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Safeguarding the energy supply—A challenge to the European community
Eneqj Vol 6. pp. 383-387. 1981 Printed tn Great Britain All rights rewved
0360-542/81/040383-05u12.oo/0 Copyright 0 1981 Pergamon Press Ltd.
SAFEGUARDINGTHEENERGYSUPPLY-A CHALLENGETOTHEEUROPEANCOMMUNITY? H. MICHAELIS Friedrich-Schmidt-StraSe 68-70, D-5000Kiiln 41, Federal Republic of Germany (Received 28 Jdy 1980) Abstract-The necessity of maintaining an adequate energy supply in the face of the two oil crises of the past seven years has challenged the European Community (EC) to formulate a joint European energy policy. An analysis of the energy consumption and the economic situation in the EC in 1979shows heavy dependence on imported fuel, along with insufficient economic growth, rising prices and increasing pressure on the balance of payments because of the increasing burden of rising oil prices. Political measures have been agreed upon within the framework of the OECD, notably the “crisis management” strategy which has, however, not yet been tested. In addition, the EC has set three goals for its autonomic energy policy: coordination of energy conservation programs in the member states, encouragement of investment and of projects in the areas of energy conservation, increased use of coal and nuclear power, and a research and development program for new energy technologies. Consideration of the targets which have been set and the achievements so far obtained show that a great deal more must be done if adequate energy supplies are to be maintained in the face of increasing uncertainty. A mnnagementprogramforEurope. The threat of further reductions in oil production, produced by critical political problems in the Middle East and increasing oil prices if the oil-exporting countries take advantage of supply shortages, make it imperative that the EC member states make every possible use of opportunities within the Community to solve energy problems cooperatively.
1. ENERGY SUPPLIES
AND COSTS FOR THE EUROPEAN
COMMUNITY
During the last seven years, the EC has had two challenges to the maintenance of its energy supply: the oil crises of 1973-74 and of 1979. Did the EC take up the challenge and did it react appropriately? We begin with a look at the most important figures for the gross inland energy consumption within the EC for 1979. Hard coal and lignite, mostly produced domestically, accounted for 22% of the total consumption of primary energy while natural gas (IS%), nuclear energy (3%), and other forms of energy other than oil covered a total of 25% of energy demands. The remaining 53% of the total energy requirement was accounted for by oil, of which 85% was imported, mainly from OPEC countries. Oil consumption increased during 1979 by 3% over the figure for 1978. The total primary energy consumption of the EC was l@ tonnes of oil equivalent in 1979. This is approximately equal to the total for 1973, in spite of economic growth of 11% (1.7% per annum) in the period 1973-79. However, there is still a strong_ dependence on imports to cover a total of 54% of energy requirements (60% in 1973) and this must be taken into account when evaluating the extent to which the energy supply is assured. Although there has been a reduction in the contribution of imported oil to primary energy consumption since 1973, it remains very high at 47%. The overall economic situation for the EC looks rather gloomy because of the increasing burden of oil costs. The economic growth rate for 1977-78 was 3.1%; for 1978-79, it was 3.3%; but, for the period 1979-80, a growth of only 1 or 2% is expected and the actual growth may well turn out to be even smaller. The unemployment rate can only be limited by economic growth of at least 4.5% so that the number of people out of work (in 1978 and 1979, there were about 5.6 million unemployed) will increase still further in 1980. The general price level in the EC has been significantly affected by the increase in oil costs and rose by 13.4% between January 1979 and January 1980, almost parallel with the increases in the U.S.A. The most alarming development, however, has been the deterioration in the balance of payments: while in 1978 the Community balance sheet for commerce and services indicated a net surplus of $18 x 109,the figures for 1979 showed a deficit of $4 X 109and a still larger deficit of at least $7 x 10’ and probably considerably more is expected for 1980. This development is, to a large extent, the result of the drastic increase in the price of crude oil, which leaped from tThis paper was presented at a conference of the Management Center Europe on “The Energy Crisis-Implications for Business” (12 May 1980),Europe Hotel, Brussels, Belgium. 383
384
H.MICHAELIS
