Leadership, Competitiveness and Energy: Imagining a European Climate Diplomacy

May 28, 2015 | 00:00
Leadership, Competitiveness and Energy: Imagining a European Climate Diplomacy
Leadership, Competitiveness and Energy: Imagining a European Climate Diplomacy
In my previous article The Necessary Dream of a European Energy Diplomacy I argued that the time is ripe for a strong and compact European energy diplomacy. This situation, however, also extends to climate diplomacy which, as discussed in this piece, could contribute to the EU energy policy and its position on the global stage, both on the short and the long term.

Indeed, the European Commission Communication on the Energy Union did not just mention the revival of its energy diplomacy, but it also brought up climate diplomacy. Not by chance: energy and climate are strictly correlated, and the European strategy for the first has to be coherent with that of the second in order to reach the ambitious targets the EU has set in October 2014. This is especially valid on the international relations side, where past and present events are as important as those which affected energy in the past months, in particular due to the approaching UN Climate Change Conference of Paris (the 21st Conference of Parties, COP). However, even if the European action could be stronger on climate than in other sectors, the long term perspectives are still anything but clear.

On the one hand, the choice of Miguel Arias Cañete as Commissioner for Energy and Climate has not been positively acknowledged by many environmentalists, as the Spanish aristocrat and his family had significant interests in the oil industry. On the other hand, in January 2015 the EU declared a diplomatic offensive on climate, announced after a meeting between Cañete and the High Representative Federica Mogherini and which will apparently involve celebrities and thousands of diplomats. In spite of the endorsement by the Member States, this plan has yet to be fully revealed. Meanwhile, on the 12th of November 2014 President Obama and the Chinese Prime Minister Xi Jinping agreed on a G2 deal to cut emissions. A decision which came as a surprise from two countries which have historically avoided international commitment on climate change, and which increased the competition for the global climate leadership.

Maintaining leadership and avoiding bankruptcy

The EU has valid reasons to strengthen its climate diplomacy, besides the obvious incentives in finding a solution to the issue. First, the EU has already committed to a reduction of 40% compared to the 1990 level by 2030, a target which will not come cheap. Europe should then be strongly motivated to involve other countries in this needed but expensive low carbon transition, especially those which are its direct economic competitors and already pay less for their energy. As an example, in 2013, the British Department for Energy and Climate Change estimated that the average EU15 domestic electricity price was more than double the value for the US and went as high as 3.25 times for Denmark and 3.2 for Germany.

Another case for a strong climate diplomacy is that, notwithstanding the historic commitment in the matter, the EU is risking to be overcome by other international players in its ambition to be the world climate leader. Despite its significant environmental issues, China is increasingly interested in the matter, and since its 2006-2010 Five Years plan the country managed to have a dominant position in renewables. Already in 2009, 45% of solar PV was Chinese, and in 2013 the country had the highest renewable production in the world. While these are absolute values and dilute when referred to the size of the Chinese economy, it is important to remember the importance of economies of scale in sectors which strongly affect climate change, such as the heavy industry or energy.

One of the greatest flaw of the European climate diplomacy in the past was probably the firm belief that the EU could go alone, serving as a role model for the world, which would then follow. This was perhaps a reasonable statement before 2007, when the economy was growing, the oil price was three times the current value and the green revolution seemed likely to happen. Then, the crisis took place and swept away all these hopes. Soon after, the Emission Trading System (ETS), the EU most innovative tool in emissions reduction, crashed: in 2013, the carbon price was as low as 2.81 euros per tonne, ten times less the value of the year before. At a level of six euros per tonne, the ETS has still to recover. And going alone does not seem a cheap and feasible option anymore.

