Young Perspective On Europe

On 17 November, a conference on “EU Energy Policy and Competitiveness” took place at the European Commission´s headquarters in Brussels. This conference, central to the analysis of the EU Energy Union was aimed at redesigning the EU’s energy policy to foster European competitiveness. Indeed, out of Juncker´s €300bn investment package to revive European economies, €21bn will be directed to building an effective Energy Union with a long-term vision. The so-called energy trilemma – the triple challenge of providing alternative ways that “support secure, affordable, and environmentally-sensitive energy”[1]– has urged the new Commission to regard “Energy and Climate” as one of their top priorities together with jobs, growth and investment and the Digital Single Market. However, how to convince the almost 25 million unemployed and impatient EU citizens[2] that the Energy Union will become part of the solution to the lack of jobs in Europe?

Elaborating on the E3ME model (Energy – Environment – Economy model for Europe)[3], I looked into some energy and climate policies and their likely impacts on employment through three main routes, namely Competitiveness, Security of Supply and Environmental Sustainability and Efficiency. Some focal points mentioned at the conference were included in italic in the diagram showed below.

Fig.1. Energy linkages leading to employment (adapted from the E3ME scenario-setting model)

Route 1. (Industrial) Competitiveness

Recent events have shaped the energy mix in the EU. The pressure of the phase-out of cheap nuclear power plants as a consequence of the Fukushima nuclear disaster forced some Member States to find alternative ways to generate energy, typically less competitive than fossil-fuel energy sources. The US shale gas boom has been widening the energy price gap between the EU and the US, resulting in negative industrial developments in Europe. So while cheaper natural gas in the US is lowering electricity prices and other energy costs in the American manufacturing industry, the EU is facing the opposite scenario. This is reason for concern for the European energy-intensive industries that in 2013 had 36% of the world’s capacity versus a 10% share for the US industry[4]. Moreover, because the US has increased its LNG (Liquid Natural Gas) exports to Asia, energy costs could decrease there as well, which could damage the EU’s competitiveness vis-a-vis the Asian markets. Referring to the diagram below, we see for example that relatively high electricity prices lead to rising industrial prices and have a detrimental effect on export capacity, result in lower output and consequently do not promote job creation.

Fig.2. Ratio of industrial energy prices relative to the United States

Route 2. Security of supply

The European Commission estimates that in 2020 the EU´s dependency on fossil-fuel imports from non-European suppliers will reach approximately 60%[5]. The Ukraine crisis exposed the vulnerability and the overreliance of Europe on Russian gas, and this reality can be further extended to other EU suppliers that are often subject to political and socioeconomic instability. This premise justifies the efforts of the EU to promote diversification of energy supplies, not only in terms of locations, but also in prime energy and production methods. Central to this analysis is the recognition of the importance to achieve a “fully functioning and connected internal energy market”[6] that develops cross-border interconnections. As a result, the likelihood of maintaining more secure gas supplies has increased and so might the final economic output.

Route 3. Environmental Sustainability and Energy Efficiency

The European Commission expects to have a 40% reduction of GHG (Greenhouse Gas) emissions and a 27% share of renewables in the energy-mix by 2030. Clearly, decarbonisation through RES (renewable energy sources) has been a crucial part of increasing environmental sustainability but their intermittency demands a well-functioning and interconnected energy market that balances energy shortages and surpluses within Member States efficiently. Since renewable energy technologies are said to be more labour-intensive than conventional energy technologies in generating the same quantity of energy supply, the most optimistic green studies consider that industries linked to RES are likely to create more jobs, especially in the sectors linked to manufacturing and operations.

With this blog post, I wanted to explore the complexities of the Energy Union as an instrument to stimulate the EU´s economic activity and to bring positive prospects for job creation. GDP and employment are affected by many different variables, but the net impact on overall employment is expected to be small according to many researchers. While industries relying on low-carbon technologies and energy efficiency and innovation might register a boost in employment, energy-intensive industries will most likely lose in this game. All in all, the true future challenge for the EU will be to align all the Member States for the full implementation of a European energy union vis-a-vis the promotion of a strong industrial policy that can boost employment.


[1] World Energy Council, Roadmap towards a Competitive European Energy, 2010

[2] Eurostat, October 2014

[3] EC, DG ENERGY, Employment Effects of selected scenarios from the Energy roadmap 2050, 2013

[4] Thomas W. O´Donnel, Energiewende vs. Shale Gas, 2013

[5] European Commission, 2004

[6] European Council, 2030 Climate and Energy policy framework, October 2014

 

About the Author: Ana Luísa Correia (Portugal) recently graduated from Economics and is looking forward to embracing new challenges linked to Development, EU Affairs, Social Cohesion, Energy and Environment. From February to August 2014 she has joined a voluntary project in a developing country where her main tasks included teaching Entrepreneurship at the National University of East-Timor and conducting microcredit-related activities. She has studied in Lisbon, Copenhagen (Erasmus Program) and London (Summer School on EU issues). Ana Luísa joined FutureLab Europe in 2014.

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