between $1.91 and $3.00 per barrel in 1973 to $l&$ll per barrel in 1974, following the first oil crisis. The increases have continued and took the price for a barrel of crude oil up to $18 by the end of 1978to between $25 and $30 at the end of 1979.During 1980,prices have ranged from $28 to $35 per barrel. The resulting annual increase in the oil burden on the EC was around $50 x 10’ between the end of 1978 and 1980; the latest figures yield even higher cost estimate. By comparison, the accumulated net surplus in the balance of payments for the OPEC countries will total approx. $15&$180 this year. Two possible effects of the oil-price explosion are particularly worrying. One is the effect on economic growth, employment and prices (the “magic triangle” data), with the apparent danger of a new recession like that of 1973-74. The other is the pressure on the balances of payments, which can lead to restrictions on currency convertibility with unforseeable consequences. Similarity to the events of 1929 should not be overlooked. Differences in energy prices within and outside the community are a serious hindrance to the competitiveness of EC products on the world market. The need to reduce its dependence on oil imports is forcing the EC to alter the structure of its energy supply. Whereas the production costs for 1 tonne of Middle East oil are around $10, North Sea Oil Sea Oil costs between $25 and $75 per tonne to produce. The export price is approximately the same for both regions at $175 to $240 per tonne. Possible substitute energy sources are still more costly: the price of 1 tonne of imported coal for power stations is at least $50 per tonne of oil equivalent and is increasing rapidly but it is still much cheaper than the price of crude oil. The production costs of coal from EC member states are upwards of $100 per tonne of oil equivalent and often well above this figure. 2.ENERGYPOLICIESOFTHEEUROPEANCOMMUNITY
We distinguished two long-term policy developments for the EC. A. Within the Framework of the OECDIIEA At the summit conference in Copenhagen in December 1973, the EC and other oil-importing countries decided to try to find a solution to their joint energy problems within the frame-work of the Organization for Economic Cooperation and Development (OECD). In February 1974, 12 nations agreed to form a working group which would draw up a plan of action for the case of a crisis in the energy supply, regulate long-term cooperation between the oil-importing states, and agree on compulsory minimum oil reserves, energy conservation measures, and a codex for the international oil companies. Good progress was made and resulted in the creation of the International Energy Agency (IEA) in Paris. By the fall of 1975, agreement had been reached on a number of measures, in particular on a crisis management strategy and on restrictions on oil imports and oil consumption. Crisis management refers to a strategy whereby an emergency, defined as a reduction in the oil supply to any one of the IEA countries by at least 7%, gives rise to an act of solidarity by the remaining countries to ensure continued supplies. The EC acts here as the executive agent for its member states. In view of reduced oil production and increased prices resulting from the policies of the OPEC countries, both the European Council in Strasbourg and the economic summit conference in Tokyo resolved in June 1979 to reduce oil consumption for 1979by at least 5% below that of the previous year and to keep oil imports from 1979 to 1985 at or below the level of 1978. Neither goal was attained in 1979: the consumption of oil was not reduced by 5% but rose instead by 2.6%; net oil imports increased by 2.7 x 106tonnes. In order to obtain a clearer picture of the oil market and the nature of oil transactions, the Council of Ministers established a register of mineral oil imports. A fourth joint action was the introduction of embargo measures against Iran, which were successful in that the proportion of oil imports coming from Iran was reduced from 14.7% in 1977 and 1978 to 5.5% by the first quarter of 1980. B. An Autonomous Energy Policy of the EC The central goal of the EC energy policy is a substantial reduction in the dependence on
Safeguardingthe energy supply
385
imported fuel by 1990.This goal is clearly stated in the program presented to the European Council of Ministers on 9 October 1979,and in the speech of the President of the Commission, Roy Jenkins, in Strasbourg on 13 February 1980. The actions to be taken to achieve this goal are concentrated in three main areas of which the first, the cornerstone of the policy, is the conservation of energy and, in particular, the coordination of the energy-conservation programs in the various member states. The Commission expects that up to 100x lo6 tonnes of oil equivalent (20% of present oil imports) can be saved annually. Savings on the present rates of consumption of 20-35% in the transport sector, 15-35% in industry, and as much as 50% in domestic consumption (especially through better heat insulation and the use of heat pumps) are expected. The second major point is to encourage investment and projects for energy conservation and for the deve!opment of domestic energy resources and new forms of energy. In the coal sector, this programme will mean building new mine-pits, modernising coal-fired power stations, the speedy construction of demonstration plants for the production of synfuels from coal, and increasing subsidies for coking. The importance which the Community attaches to the role of nuclear power remains unchanged and is expressed in the Commissioners’ statement that “without further development of this source of energy, an increase in our economic capacity and a reduction of unemployment are not possible”. The Heads of State or Government of the EC resolved in Venice on 27 and 28 April 1980, to appeal urgently to the member states to increase their efforts to develop nuclear power further. This political standpoint is shared by practically all worldwide and regional organisations which are