Empowering European climate diplomacy

The EU has, however, still a few strong advantages against its rivals in leading the global fight to climate change. First, despite the diplomatic advancement, only Russia, the USA, Norway , Mexico and a few minor emitters (Andorra, Lichtenstein, Switzerland and Gabon) have sent the UN their Intended Nationally Determined Contributions (INDCs), the document providing the amount of greenhouse gases (GHG) they will commit to reduce. These values are also significantly lower than the EU proposal: the U.S. indicated a reduction of 26%-28% by 2025 compared to the 2005 level (equivalent to 14–17% below 1990 levels), Russia 25%-30% by 2030 compared to 1990 levels, an easy task as the country has been decommissioning a large part of its heavy industry since the fall of the Soviet Union. In addition, despite the failure of the ETS, the EU has still tools which the other countries lack. Successful or not, there is not a more comprehensive energy and climate package in the world as the one Europe has approved in October 2014. A leadership by example which could be hardly challenged by Russia, whose proposal focuses more on the importance of its forests than on renewables or energy efficiency, or by the U.S., which relies mostly on the Clean Air Act, a very broad piece of legislation which was not originally designated to address climate change. Plus, EU and China itself have widely cooperated on climate change since the Rolling Work Plan of 2006, thanks to the importance of the European know-how in the matter. A collaboration which was strongly remarked when the High Representative Federica Mogherini visited China on the occasion of the 40th anniversary of EU-China relations.
Source: Author's elaboration on UNFCC data (2014)
Source: Author's elaboration on UNFCC data (2014)

How to further strengthen the European climate diplomacy? It is possible to consider two solutions, one on the short and one on the long term.

The best option for the EU to consolidate its international position on climate change in the following months is probably to make Paris 2015 a success, and be the reason behind that victory. As discussed with Liz Gallagher, programme leader on Climate Diplomacy at the think tank E3G, the most successful COPs, such as Durban, have happened when interests have been aligned. The key to make this happen is coalition building, and perhaps the EU has learned its lesson on this. Europe has started focusing on this strategy since the Copenhagen conference in 2009 and it has engaged in particular with Latin America and the Caribbean, through initiatives such as EUROCLIMA and the EU-CELAC Summits. The work of DG DEVCO has also been a strong asset in climate change diplomacy, directly and indirectly, as in the case of the Voluntary Partnership Agreements (VPAs) to reduce deforestation in third countries, such as the DRC or Guyana. Ms. Gallagher highlighted then the importance of frontloading finance, not only for the poorer countries but also by providing systematic solutions for middle-income developing countries, aligning the current funds to the 2 degrees target. The EU should not also forget adaptation, she added, as Paris will probably focus on building resilience, an issue which many developed countries have not taken enough into account yet. This is a series of objectives which will need the development of a Paris Protocol which will define a strong and transparent UN institutional framework, unlike the current complex overlap of tens of bodies, from the UNCCC to the IPCCC, the FAO or the IFAD. An outcome where the EU could have a stronger seat if it will play its climate diplomacy cards right.

The development of a stronger European climate diplomacy will not be limited to Paris though, as this output will have to be applied through regional and global tools and programmes. Here is where the EU can be most effective by exploiting its solid know-how. However, more domestic consistency is required to play an important role in this, and the comparison with energy is here strong.

First, a more powerful climate diplomacy will need a clearer institutional approach, avoiding the current intra-European overlaps and giving the role of being the “European voice” to a single body, possibly the EEAS. The nature of climate change makes this choice even more profitable than for energy, as the discussion requires a truly international platform. If the Member States are valid partners concerning the countries with which they have solid diplomatic ties, the EU could consistently represent the overarching platform to coordinate the whole effort.

Coherence is also fundamental in a number of aspects. As with energy and many other sectors, the European and the national interests often clash, leading to sub-optimal results. In particular, the risk is to have a separation between the targets on which the Member States have agreed, and the tools to realise them. For instance, the UK and the Netherlands, among the others, will not reach its legally binding renewables target for 2020. The same energy efficiency goal, which was however not binding, will be missed by the EU by at least one or two points. 40% is an adequate level of reduction, if it does not remain merely theoretical. The Latvian Presidency has struggled to anticipate the start of the Market Stability Reserve (MSR), the first tool for the reform of the ETS, by 2019. The Commission proposal was instead 2021, due to the pressure by Member States such as Poland. Two years which would have cost the EU as much emissions as the annual amount from 50 medium sized coal plants (under Thomson Reuters Point Carbon analysts estimates).
Source: author's calculations over IEA data (2014)
Source: author's calculations over IEA data (2014)

Two sides of the same coin: energy and climate

The coherence in domestic policy is particularly important because of the focal role of the European leadership by example in its climate diplomacy. This concerns the whole approach of all European policies as well, but in particular energy.

