The EU should merge energy and environmental policy to achieve energy independence from Russia.

AuthorSewalk, Stephen

    Recently, Russia has seen considerable time in the international policy spotlight, sending shock waves throughout the international community with its military support during the para-military led annexation of Ukraine's Crimea peninsula in March. (1) The European Union's ("EU") energy dependence on Russia has hindered its ability to effectively execute sanctions against Russia for its bold and aggressive behavior. (2) These recent events underline the serious vulnerabilities of the EU's energy policy and demonstrate how energy dependence has translated itself into both economic and political dependence. (3) The EU should merge its energy and environmental policy together by abandoning its ineffective European Union--Emissions Trading System (EU-ETS) and adopt a Carbon Tax with Reinvestment (CTR), reclaiming its autonomy and ensuring the stability of its multinational economy, while simultaneously ensuring its ability to meet and exceed its Kyoto commitments. (4)

    In this article, I begin by discussing the history of Russian and European foreign relations, focusing on the energy policy dynamics and their effect on these relations. I then examine how Russia's energy policy is a key element to its foreign relations strategy. Then, the implications of the EU's dependence on Russian natural gas are discussed, examining the seemingly conflicting interests between Europe's climate and energy security goals. Finally, I demonstrate how a coordinated energy and environmental policy, using a carbon tax with reinvestment, can significantly reduce built environment emissions while reducing the EU's dependence on Russia; allowing the EU to address security, economic, and environmental concerns in a synergetic manner.

    1. EU Energy History and Policy

    The European Coal and Steel community was created under the Treaty of Paris. (5) Since the Treaty of Paris, Europe has held that energy policy integration is fundamental to its security and cohesiveness. (6) In 1973, the community would not only enlarge with three countries joining, but would also be faced with an energy crisis due to the Arab-Israeli war. (7) The EU was heavily dependent on foreign oil sources, especially from the Middle East, and still remains heavily dependent, importing over 90% of its oil and 66% of its natural gas. (8) Against this backdrop of European cooperation in energy security, I would like to examine Europe's current challenges with Russia and present my policy solution.

    First, previous European energy securities must be considered. Energy security as a foreign policy issue has long involved issues much more profound than power generation and raw materials exchange. (9) As colonial powers, Europe, and then the U.S. companies, controlled and owned energy producing areas and facilities. These firms were named "The Seven Sisters." (10) This "first" period of energy producer consumer relations has since been replaced with the formation of OPEC in the 1960 s, and the reclaiming of energy assets by energy producing nations. (11) This shifting dynamic has laid the foundation for energy policy being an issue of international diplomacy, as energy assets and other natural resources become symbolic of national power and autonomy. (12)

    Europe (and the rest of the world) is now in a third period (identified by economic historians that is neither colonial-dominated by resource consumers, nor nationalistic-dominated by resource producers), an era that began

    with the dissolution of the Soviet Union, the spread of liberal values such as democracy and market economy and the empowerment of liberal international institutions. The liberalization of the energy sector, particularly in the EU, entails that energy has increasingly become subject to the logic of free markets. These last years, however, producing countries have increasingly resorted to political consideration in the management of energy. (13) EU Energy trends have thus been marked by a post-World War II pattern of integration and liberalization. (14) During this period of liberalization, modern day Russia was still part of the Union of Soviet Socialist Republics ("USSR"), which might have contributed to asymmetric attitudes between Europe and Russia, especially with regards to energy policy. (15) Liberalization implies that firms have autonomous control over resources, thereby creating a framework by which governments have less ability to manipulate either the consumption or production of energy resources for geopolitical purposes. (16) The EU has been much more liberal and decentralized regarding their energy policy than Russia, by allowing the development of national but independent publicly traded companies that pursue their own economic interests, not solely those of the State. (17) This is partially due to political economic tradition, but also due to Russia being a sovereign government, whereas the EU is a collaborative union of many governments. (18) I will be discussing a united policy for the EU as a single, empowered policy actor, and, therefore, will begin with a more detailed historical analysis of the EU's energy policies, beginning in 1990. Since 1990, the EU and surrounding areas have sustained an economic growth rate of roughly 2% GDP per capita. (19) Energy intensive sectors (industries that require very high energy consumption to sustain output) have grown at a slower rate than the economy overall, causing the energy sector to grow at a correspondingly slower rate. (20) Regardless, economic growth has sustained a clear growth in the aggregate energy needs of the EU. (21) This conclusion is illustrated by the steady rise in imported energy over the past 25 years. (22) The European Commission projects this reliance to increase at an alarming rate, with the EU importing over 67% of their energy supply by 2030. (23) Thus, Europe faces significant structural pressure to obtain energy security via greater leverage in securing supply abroad, create a strategy to decrease imports via better production at home, or implement policies that work towards both of these objectives. (24)