concerned with energy questions, UNO, ECE, IEA, COMECON, and the World Energy Conference. Community policy in the nuclear sector is particularly concerned with the advancement of nuclear technology and with increasing activity in the “nuclear trilogy” fields of atomic waste disposal, reprocessing and breeder reactors. This “nuclear trilogy” was taken up by the Council of Ministers on 18 February 1980. The use of new forms of energy (in particular solar energy, wind, geothermal energy, and atomic fusion) is being encouraged by the Community in various ways. The third main area covered by the autonomous energy policy of the EC is a broadly based research and development program, which includes research at EC centers, as well as participation in national and international programs and the necessary coordination of national programs within the Community. The most important fields included in the program are nuclear technology and reactor safety, new technologies for the conservation of energy (especially the further development of heat pumps), the advancement of new forms of energy (for example, thermonuclear fusion as represented by JET project in Culham and the EURELIOS project, a solar power plant in Sicily), further development of coal-based synfuel production and of hydrogen technology. The latter is concentrated chiefly on water fission through thermochemical processes using nuclear heat. A world-wide research and development program in the field of hydrogen technology is centered at Ispra, the main EC research center. The expenditure of the EC for research has always been small, however; the $220 x IO6 spent on research and development in the energy sector in 1978 represent 8% of the $2.6 x lo9 per annum spent nationally by the member states. 3. ACHIEVEMENTS
We now consider how successful various aspects of the EC energy policy have been this far. Agreement on the crisis management strategy should doubtless be considered a success, but the plan itself has not yet been put to the test. As an old hand in dealing with Article 59 of the European Coal and Steel Treaty, I am somewhat sceptical about it. On the other hand, while the targets set for the reduction of oil consumption and oil imports have not yet been reached, I am optimistic that they will be reached by 1985. I am also very hopeful that a great deal can be achieved by energy conservation measures. My experience in the Federal Republic of Germany suggests, however, that here the sights have probably been set too high. The coal program is also very ambitious. It assumes an increase in the consumption of hard coal from 270x lo6 tonnes in 1979 to 335 x 166 tonnes in 1980 and 490X 106 tonnes in the year 2000. This would be an increase in absolute terms of 220 X 106 tonnes or of 80% by the end of the century. However, an increase in domestic coal
386
H.MICHAELIS
production is fraught with difficulties and, while coal imports offer an alternative, the world coal trade volume remains small (only 7% of world production, a little over 200 x 106tonnes) and an increase of at most 370 x lo6 tonnes by 2000 can be hoped for. Of this quantity, very little will be available for the EC, which should therefore not set too much store by imports. This is a very sobering thought since the production of synthetic fuels from coal, which is an important and in principle realistic option for the substitution of imported oil, is obviously dependent on adequate supply of coal. The question remains unanswered where this coal can be obtained. A simple calculation ihustrates the extent of the problem: the production of 1 tonne of coalderived gasoline requires the input of more than 3 tonnes of hard coal. In order to replace a mere 10% of the mineral oil products which are expected to be consumed in 1990 or 2000, 180x lo6 tonnes of hard coal or its equivalent would be needed. This is an increase of two thirds over and above projected consumption figures for coal and it is doubtful whether this amount of coal can be obtained. The development of nuclear power in the member states of the EC is progressing with vastly different speeds and intensities. While France is pursuing an expansive development program with the aim of covering 30% of its primary energy needs from nuclear power by 1990 and the development in Belgium is similar, in the Federal Republic of Germany and, especially in Italy, Great Britain and the Netherlands, nuclear power will not contribute more than about 10% to the primary national energy consumption in 1990. It is, therefore, doubtful that the targets of the Commission, which are set at 170 GW (13% of gross inland consumption) installed nuclear power capacity in 1990 and approx. 275 GW (21% of gross inland consumption) by the year 2000 can be reached. The expected contribution of the new forms of energy are not spectacular. A contribution of 0.7% in 1990 and 1.5% in 2000 is expected to the primary energy consumption in the EC. These targets will probably be reached but represent far less than has generally been hoped for. It is particularly unfortunate that the EC energy programs assume what appear to be unjustifiably favorable figures for future oil gas supplies. Oil imports to the EC are expected to be as high as those in 1979 (470 X lo6 tonnes). This level is certainly not unthinkable but very uncertain since the political situation in the Middle East is threatening the availability of supplies and further large price increases are putting great strains on the balance of payments and may soon lead to a dramatic change in energy policy. We must conclude that the EC energy policy is in no way equal to the challenge it is likely to face. 4.DIFFICULTIESANDPROSPECTSFORAEUROPEANENERGYPOLICY
