linked to environmental challenges – and climate change in particular. The world’s output of carbon dioxide (CO2) – which accounts for 75% of all greenhouse gases – is set to increase by 55% by 2030 with the EU’s emissions increasing by 5%.The impact of this scenario on Europe’s environment, economy and way of life would be tremendous.

Just think of some of the possible consequences of climate change. A six-metre rise in sea level would submerge large parts of Barcelona, Venice, Amsterdam, London, Stockholm, and Lisbon. It would exacerbate water shortages in parts of Southern Europe. And it could lead to an influx of millions of refugees from hardhit developing countries. The Europe which my - our - children inherit would look very different from the Europe we know today.

But let’s look again as it were through the eyes of a child and try to see all that potential, all those unlimited possibilities.While energy and the environment are the greatest challenges for Europe in the 21st century, they also represent an enormous opportunity. By accelerating low-carbon growth and dramatically increasing the amount of low-emission energy produced and used, Europe can become the leader in renewable energy and lowcarbon technologies, and make its economy much more robust in the process. In short, Europe has the opportunity to usher in a new industrial revolution in energy.

Recognising the seriousness of the challenge, as well as the inherent opportunity, we at the European Commission have put forward a comprehensive European Energy Policy – the most far-reaching reform of Europe’s energy policy ever attempted. The policy aims to transform Europe’s energy economy into one that is sustainable and competitive and enjoys security of supply.

The first step is to achieve a 20% reduction in the EU’s greenhouse gas emissions by 2020 versus 1990 levels. This unilateral target is just an initial goal.We hope to set an example for the world and that other nations will follow Europe’s lead. When such an international commitment exists, Europe will raise the target to a 30% reduction by 2030 and a 60-80% reduction by 2050. Having simple targets like these will keep us focused on what’s really important.

The 20% target is the driver for the new European energy policy, but the policy is not just about climate change. It also aims to improve Europe’s energy security and competitiveness.Achieving the 20% target can limit the EU’s growing exposure to volatility in the price of oil and gas, create a more competitive EU energy market, and stimulate innovation and job creation. Even without global warming, Europe should be taking this bold step forward.

To realise this vision, the European Commission has tabled a seven-point action plan foreseeing a range of measures:

• Creating an efficient and competitive EU energy market: a more efficient and competitive energy market will result in more reliable supply at a lower cost to consumers. To achieve this, Europe must unbundle networks from services, harmonise energy regulation and create a body that has the power to adopt binding decisions on cross-border issues.

• Ensuring security of supply for oil, gas and electricity and promoting solidarity between Member States: this means promoting diversity of energy source, supplier, transport route and transport method, as well as putting in place effective mechanisms to ensure solidarity between Member States in the event of an energy crisis.

• Promoting energy efficiency: to achieve a 20% improvement in energy efficiency by 2020, including a 13% reduction in energy consumption - meaning a reduction of 780 million tonnes in annual CO2 emissions and annual savings of € 100 billion.

• Supporting renewable energy: without a substantial shift towards renewable energy over the coming years, Europe will not be able to reduce greenhouse gas emissions by 20%. Although increased energy efficiency, nuclear energy and carbon capture and storage can all contribute to achieving the 20% target, none of these measures will have a major impact before 2020.We therefore propose to raise the share of renewable energy in the EU’s energy mix to 20%.

• Backing research: Europe is lagging behind on research into the next generation of low-carbon and renewable technologies. The European Commission will work to stimulate the construction and operation by 2015 of up to 12 large-scale fossil fuel plants to demonstrate CO2 capture and storage technology, and will provide a clear indication of when coal- and gas-fired plants will need to install the technology.

• Building a framework for nuclear energy: whilst not all European nations will opt for nuclear energy, it nonetheless accounts for 30% of electricity generated in the EU and is the largest – and one of the cheapest – sources of low-carbon energy available. The EU should create an advanced framework for nuclear energy, including nuclear waste management and decommissioning.

• Developing a common External EU Energy Policy: Global warming and energy security are global challenges. The EU can set the pace on these issues, but it needs to bring the US, China, India, Japan and its other partners on board. To do so, and to protect its own interests, Europe must speak with one voice and act as one. EU energy policy can also help developing countries. Like Europe, many of these countries depend on energy imports, and surges in oil prices can effectively cancel out development aid.

So the energy and environmental challenges that we face are certainly not child’s play – but they should really be seen as opportunities in disguise, and for those who seize them, the rewards will be great. Europe now has the chance to establish world leadership in clean, efficient and low-emission energy technologies. These will become an engine for growth and job creation whilst sustaining a high quality of life.The new European Energy Policy offers a roadmap to Europe’s secure, clean and prosperous energy future. Let’s be grown-up about it and act now.