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2017 | Book

Introduction: Perspectives, Aims and Contributions Read chapter Read first chapter

Energy Union

Europe's New Liberal Mercantilism?

Editors: Svein S. Andersen, Andreas Goldthau, Nick Sitter

Publisher: Palgrave Macmillan UK

Book Series : International Political Economy Series

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

This book contributes to an ongoing debate about the EU as a global actor, the organization’s ability to speak with one voice in energy affairs, and the external dimension of the regulatory state. Investigating whether the Energy Union amounts to a fundamental shift towards Europe's new 'Liberal Mercantilism', it gathers high-level contributors from academia and the policy world to shed light on the changing nature of the EU's use of power in one of its most crucial policy fields. It argues that the Energy Union epitomizes a change in the EU’s approach to managing its economic power. Whilst the EU remains committed to a liberal approach to international political economy, it seems ready to promote regulation for the purpose of augmenting its own power at the expense of others, notably Russia. This edited collection will appeal to political scientists, economists and energy experts.








Table of Contents

Frontmatter
Introduction: Perspectives, Aims and Contributions
Abstract
In February 2015, the Commission of the European Union put forward a proposal for an EU Energy Union that signaled a shift in the EU’s use of economic power in external relations. Some of the new policies would amount to the EU’s using market might in the shape of a $17.5 trillion economy and a 400 bcm gas market, not only for setting market standards, but also for political ends such as energy security. The proposal featured five related and mutually reinforcing dimensions—security of supply, a fully integrated internal energy market, energy efficiency, emissions reductions and research and innovation (European Commission 2015). The first two have a direct effect on the EU’s external energy policy. The external dimension of security of supply concerns the diversification of the EU’s sources of gas imports, with dependence on Russian gas, a particularly sensitive issue in the context of gas cut-offs in the 2000s (particularly related to Russian–Ukrainian relations in 2006 and 2009) and the Russian annexation of Crimea in 2014. Completion of the internal energy market affects external players inasmuch as they have to comply with EU rules if they want to sell gas to or operate on the Single European Market. Moreover, as the Commission and the more liberally oriented member states have long argued (Andersen and Sitter 2009), an integrated and interconnected market reduces each state’s vulnerability to external gas supply shocks. The EU’s long-standing approach to energy policy has been to treat energy as a commodity that has important public goods characteristics, and to address issues related to the behavior of Russia and its state-owned gas monopoly exporter, Gazprom, as matters of a big firm’s abuse of its dominant market position. The central question in this book is whether the Energy Union proposals and the debates surrounding them signal a shift from the EUs long-standing ‘regulatory power’ approach to energy policy to a new policy agenda that involves more direct and assertive use of the EU’s economic power.
Svein S. Andersen, Andreas Goldthau, Nick Sitter

The EU and the Global Political Economy of Energy

Frontmatter
From Low to High Politics? The EU’s Regulatory and Economic Power
Abstract
This chapter defines and explores the European Union (EU)’s ‘regulatory power’ and ‘economic power’, with a view to assessing the dynamics and potential of both forms of power in the EU’s external energy strategy. Overall, the chapter finds that the EU’s regulatory power, based on regulation and legislation, proves suitable to address some of the challenges of a more ‘geopolitical’ external energy environment. Although the Commission used regulatory power for mercantilist ends, this power, clearly, is limited as by definition it works best in a market context. Acknowledging that the Energy Union pushed security of supply to the center stage, the chapter concludes that the EU is best advised not to try to use its economic (and not just regulatory) power more assertively and adopt a strategy with ‘liberal mercantilist’ elements.
Svein S. Andersen, Andreas Goldthau, Nick Sitter
The Road to Energy Union
Abstract
The chapter provides an in-depth overview of the slow elaboration of the energy policy of the European Union (EU). It examines the reasons why this policy was not favoured by the Member States until 2007, when they decided an “Energy Policy for Europe” based on the reduction of greenhouse gas emissions, the promotion of renewables and of energy efficiency. Giving detailed examples, the chapter describes the main steps taken to create an internal energy market for gas and electricity, well interconnected and secure, and complemented by clear directions to promote renewable and energy efficiency. The chapter argues that the substantial progress made between 2007 and 2014 allows for a new phase called the Energy Union, which amounts to a qualitatively new step to equip the EU with a coordinated and holistic approach to energy and climate.
Jean-Arnold Vinois
The Global Dimension of EU Energy Policy
Abstract
The European Union (EU) energy policy has essentially been driven by domestic European concerns, to increase energy efficiency and reduce carbon emissions, and to raise self‐sufficiency and reduce import dependence. Concerns about global issues have been subdued. Costs are hardly mentioned, nor the competitiveness of European industry, nor the trade relations with the immediate neighbourhood, North Africa, the Middle East and Russia. Even concerns for social issues, such as the redistributive effect of energy costs and taxes, are not mentioned. The justification was that external oil and natural gas supplies are unreliable and increasingly expensive. Instead, world market energy prices have fallen. Climate concerns are essentially a European matter. Consequently, EU energy policy has become a burden for industrial competitiveness. Support for wind and, especially, solar power has reached levels where the implicit price of CO2 not emitted is up to one hundred times the traded Emission Trading System (ETS) price. The policy provides the EU with the world’s most expensive electricity without corresponding reliability, at a huge social cost.
Øystein Noreng