Why is it so difficult to achieve a united European energy policy? There are a number of classical reasons, which include differences between the member states in the pattern of control over the energy economy (for instance, the degree of influence exerted by the national governments) and inadequacy and incoherence of the three treaties which form a basis for cooperation; also, divergent energy-political interests with regard to coal, North Sea oil, relationships to oil-producing countries in the Middle East, nuclear weapons states or not and so forth; finally the lack of a consensus regarding further development of nuclear power and differences in opinion on European integration. It is easily seen that the optimism of the Hallstein era was not justified as far as the energy market and energy policy of the EC are concerned. The pressure towards still further integration expected to result from the introduction of new functions into the EC (the so-called “spill-over effect”) did not arise. Neither has the new political legitimacy, resulting from the directly elected European Parliament, given the necessary impetus towards cooperation. Whereas the energy policy of the EC once set the pace, it is now limping sadly behind. What are the causes of this malady? The failure of the common energy policy of the EC is not so much the result of inadequacy of the instruments available to the European organizations as of insufficient and inappropriate decision-making structures. The ECSC and EURATOM treaties provide more than sufficient instruments. Energy politics at the level of the EC are primarily concerned with a foreign trade policy and the instruments available, the common customs tariff and the competence to negotiate in commercial agreements, are almost entirely in the hands of the Community. But the Commission is no longer the motor of development;
Safeguarding
the energy
supply
387
empty phrases such as conserving energy, new forms of energy, alternatives to oil, or increasing the production of coal betray the inadequacy of the Commission’s powers of decision in energy questions. When concrete targets have been occasionally formulated, such as exact limits to oil consumption and oil imports, they have rarely been reached. Nevertheless, integration in the European Community is progressing in also the energy sector, albeit slowly. There has not been a leap forward, no consolidation of the integration so far achieved, no enlargement of the judicial competence of the Community, and no improvement in the conditions of competition. Success has been limited to increasingly intensive cooperation in the field of foreign policy. The last statement requires some further explanation: economists and politicians justify European integration in two ways: firstly, the increased possibilities for rationalisation within the EC and, secondly, making use of the bargaining power of the EC towards non-EC states. What is the present position here? The rationalisation potential of the Community has hardly been exploited in the field of energy. Trade in energy products within the EC is meagre and is practically limited to coking coal and small quantities of North Sea oil and gas. Joint efforts in research and development in the energy sector give some cause for satisfaction, although they account for less than one tenth of the amount which the individual member states spend on energy research. The effectiveness of the crisis management strategy remains an open question; it may represent a good chance to make use of the rationalisation potential within the Community. The external bargaining power of the EC has, however, been far better used than was expected. Of the summit conferences organised within the framework on European political cooperation, none has failed to attach considerable importance to the discussion of energy problems. The EC generally tries to coordinate the standpoints of its member states in the discussions with third parties, i.e., with the other OECD countries (either within the IEA or bilaterally with the U.S.A., Canada, and Australia), with the COMECON countries, with the oil-producing countries (e.g. the Iran embargo), and within INFCE. The most important energy-political issues continue to relate to procedures for ensuring adequate oil supplies and economic and financial measures to combat the difficulties which arise in connection with energy supplies. Agreements at the highest level have led to broader and more intensive cooperation in energy policy and to solidarity in a number of energy-political undertakings. However, the problem remains that these measures alone are inadequate to solve the future energy problems of the Community. Increasing tension and the possibility of a new crisis in the Middle East, along with further increases in oil prices through possible exploitation of oil shortages, make the supply of oil increasingly uncertain. We must, therefore, appeal to the governments of the EC member states to be aware of the critical nature of the present position and to use all possibilities which the Community offers to solve the problems of ensuring adequate energy supplies.