As the Energy Union proposes a revitalised European energy and climate diplomacy, the first option is to develop two separate diplomacies, with coherent but distinct objectives. Or, the EU could mainstream climate change into the external action for energy (and potentially in other sectors). Exploiting the wave of the Energy Union, the EU can turn it into an Energy and Climate Union, a purpose which is already envisaged by its full denomination: a Resilient Energy Union with a Forward-Looking Climate Change Policy. Not by chance the Package of the 25th of February included A blueprint for tackling global climate change beyond 2020. The document is interesting, but it is sometimes in contradiction with other European policies. Among the suggested next steps for the EU, it states: press for the swift liberalisation of trade in environmental goods and services before the end of 2015. In spite of the criticism towards Russia or Brazil, the EU itself is not immune to protectionism, an accusation which Obama himself addressed to Europe last February. Furthermore, the European strategy on the external supply of energy is often incoherent with its climate objectives. Gas has still a dominant role in its energy mix and in its infrastructural plans, from the Southern Corridor to the domestic Projects of Common Interest (PCI). Despite the smaller amount of emissions when compared to coal or oil, natural gas is anyway a fossil fuel, and 52% of its global reserves should be kept in the ground to reach the 2 degrees target, as assessed by the University College of London (see chart). The so-called Renaissance of coal has apparently ended, but the resource has still an ambiguous role in countries such as Germany, a clear importance in Poland and the supply from the U.S. is cheap and often welcome in Europe. And so on.

Regional distribution of reserves unburnable before 2050 for the 2 °C scenario
FSU, the former Soviet Union countries; CSA, Central and South America; ODA, Other developing Asian countries; OECD, the Organisation for Economic Co-operation and Development.
FSU, the former Soviet Union countries; CSA, Central and South America; ODA, Other developing Asian countries.

Data source: The geographical distribution of fossil fuels unused when limiting global warming to 2 °C

Nonetheless, a European energy diplomacy which will seriously take into account climate change has in its hand a large number of opportunities, such as the development of renewable energies in Northern Africa, a purpose on which organisations such as the MedReg or Res4med are already working. If many European companies are involved in oil and gas extraction in Sub-Saharan Africa, others are participating in renewable energies projects, such as Enel Greenpower. Off-grid solutions could provide a quick fix to issues such as the development of interconnections, reducing energy poverty and the emissions of the time worn but still widespread diesel generators in Kenya or Ethiopia. A low carbon energy diplomacy can insulate many European commercial partners from the geopolitical instability associated with a high reliance on fossil fuels, either in consumption or in production. This is the case of Nigeria or Egypt, for instance.

Climate diplomacy is less tangible, but this does not mean its effects are less evident. Besides the actual impact in emissions reduction and adaptation, its success is also an index of a fundamental aspect of the EU: its effectiveness. Europe is on track to reach its 2020 climate target, but mostly thanks to the economic crisis, which reduced economic activity and emissions at the same time. The EU will not rely on this in the future (hopefully), yet it will have to reach its already agreed 2030 target, possibly with a forward looking attitude to its 2050 plans, which many seem to have forgotten. And this will require a full and effective implementation of the policy instruments it has already defined, and which has rarely happened in the past. In addition, climate change diplomacy is probably the strongest kind of soft power the EU will have at its disposal in the next years, but it will be strongly undermined if Europe will not respect its commitments, or if this effort will not be internationally recognised. If the Energy Union is the first step for a stronger, more confident EU (or at least for a more clearly defined), climate change diplomacy is the first battlefield where this attitude will be tested. And where, for the first time in decades, Europe could be again leading the world.
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