High Politics: The New Security Dimension of European Energy Policy

Frontmatter
Geopolitics and the Foreign Policy Dimension of EU Energy Security
Abstract
This chapter outlines the geopolitical context in which EU’s foreign energy policies are being framed. Europe is in a particularly delicate position when compared to the other large energy-consuming regions of the world, as it is situated at the margins of a ‘new arc of instability’. Moreover, the incisiveness of the EU’s foreign energy policy is undermined by fragmentary interests within the EU. In the post-Cold War era, the EU has tried to address energy security challenges in multiple ways, but the guiding principle has been to promote energy security by supporting the idea that free markets depoliticize energy trade. The chapter provides a series of examples showing how the EU has deliberately pursued foreign energy policy interests by making use of its newly devised ‘rules of the game’ inspired by the principles of market liberalization. This led to divergent views between the EU and external suppliers. Finally, the chapter offers a brief overview of EU foreign energy policy instruments included in the Energy Union concept. This can be regarded as an attempt to overcome problems posed by the existence of fragmentary interests within the EU, and shows a recognition of the need for new forms of engagement with external suppliers.
Luca Franza, Coby Van Der Linde
Wither the EU’s Market Making Project in Energy: From Liberalization to Securitization?
Abstract
This chapter embeds the Energy Union debate in the broader context of European Union (EU) policy paradigms, and explores how the EU went from focusing on the commercialization of energy policy to the securitization of energy policy. It traces EU (grand) strategies in energy, assesses to what extent the Energy Union entails veritably new policy approaches, and explores whether it represents a mere attempt to rebrand existing policies. The chapter does so by comprehensively assessing relevant recent policy documents and proposals as recently tabled. The chapter tentatively argues that the Energy Union reveals new rhetoric as well as elements of a paradigm shift, but that much will depend on the European Commission’s ability and readiness to materially move from the long existing paradigm of market liberalization toward a securitization agenda.
Tim Boersma, Andreas Goldthau
The Hunter Becomes the Hunted: Gazprom Encounters EU Regulation
Abstract
This chapter addresses two questions. Firstly, judging from the growing regulatory pressure on Gazprom, has the EU really become liberal mercantilist, or is it still just liberal? Secondly, how can Gazprom respond to the pressure? The chapter finds that the EU has become far more systematic and salient in its measures to handle Gazprom, but that it is methodologically difficult to say, on the basis of this case alone, whether the regulatory tightening amounts to a new liberal mercantilist stance or not. The chapter lays out several avenues that Gazprom has followed or could follow in response to the EU and concludes that the best approach for Gazprom would be to adapt to EU market liberalization rather than fighting it—which it is increasingly doing.
Indra Overland

Low Politics: The Regulatory Dimension of European Energy Policy

Frontmatter
An Industry Perspective: The Primacy of Market-Building
Abstract
The literature on European control of security of supply has recently focused on the high politics of the EU as a potential actor in world energy. However, this chapter argues that this view though perfectly valid is, to some extent, missing the point. From a practitioner’s perspective, substantial developments in the EU’s regulation of security of supply have also taken place that are no less significant. In particular, issues associated with the low politics of security of supply standards associated with balancing energy and cross-border trade that keep the lights on real time. In responding to the proposals, there is a strong neoliberal consensus in the industry and complete deadlock on the way European markets should be designed. The differences between companies can be explained with reference to their underlying interests, shaped by incentive structures, created as a result of regulatory design. To demonstrate this argument, the chapter uses European energy industries’ reaction to the Energy Union consultation on New Energy Market Design as a case study. It is based on the discussions held in Eurelectric, national trade associations and individual energy companies in developing the industries’ public position.
Sebastian Eyre
Regulating for Consumers? The Agency for Cooperation of Energy Regulators
Abstract
The European Commission’s proposal for the Energy Union is a guiding strategy to integrate the European Union (EU)’s energy market, improve security of supply and revitalize energy efficiency measures. This chapter establishes a connection between the Energy Union and the Agency for Cooperation of Energy Regulators (ACER). Regulation of the energy market must contribute in three areas for the Energy Union to be judged successful: (1) Integration of national markets into the EU’s Internal Energy Market (IEM); (2) improvement in energy security; and (3) lower consumer bills. The aim of this chapter is to review the institutional structure and regulatory tools used to fulfill the energy security mandate of the Energy Union and the ability to impact energy prices. Increasing levels of energy poverty and divergent efforts to improve energy security are hallmarks of liberalized markets, deficiencies the Energy Union attempts to resolve. Energy justice emerges as a means to alter liberal energy markets dominated by private companies, with politicians redirecting profits to consumers. However, it is argued here, transparency needs to be a hallmark of the Energy Union, battling corruption and improving decision-making thereby assisting rate-payers in lowering energy bills.
Michael Carnegie Labelle
The Energy Network: Infrastructure as the Hardware of the Energy Union
Abstract
This chapter investigates the incremental developments in the trans-European energy networks by looking at the physical networks aimed at connecting the national markets, which we dub the “hardware” complementing European Union (EU) energy network regulation—the “software” of the energy market. The central argument of this chapter is that the full integration and a high level of interconnectivity represent the main instrument for the gradual construction of a resilient Energy Union with a forward-looking energy policy meant to ensure safe, sustainable and affordable energy for Europe. The Energy Union project benefits from the increasing politicization of the energy policy and it institutionalizes a holistic approach to it. The latter is endorsed by all political levels in the institutional quadrangle and reinforces the important infrastructure dimension of European energy security.
Adina Crisan, Maximilian Kuhn