0360-542/81/040383-05u12.oo/0 Copyright 0 1981 Pergamon Press Ltd.
SAFEGUARDINGTHEENERGYSUPPLY-A CHALLENGETOTHEEUROPEANCOMMUNITY? H. MICHAELIS Friedrich-Schmidt-StraSe 68-70, D-5000Kiiln 41, Federal Republic of Germany (Received 28 Jdy 1980) Abstract-The necessity of maintaining an adequate energy supply in the face of the two oil crises of the past seven years has challenged the European Community (EC) to formulate a joint European energy policy. An analysis of the energy consumption and the economic situation in the EC in 1979shows heavy dependence on imported fuel, along with insufficient economic growth, rising prices and increasing pressure on the balance of payments because of the increasing burden of rising oil prices. Political measures have been agreed upon within the framework of the OECD, notably the “crisis management” strategy which has, however, not yet been tested. In addition, the EC has set three goals for its autonomic energy policy: coordination of energy conservation programs in the member states, encouragement of investment and of projects in the areas of energy conservation, increased use of coal and nuclear power, and a research and development program for new energy technologies. Consideration of the targets which have been set and the achievements so far obtained show that a great deal more must be done if adequate energy supplies are to be maintained in the face of increasing uncertainty. A mnnagementprogramforEurope. The threat of further reductions in oil production, produced by critical political problems in the Middle East and increasing oil prices if the oil-exporting countries take advantage of supply shortages, make it imperative that the EC member states make every possible use of opportunities within the Community to solve energy problems cooperatively.
1. ENERGY SUPPLIES
AND COSTS FOR THE EUROPEAN
COMMUNITY
During the last seven years, the EC has had two challenges to the maintenance of its energy supply: the oil crises of 1973-74 and of 1979. Did the EC take up the challenge and did it react appropriately? We begin with a look at the most important figures for the gross inland energy consumption within the EC for 1979. Hard coal and lignite, mostly produced domestically, accounted for 22% of the total consumption of primary energy while natural gas (IS%), nuclear energy (3%), and other forms of energy other than oil covered a total of 25% of energy demands. The remaining 53% of the total energy requirement was accounted for by oil, of which 85% was imported, mainly from OPEC countries. Oil consumption increased during 1979 by 3% over the figure for 1978. The total primary energy consumption of the EC was l@ tonnes of oil equivalent in 1979. This is approximately equal to the total for 1973, in spite of economic growth of 11% (1.7% per annum) in the period 1973-79. However, there is still a strong_ dependence on imports to cover a total of 54% of energy requirements (60% in 1973) and this must be taken into account when evaluating the extent to which the energy supply is assured. Although there has been a reduction in the contribution of imported oil to primary energy consumption since 1973, it remains very high at 47%. The overall economic situation for the EC looks rather gloomy because of the increasing burden of oil costs. The economic growth rate for 1977-78 was 3.1%; for 1978-79, it was 3.3%; but, for the period 1979-80, a growth of only 1 or 2% is expected and the actual growth may well turn out to be even smaller. The unemployment rate can only be limited by economic growth of at least 4.5% so that the number of people out of work (in 1978 and 1979, there were about 5.6 million unemployed) will increase still further in 1980. The general price level in the EC has been significantly affected by the increase in oil costs and rose by 13.4% between January 1979 and January 1980, almost parallel with the increases in the U.S.A. The most alarming development, however, has been the deterioration in the balance of payments: while in 1978 the Community balance sheet for commerce and services indicated a net surplus of $18 x 109,the figures for 1979 showed a deficit of $4 X 109and a still larger deficit of at least $7 x 10’ and probably considerably more is expected for 1980. This development is, to a large extent, the result of the drastic increase in the price of crude oil, which leaped from tThis paper was presented at a conference of the Management Center Europe on “The Energy Crisis-Implications for Business” (12 May 1980),Europe Hotel, Brussels, Belgium. 383
384
H.MICHAELIS
between $1.91 and $3.00 per barrel in 1973 to $l&$ll per barrel in 1974, following the first oil crisis. The increases have continued and took the price for a barrel of crude oil up to $18 by the end of 1978to between $25 and $30 at the end of 1979.During 1980,prices have ranged from $28 to $35 per barrel. The resulting annual increase in the oil burden on the EC was around $50 x 10’ between the end of 1978 and 1980; the latest figures yield even higher cost estimate. By comparison, the accumulated net surplus in the balance of payments for the OPEC countries will total approx. $15&$180 this year. Two possible effects of the oil-price explosion are particularly worrying. One is the effect on economic growth, employment and prices (the “magic triangle” data), with the apparent danger of a new recession