Opinion

A new way to approach Europe’s gas security, beyond the usual Russian obsession

Instead of doing everything to reduce gas supplies from key suppliers, gas supply security could more effectively be safeguarded by ensuring that unused alternatives are maintained so that they can be tapped into for in case of supply disruption.

By: and Date: February 3, 2016 Topic: Green economy

This op-ed was originally published in Dienas Bizness, Kauppalehti,and Sina. It was also published in Hospodarske NovinyDziennik Gazeta Prawna, Diario EconomicoEl Economista and Il Sole 24 Ore.

Dienas Bizness logo

Kauppalehti

Sina

HOSPODARSKE_NOVINY_logo

el economista logo

Il Sole logo

diario economico logo

Dziennik-Gazeta-Prawna-2011_ok_CMYK_bez_cienia-300x65

European citizens remain vulnerable to another gas crisis, ten years after Russia cut off gas supplies to Ukraine and Europe in the winters of 2006 and 2009.

The events ten years ago revealed European vulnerability and sparked demands to increase Europe’s energy security.

In response to the crisis, European leaders planned to reduce Europe’s dependence on Russian gas via supply diversification and import dependency reduction. However, this strategy soon proved expensive and insufficient to provide a systemic response to Europe’s energy security vulnerability.

Ten years after that first gas crisis, the European approach to security of gas supply has somehow remained unchanged. But Europe cannot afford another ‘lost decade’ in energy security. In fact, due to rapidly declining domestic production, Europe’s gas import requirements will grow over the next few decades.

In the Netherlands, gas production dropped from 70 billion cubic metres (bcm) in 2010 to 56 bcm in 2014, and this declining trend is set to accelerate. The United Kingdom’s gas production volume declined from 57 bcm in 2010 to 37 bcm in 2014, mainly because of the rapid depletion of resources in the North Sea.

According to the International Energy Agency (IEA, 2015), the EU’s import requirements will increase in all scenarios. This means that a new strategy is urgently needed to structurally tackle the challenge of the continent’s security of gas supply.

Russia (or any other pivotal supplier) should not be considered a threat to European security of gas supply. Europe can safely import a consistent share of its gas requirements from Russia at a low cost, as long as it has at its disposal alternative supplies that can be used if supply is cut off.

Instead of doing everything to reduce gas supplies from key suppliers, gas supply security could more effectively be safeguarded by ensuring that unused alternatives are maintained so that they can be tapped into for an indefinite period in case of supply disruption from a key supplier.

Finding alternative suppliers is challenging at national level, but simple at the European level. European gas import infrastructure is currently largely underutilized, with only 58% of pipelines and 32% of LNG capacity currently in use.

By acting together European member states could make use of this margin of flexibility, and create a kind of EU-wide insurance system that might be activated in the case of a disruption in supply. This can be done by legally requiring all European gas importers and domestic producers to have available a certain amount of alternative resources, for example 20 percent of contracted demand for 1 year, to make the European gas system more secure, flexible and interconnected.

Although technically and economically feasible, this option is politically challenging. Most European member states currently regard security of gas supply as an issue exclusively for central and eastern European countries that heavily rely on Russian gas, such as Poland or the Baltic states.

However, energy security is an issue for all European member states, not just in central and Eastern Europe. The complex and volatile geopolitics of the European neighbourhood mean that other key suppliers might unexpectedly and unpredictably become a threat.

For instance, a traditionally secure supplier as Norway might need to reduce its gas exports in the future simply because of depleting resources, or Algeria, another traditionally secure supplier, might cut its supplies in case of unpredictable regional political turbulence. Security of gas supply is therefore an issue that concerns all EU member states.

There is also a risk that market conditions drastically change, as happened in the liquefied natural gas (LNG) market after the Fukushima nuclear disaster, when demand for gas soared. In this context, an EU member state that today might not perceive security of gas supply as a direct threat could become vulnerable in the future.

