Commentary: Europe needs energy

24 May 2013 15:14  [Source: ICB]

As EU leaders meet to discuss future energy policy, the region's lack of global competitiveness becomes increasingly apparent. Meanwhile, the chemical industry clamours for shale gas

The political leaders of Europe met last week to discuss the region's energy policy and renewables targets, which lapse in 2020.

Europe's industries are struggling with some of the world's highest energy costs, driven not just by the basic cost of power generation, but also by legislation for carbon taxes, targets for renewable-based generation and the withdrawal from nuclear power in some countries.


 Europe's chemical industry seeks cheaper energy

Copyright: Rex Features

European Commission President Jose Manuel Barroso did at least concede that there are major challenges. "The reality is that the global energy landscape is changing very quickly, and not in Europe's favour," he said. "There is no silver bullet to solve the strategic energy challenges that Europe faces."

However, his five-pronged action plan - although it contains some lofty aims on innovation, infrastructure, energy efficiency and renewables - did not commit to much that is likely to cut energy costs in the short to medium term for the region's beleaguered chemical ­industry. On a positive note, Barroso did mention the completion of the internal energy market. Many argue that there is not yet proper competition between power suppliers in Europe. Anything that can improve matters here is to be welcomed.

US shale gas has slashed the cost of energy and feedstocks for chemical producers and the country's entire manufacturing backbone is likely to get a new lease of life with this inexpensive resource. Understandably, the chemical industry Europe is crying out: "Give us shale gas now!"

But the region - which possesses some decent reserves of exploitable shale - is going in different directions. The Commission still seems to be sitting firmly on the fence. Guenther Oettinger, the energy commissioner, last week told German newspaper Die Welt that hydraulic fracking to obtain shale gas will be on the EU's agenda this year. Oettinger also warned Germany not to be too quick to oppose fracking. Chancellor Angela Merkel has taken a vary cautious stance on shale.

Yet last week the EU's commissioner for climate change, Connie Hedegaard, stated that the emphasis should be firmly on energy efficiency and renewables. Shale will not be a "game changer" for Europe, she added.

Meanwhile, the UK is moving ahead with shale exploration. Despite opposition prompted by earth tremors near a wellhead, the government there has even introduced generous tax breaks for fracking companies. A ban is still in force in neighbouring France.

By: Will Beacham
+44 20 8652 3214

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