like that of 1973-74. The other is the pressure on the balances of payments, which can lead to restrictions on currency convertibility with unforseeable consequences. Similarity to the events of 1929 should not be overlooked. Differences in energy prices within and outside the community are a serious hindrance to the competitiveness of EC products on the world market. The need to reduce its dependence on oil imports is forcing the EC to alter the structure of its energy supply. Whereas the production costs for 1 tonne of Middle East oil are around $10, North Sea Oil Sea Oil costs between $25 and $75 per tonne to produce. The export price is approximately the same for both regions at $175 to $240 per tonne. Possible substitute energy sources are still more costly: the price of 1 tonne of imported coal for power stations is at least $50 per tonne of oil equivalent and is increasing rapidly but it is still much cheaper than the price of crude oil. The production costs of coal from EC member states are upwards of $100 per tonne of oil equivalent and often well above this figure. 2.ENERGYPOLICIESOFTHEEUROPEANCOMMUNITY
We distinguished two long-term policy developments for the EC. A. Within the Framework of the OECDIIEA At the summit conference in Copenhagen in December 1973, the EC and other oil-importing countries decided to try to find a solution to their joint energy problems within the frame-work of the Organization for Economic Cooperation and Development (OECD). In February 1974, 12 nations agreed to form a working group which would draw up a plan of action for the case of a crisis in the energy supply, regulate long-term cooperation between the oil-importing states, and agree on compulsory minimum oil reserves, energy conservation measures, and a codex for the international oil companies. Good progress was made and resulted in the creation of the International Energy Agency (IEA) in Paris. By the fall of 1975, agreement had been reached on a number of measures, in particular on a crisis management strategy and on restrictions on oil imports and oil consumption. Crisis management refers to a strategy whereby an emergency, defined as a reduction in the oil supply to any one of the IEA countries by at least 7%, gives rise to an act of solidarity by the remaining countries to ensure continued supplies. The EC acts here as the executive agent for its member states. In view of reduced oil production and increased prices resulting from the policies of the OPEC countries, both the European Council in Strasbourg and the economic summit conference in Tokyo resolved in June 1979 to reduce oil consumption for 1979by at least 5% below that of the previous year and to keep oil imports from 1979 to 1985 at or below the level of 1978. Neither goal was attained in 1979: the consumption of oil was not reduced by 5% but rose instead by 2.6%; net oil imports increased by 2.7 x 106tonnes. In order to obtain a clearer picture of the oil market and the nature of oil transactions, the Council of Ministers established a register of mineral oil imports. A fourth joint action was the introduction of embargo measures against Iran, which were successful in that the proportion of oil imports coming from Iran was reduced from 14.7% in 1977 and 1978 to 5.5% by the first quarter of 1980. B. An Autonomous Energy Policy of the EC The central goal of the EC energy policy is a substantial reduction in the dependence on
Safeguardingthe energy supply
385
imported fuel by 1990.This goal is clearly stated in the program presented to the European Council of Ministers on 9 October 1979,and in the speech of the President of the Commission, Roy Jenkins, in Strasbourg on 13 February 1980. The actions to be taken to achieve this goal are concentrated in three main areas of which the first, the cornerstone of the policy, is the conservation of energy and, in particular, the coordination of the energy-conservation programs in the various member states. The Commission expects that up to 100x lo6 tonnes of oil equivalent (20% of present oil imports) can be saved annually. Savings on the present rates of consumption of 20-35% in the transport sector, 15-35% in industry, and as much as 50% in domestic consumption (especially through better heat insulation and the use of heat pumps) are expected. The second major point is to encourage investment and projects for energy conservation and for the deve!opment of domestic energy resources and new forms of energy. In the coal sector, this programme will mean building new mine-pits, modernising coal-fired power stations, the speedy construction of demonstration plants for the production of synfuels from coal, and increasing subsidies for coking. The importance which the Community attaches to the role of nuclear power remains unchanged and is expressed in the Commissioners’ statement that “without further development of this source of energy, an increase in our economic capacity and a reduction of unemployment are not possible”. The Heads of State or Government of the EC resolved in Venice on 27 and 28 April 1980, to appeal urgently to the member states to increase their efforts to develop nuclear power further. This political standpoint is shared by practically all worldwide and regional organisations which are concerned with energy questions, UNO, ECE, IEA, COMECON, and the World Energy Conference. Community policy in