EU must ban all energy imports from Russia

We will never forget this European war happening before our eyes. Russia is now a pariah state. In this radically changed context, the European Union must recognise its own energy mistakes and make bold decisions on what to do next.

We are largely in this mess because of Germany’s ill-conceived energy policy. In the past 15 years, Europe has been lectured about the highly innovative German ‘Energiewende’ that started by closing nuclear plants in 2011 for populist reasons and came to increase the coal load factor in 2011-2014 to avoid blackouts and to continue to build Diesel cars that didn’t even meet the EU standards! Merkel’s Germany ended pushing, in 2020, the EU hydrogen strategy without looking at basic science and high dependency risks on China for transition minerals.

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To illustrate this failure in gas, it is worth comparing German and Polish energy policies. While Mrs Merkel was telling us she knew Mr. Putin and that Nord Stream 2 was “just a commercial project”, the Polish government made clear and public that under no circumstances it would renew, in 2022, the Gazprom contract with their national company. So, Poland started an aggressive diversification process by building a regasification terminal, signing long-term non-Russian LNG contracts and constructing the Baltic Pipe, which will soon connect Poland to Norwegian gas fields. Now, we can contemplate the differences between the situation of Poland that also lived under the soviet regime and Merkel’s Germany.

There are many other examples like the gas storage regulation that is much wiser in France, Italy and Poland than in Austria, Germany and the Netherlands or the diversification targets Spain implemented 20 years ago to mitigate the share of Algerian gas. In short, while some states designed coherent but slow-moving energy and climate policies, others like Austria, Belgium, Luxemburg were increasing their energy dependency on Russian gas… This wouldn’t have happened if Germany was not leading this group as we all know that we are all equal in the EU, but that Germany is more equal than any of the other 26 Member States.

Energy policy takes decades to implement and requires a careful analysis. The lack of a long-term vision is an unforgivable fault.

“Thanks” to all these great moves, Gazprom’s EU market share increased from 25% gas demand in 2012 to 40% in 2019, way above the 33% in line with the spirit of European directive of security of supply.

It is because we rely too much on Russian gas that we cannot fully replace it overnight. At least 25% of present Russian gas imports are irreplaceable in the short and medium term, making us weak in front of the Russian dictator, who is again using energy as a weapon.

What should we do?

Energy policy takes decades to implement and cannot be in the hands of populists. Energy policies need to be designed by competent adults that understand and believe in science, not by consultation process done in Brussels nor by teenagers wanting to avoid school!

Europe is now facing four crises: climate, energy, economic and military. As it was already difficult to solve one, it is impossible to solve the four together and we must find the least painful path.

It is morally impossible to justify us sending €1bn/day to Russia for our energy bill. This must stop as fast as possible to halt the financing of this barbaric war. Business as usual cannot be the strategy any longer.

It makes no sense, as the EU Commission suggested using its usual ‘Magic Maths’, in trying to reduce our dependency on Russian gas by two thirds. This is because the amount of money we will continue to transfer to Russia is still going to be linked to volumes multiplied by price. And European companies with long term contracts gas contracts are bound to continue to pay Gazprom & Novatek until 2035.

The pragmatic least painful option is to short-term focus on energy in a way that makes Europe more resilient vis-à-vis Russia as fast as possible while addressing longer term climate issues.

We must now fully displace Russian coal, oil and gas in the EU as fast-as-possible. The best option is to initiate a three-step embargo on Russian energy commodities imports to the EU:

●      Coal immediately as it is the most polluting fuel

●      Oil in the coming weeks as it is a fungible commodity and traders could help redirect supply. An International Energy Agency (IEA) oil and oil products strategic stocks coordinated release should be decided to mitigate the Diesel tightness in Europe

●      Gas by the end of the year as this will allow us to be safe until mid-2023

For the mess Germany put us in, the least it can now do is to start dismantling Nord Stream 2 today. This shouldn’t be a big deal as Germans know how to dismantle much more complex nuclear plants and as we will never need this pipe, we cannot leave it on the seabed for environmental reasons. German energy track record is so poor that leaving Nord Stream 2 on the seabed could be an indication that Germany still secretly hopes to use it later. Dismantling Nord Stream 2 will send a strong signal not only to markets but also to the Kremlin’s dictator.

To mitigate the double burden of energy scarcity and record high prices, Europe should:

• Save energy.  Record high prices are a serious incentive to change not only our way of life but also to substantially invest in energy efficiency.
• Continue to buy additional non-Russian coal, oil and gas on spot markets.

• Facilitate switching from gas to coal for power generation regardless of CO₂ pricing to reduce risks of black outs and recession. In front of immense financial strain, burning the least expensive fuel – coal – will help alleviate rising energy bills. Instead of ‘subsidy farming’ where everyone gets taxpayers money at the expense of EU next generation that will have to reimburse the debt, freeze temporarily the EU Emission Trading System (ETS) to avoid extreme high CO₂ prices to negatively impact EU consumers with zero benefit for climate. This could also reduce the systemic risk in the energy system. The EU ETS was designed during peace to foster CO₂ reduction and is no longer relevant when CO₂ emissions are going up during wartime. From 2024, to deliver an effective reduction in CO₂ emissions, the EU ETS could restart in combination with the new Carbon Border Adjustment Mechanism (CBAM). This would stop providing free allowances to industrial emitters.

• Initiate long-term requests for the US, Norway and Qatar to boost their gas exports (pipe and LNG) from 2026 as gas will be needed for the foreseeable future. This will be necessary because, for the long-term, Europe will need to replace all gas from Russia and the coal generation ie more than 50% of actual demand by new extra non-Russian gas. This could be envisaged as part of a ‘strategic partnership’ between the EU and international partners to increase security of supply while fostering the energy transition.

• While continuing to invest massively in renewables, start building new nuclear plants that will help effective decarbonisation from 2040.

The outcome of such a broad new strategy would make Mr. Putin aware that the EU money is going to disappear in the next nine months by reducing and fully eliminating the Russian risk on security of supply. And, when later, we will have to discuss energy in a peace treaty with Russia, the starting point won’t be the actual position but the no imports one.

Of course, such a strategy would be very painful for Europe in the short term, leading to blackouts and a deep economic recession. The upside is that it would bring a long-term pragmatic resilient climate strategy.

This feature was originally published by Euractiv on March 17. Dr Thierry Bros is an energy and climate expert. He is a professor at Sciences Po university in Paris and a regular contributor to Natural Gas World.

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