    The modern era of European energy policy can be defined by the EU's commitments to lowering C[O.sub.2] emissions, which has been a defining factor in its modern energy policy approach. (25) This commitment has made several EU countries leaders in producing energy that does not emit carbon, carbon equivalents, or other environmentally detrimental emissions. (26) However, this commitment is also one of the major forces driving Europe to import energy sources. (27) An integrated approach throughout the EU is crucial to success in energy security. (28) The EU must either import less energy or demonstrate that it is capable of importing less energy if it is to achieve energy security while also strengthening its standing in international policy. Research in energy economics and foreign policy can be utilized to illustrate that this is the case. (29)

    1. European Natural Gas Consumption

      Collectively, the EU member states are the world's largest energy importer, importing about 55% of their energy supply. (30) The EU imports approximately 64% of its natural gas in order to reduce its carbon dioxide and greenhouse emissions. (31) These imports are not simply for convenience or price, for only a handful of European states could cope with a disruption of this supply economically. (32) The European Commission forecasts that the EU will import over 80% of its natural gas needs by 2030. (33) Russia remains one of Europe's most important natural gas suppliers, accounting for 41% of European gas imports in 2013, (34) and with several countries importing over 80% of their Natural Gas from Russia. (35) With projections of increased natural gas consumption, coupled with the decline of domestic natural gas production, (36) the EU's dependence on Russia as a supplier can only be expected to grow unless policy actions reverse this dependence.

      Today, twelve EU member states depend on Gazprom, the state-run Russian natural gas producer, for more than half of their natural gas consumption, and in some cases, they are entirely dependent. (37) Europe's glaring dependency has been a concern for decades, but the current political crisis in Ukraine has accentuated the urgent need for Europe to diversify its energy sources, particularly in respect to natural gas. (38) As I discussed above and will explore further below, Gazprom is an example of a mechanism through which the state in an energy producing country obtains greater control of resource production to use as a foreign policy tool.

      Gazprom dominates Russia's upstream (the exploration and production of natural gas) and downstream (marketing and distribution), with over $106 billion USD in revenue, even when geo political conflict begins to affect the revenue flow. (39) This significant influx of cash has given President Putin significant leverage both domestically and internationally. (40) The State Owned Enterprise ("SOE") is more than willing to participate actively in accordance with Putin's interests. (41) There are many examples of Gazprom using shutdown threats as a policy tool. (42) EU policy in the early 1990's was to help Russia increase exports; (43) however, this policy would make the EU more dependent despite its dominance of Russian gas production. (44) Gazprom has not been the most reliable partner for Europe, as Gazprom has been accused of being nontransparent about its abilities to sustain exports and commitments to improve infrastructure. (45) Despite these shortcomings, there is no reason to think Gazprom will stop growing, as it begins to seize significant development opportunities in Central Asia. (46) As the graphic below shows, the natural gas consumption of Europe implies that Gazprom and all Russian natural gas producers represent a vital piece of this discussion.

      The EU's reliance on Gazprom and other Russian exporters is only expected to...

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