the nuclear sector is particularly concerned with the advancement of nuclear technology and with increasing activity in the “nuclear trilogy” fields of atomic waste disposal, reprocessing and breeder reactors. This “nuclear trilogy” was taken up by the Council of Ministers on 18 February 1980. The use of new forms of energy (in particular solar energy, wind, geothermal energy, and atomic fusion) is being encouraged by the Community in various ways. The third main area covered by the autonomous energy policy of the EC is a broadly based research and development program, which includes research at EC centers, as well as participation in national and international programs and the necessary coordination of national programs within the Community. The most important fields included in the program are nuclear technology and reactor safety, new technologies for the conservation of energy (especially the further development of heat pumps), the advancement of new forms of energy (for example, thermonuclear fusion as represented by JET project in Culham and the EURELIOS project, a solar power plant in Sicily), further development of coal-based synfuel production and of hydrogen technology. The latter is concentrated chiefly on water fission through thermochemical processes using nuclear heat. A world-wide research and development program in the field of hydrogen technology is centered at Ispra, the main EC research center. The expenditure of the EC for research has always been small, however; the $220 x IO6 spent on research and development in the energy sector in 1978 represent 8% of the $2.6 x lo9 per annum spent nationally by the member states. 3. ACHIEVEMENTS
We now consider how successful various aspects of the EC energy policy have been this far. Agreement on the crisis management strategy should doubtless be considered a success, but the plan itself has not yet been put to the test. As an old hand in dealing with Article 59 of the European Coal and Steel Treaty, I am somewhat sceptical about it. On the other hand, while the targets set for the reduction of oil consumption and oil imports have not yet been reached, I am optimistic that they will be reached by 1985. I am also very hopeful that a great deal can be achieved by energy conservation measures. My experience in the Federal Republic of Germany suggests, however, that here the sights have probably been set too high. The coal program is also very ambitious. It assumes an increase in the consumption of hard coal from 270x lo6 tonnes in 1979 to 335 x 166 tonnes in 1980 and 490X 106 tonnes in the year 2000. This would be an increase in absolute terms of 220 X 106 tonnes or of 80% by the end of the century. However, an increase in domestic coal
386
H.MICHAELIS
production is fraught with difficulties and, while coal imports offer an alternative, the world coal trade volume remains small (only 7% of world production, a little over 200 x 106tonnes) and an increase of at most 370 x lo6 tonnes by 2000 can be hoped for. Of this quantity, very little will be available for the EC, which should therefore not set too much store by imports. This is a very sobering thought since the production of synthetic fuels from coal, which is an important and in principle realistic option for the substitution of imported oil, is obviously dependent on adequate supply of coal. The question remains unanswered where this coal can be obtained. A simple calculation ihustrates the extent of the problem: the production of 1 tonne of coalderived gasoline requires the input of more than 3 tonnes of hard coal. In order to replace a mere 10% of the mineral oil products which are expected to be consumed in 1990 or 2000, 180x lo6 tonnes of hard coal or its equivalent would be needed. This is an increase of two thirds over and above projected consumption figures for coal and it is doubtful whether this amount of coal can be obtained. The development of nuclear power in the member states of the EC is progressing with vastly different speeds and intensities. While France is pursuing an expansive development program with the aim of covering 30% of its primary energy needs from nuclear power by 1990 and the development in Belgium is similar, in the Federal Republic of Germany and, especially in Italy, Great Britain and the Netherlands, nuclear power will not contribute more than about 10% to the primary national energy consumption in 1990. It is, therefore, doubtful that the targets of the Commission, which are set at 170 GW (13% of gross inland consumption) installed nuclear power capacity in 1990 and approx. 275 GW (21% of gross inland consumption) by the year 2000 can be reached. The expected contribution of the new forms of energy are not spectacular. A contribution of 0.7% in 1990 and 1.5% in 2000 is expected to the primary energy consumption in the EC. These targets will probably be reached but represent far less than has generally been hoped for. It is particularly unfortunate that the EC energy programs assume what appear to be unjustifiably favorable figures for future oil gas supplies. Oil imports to the EC are expected to be as high as those in 1979 (470 X lo6 tonnes). This level is certainly not unthinkable but very uncertain since the political situation in the Middle East is threatening the availability of supplies and further large price increases are putting great strains on the balance of payments and may soon lead to a dramatic change in energy policy. We must conclude that the EC energy policy is in no way equal to the challenge it is likely to face. 4.DIFFICULTIESANDPROSPECTSFORAEUROPEANENERGYPOLICY