It is this unpredictable nature of security of gas supply, combined with its increasing importance in the European energy system, that calls for a new approach to European security of gas supply beyond the traditional obsession with Russia.

Gas supply security should be addressed at EU level because a joint solution would be cheaper, national approaches could undermine the internal energy market and have adverse effects on other countries, and the EU Treaty explicitly calls for energy solidarity.

The security of the European Union’s gas supplies is crucial to ensuring that supplies to households are not disrupted in freezing winters, that industry can flourish and that the EU cannot be blackmailed in vital foreign policy questions. If European policymakers act quickly to ensure energy security, both Europe and European citizens will benefit.

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic More by this author
 

Blog Post

REPowerEU: will EU countries really make it work?

By acting together, the European Union can optimise its response to the energy crisis in all scenarios but each country will have to make concessions.

By: Simone Tagliapietra Topic: Green economy Date: May 18, 2022
Read article
 

Blog Post

The EU needs transparent oil data and enhanced coordination

The EU lacks the coordination structure and transparent data necessary to most effectively navigate an embargo on Russian oil.

By: Agata Łoskot-Strachota, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: May 16, 2022
Read article
 

Blog Post

Now is not the time to confiscate Russia’s central bank reserves

The idea of confiscating the Bank of Russia’s frozen reserves is attractive to some, but at this stage in the Ukraine conflict confiscation would be counterproductive and likely illegal.

By: Nicolas Véron and Joshua Kirschenbaum Topic: Banking and capital markets, Global economy and trade Date: May 16, 2022
Read article More on this topic
 

Opinion

For Europe, an oil embargo is not the way to go

Even at this late hour, the European Union should consider taking a different path.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 9, 2022
Read article More on this topic
 

Opinion

A tariff on imports of fossil fuel from Russia

A tariff on imports of Russian fossil fuels would allow Europe to hit Russia's energy sector without great suffering.

By: Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

External Publication

How to weaken Russian oil and gas strength

Letter published in Science.

By: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Ulrich Schetter, Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

Opinion

A phase out of Russian oil may be less effective than a tariff at reducing Putin’s rents

A punitive tariff on all energy imports from Russia would be a better choice than a gradually phased-in embargo on selected fuels.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article
 

Blog Post

How a European Union tariff on Russian oil can be designed

The European Union should apply a tariff on imports of Russian oil; it can be accompanied by a quota for a gradual, conditional phase-out of all Russian oil imports.

By: David Kleimann, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 29, 2022
Read article
 

Opinion

EU risks letting Putin’s gas divide-and-rule strategy win

The 2 May meeting of EU energy ministers should deliver strong and common EU action. Failing to do so would undermine Europe’s unity, energy security and foreign policy.

By: Agata Łoskot-Strachota, Simone Tagliapietra and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 29, 2022
Read article More by this author
 

Opinion

Europe must get serious about cutting oil and gas use

As energy security risks increase, European governments must stop subsidising oil and gas, and ask people to consume less.

By: Simone Tagliapietra Topic: Global economy and trade, Green economy Date: April 29, 2022
Read article Download PDF
 

Policy Contribution

European governance

Fiscal support and monetary vigilance: economic policy implications of the Russia-Ukraine war for the European Union

Policymakers must think coherently about the joint implications of their actions, from sanctions on Russia to subsidies and transfers to their own citizens, and avoid taking measures that contradict each other. This is what we try to do in this Policy Contribution, focusing on the macroeconomic aspects of relevance for Europe.

By: Olivier Blanchard and Jean Pisani-Ferry Topic: European governance, Macroeconomic policy Date: April 29, 2022
Read article Download PDF
 

Working Paper

Cutting Putin’s energy rent: ‘smart sanctioning’ Russian oil and gas

The most efficient way for Europe to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.

By: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Simone Tagliapietra, Ulrich Schetter, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 28, 2022
Load more posts