Contesting the Energy Union

Frontmatter
An Odd Pro-Market Trio: Germany, the UK and Norway
Abstract
The European Union (EU) energy market is fragmented in terms of resources, policies and institutions. The North-Western market, centered on the UK, is liberalized (particularly compared to the Mediterranean and Eastern markets), and its gas-to-gas competition increasingly shapes the German and Central European market. This chapter examines the options that the biggest “internal” EU gas suppliers (i.e. including Norway) and market-players face in the context of the Energy Union proposal, their reactions to a more mercantilist policy agenda, and how their preferences and responses shape the energy union debate. These three, more liberal, players, represent the main internal opposition to possible modifications of the EU’s liberal approach to the political economy of energy.
Svein S. Andersen, Andreas Goldthau, Nick Sitter
No United Front: The Political Economy of Energy in Central and Eastern Europe
Abstract
This chapter analyzes the deep energy policy rift within Central Eastern Europe (CEE). It argues that although these countries share number of issues (e.g., infrastructural limitations), there are important differences among them when it comes to preferences towards the development of the Energy Union and EU energy policy in general. These differences also translate into individual country positions on the Energy Union as the EU’s newest—and some argue mercantilist—approach towards external relations. The chapter claims that the positions of CEE countries are influenced by different perceptions of energy policy priorities and structural obstacles to the implementation of Energy Union. While some, like Poland, would prefer EU to provide mercantilist muscle, others like Hungary would like to maintain sovereignty in the energy policy.
Andrej Nosko, Matúš Mišík
Something for Everyone: Political Fragmentation and Policy Accommodation in the European Parliament
Abstract
The European Parliament (EP) and its component political groups will play a key role in the creation of the proposed Energy Union. Many of the initiatives put forward by the Commission in its Energy Union package are legislative in nature and will require parliamentary approval. The biggest challenge facing the EP may well be internal. Following the elections of May 2014, the assembly is more fragmented than ever. In June 2015, a draft resolution on the EU Energy Security Strategy was voted down by a coalition of moderately euroskeptic and strongly anti-EU forces; in December, the mainstream parties pushed through a resolution on Energy Union against the votes of parties on the left and right flank. As of the end of 2015, the EP’s position on Energy Union was that there must be something in it for all the mainstream factions—liberals, conservatives, socialists and greens. Consequently, the EP has eschewed the most mercantilist elements of the Energy Union, embraced its liberal elements (subject to social and environmental flanking policies), and endorses many of the proposals that fall in the grey zone between liberal and mercantilist measures.
Michiel van Hulten, Nick Sitter
Conclusion: Liberal Mercantilism?
Abstract
The point of departure for this book was the role in EU external policy that the Commission has gradually acquired as the manager of the EU’s regulatory state. In this capacity, the Commission’s mandate is narrow, and its toolbox is limited. However, within the parameters that the single market rules constitute, the EU can and does act in a unified, cohesive and comparatively effective way. Recent developments in international energy markets have highlighted asymmetries in the way that the EU (and its member states) on the one hand, and Russia and Gazprom on the other hand, pursue their objectives in the gas market. Such developments represent the backdrop for the Energy Union initiatives. The Russia’s annexation of the Crimea brought these issues to the forefront of the EU’s political agenda. The EU’s emphasis on market-building and competition law represents a unique liberal approach to regional governance and trade—a liberal grand strategy. The Energy Union proposal acknowledged that this strategy now faces important challenges, and that this may warrant new policy initiatives that amount to a modification of—or even a departure from—the EU’s liberal regulation and practices in energy governance.
Svein S. Andersen, Andreas Goldthau, Nick Sitter
Backmatter
Metadata
Title
Energy Union
Editors
Svein S. Andersen
Andreas Goldthau
Nick Sitter
Copyright Year
2017
Electronic ISBN
978-1-137-59104-3
Print ISBN
978-1-137-59105-0
DOI
https://doi.org/10.1057/978-1-137-59104-3