Why is it so difficult to achieve a united European energy policy? There are a number of classical reasons, which include differences between the member states in the pattern of control over the energy economy (for instance, the degree of influence exerted by the national governments) and inadequacy and incoherence of the three treaties which form a basis for cooperation; also, divergent energy-political interests with regard to coal, North Sea oil, relationships to oil-producing countries in the Middle East, nuclear weapons states or not and so forth; finally the lack of a consensus regarding further development of nuclear power and differences in opinion on European integration. It is easily seen that the optimism of the Hallstein era was not justified as far as the energy market and energy policy of the EC are concerned. The pressure towards still further integration expected to result from the introduction of new functions into the EC (the so-called “spill-over effect”) did not arise. Neither has the new political legitimacy, resulting from the directly elected European Parliament, given the necessary impetus towards cooperation. Whereas the energy policy of the EC once set the pace, it is now limping sadly behind. What are the causes of this malady? The failure of the common energy policy of the EC is not so much the result of inadequacy of the instruments available to the European organizations as of insufficient and inappropriate decision-making structures. The ECSC and EURATOM treaties provide more than sufficient instruments. Energy politics at the level of the EC are primarily concerned with a foreign trade policy and the instruments available, the common customs tariff and the competence to negotiate in commercial agreements, are almost entirely in the hands of the Community. But the Commission is no longer the motor of development;
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empty phrases such as conserving energy, new forms of energy, alternatives to oil, or increasing the production of coal betray the inadequacy of the Commission’s powers of decision in energy questions. When concrete targets have been occasionally formulated, such as exact limits to oil consumption and oil imports, they have rarely been reached. Nevertheless, integration in the European Community is progressing in also the energy sector, albeit slowly. There has not been a leap forward, no consolidation of the integration so far achieved, no enlargement of the judicial competence of the Community, and no improvement in the conditions of competition. Success has been limited to increasingly intensive cooperation in the field of foreign policy. The last statement requires some further explanation: economists and politicians justify European integration in two ways: firstly, the increased possibilities for rationalisation within the EC and, secondly, making use of the bargaining power of the EC towards non-EC states. What is the present position here? The rationalisation potential of the Community has hardly been exploited in the field of energy. Trade in energy products within the EC is meagre and is practically limited to coking coal and small quantities of North Sea oil and gas. Joint efforts in research and development in the energy sector give some cause for satisfaction, although they account for less than one tenth of the amount which the individual member states spend on energy research. The effectiveness of the crisis management strategy remains an open question; it may represent a good chance to make use of the rationalisation potential within the Community. The external bargaining power of the EC has, however, been far better used than was expected. Of the summit conferences organised within the framework on European political cooperation, none has failed to attach considerable importance to the discussion of energy problems. The EC generally tries to coordinate the standpoints of its member states in the discussions with third parties, i.e., with the other OECD countries (either within the IEA or bilaterally with the U.S.A., Canada, and Australia), with the COMECON countries, with the oil-producing countries (e.g. the Iran embargo), and within INFCE. The most important energy-political issues continue to relate to procedures for ensuring adequate oil supplies and economic and financial measures to combat the difficulties which arise in connection with energy supplies. Agreements at the highest level have led to broader and more intensive cooperation in energy policy and to solidarity in a number of energy-political undertakings. However, the problem remains that these measures alone are inadequate to solve the future energy problems of the Community. Increasing tension and the possibility of a new crisis in the Middle East, along with further increases in oil prices through possible exploitation of oil shortages, make the supply of oil increasingly uncertain. We must, therefore, appeal to the governments of the EC member states to be aware of the critical nature of the present position and to use all possibilities which the Community offers to solve the problems of ensuring adequate energy supplies.