New York Times: "E.U. Tries To Head Off Future Natural-Gas Shortages"

BRUSSELS — The European Commission sought Thursday to keep all its options open to avoid future crises over supplies of natural gas, as new evidence emerged that another of its main energy goals — encouraging biofuels — might need to be revised.

Günther Oettinger, the bloc’s commissioner for energy, pledged €200 million, or $273 million, for the Nabucco project, a pipeline that would start delivering gas in around 2015 from the Caspian Sea region, bypassing Russia and Ukraine.

The pledge was the first time that the commission had offered money for the construction phase of a gas pipeline. Mr. Oettinger said the offer, which was presented as part of a package of other energy infrastructure projects worth €2.3 billion, was a “milestone” for European energy policy.

“We’re not just supporting an idea anymore, we’re talking about funding,” Mr. Oettinger said during a news conference in Brussels.

The pipeline would stretch more than 2,000 miles, or 3,220 kilometers, from Turkey across Bulgaria and Romania and into Austria. The project has significant strategic implications for the European Union, which is seeking to lessen its dependence on Russian gas.

Mr. Oettinger also offered encouragement to a rival, Russian-backed project called South Stream, which would take Russian natural gas under the Black Sea to Europe.

“We advocate South Stream and we are watching the decision-making procedure in a positive sense,” he said.

Mr. Oettinger emphasized that the companies backing Nabucco, including RWE of Germany and OMV of Austria, needed to make a decision by autumn on whether to go forward, or the money could be used for other projects. “All participants want decisions to be taken, one way or the other, this year in fact,” he said.

The total cost of the Nabucco project is estimated at about €8 billion, or around 40 times more than the sum pledged Thursday. But Mr. Oettinger said the money still represented a “trump card on the table” for Nabucco.

The pledge could help unblock stalled progress on Nabucco because the companies that back the pipeline would need to begin ordering some of the pipes to receive the money, according to E.U. officials, who spoke on condition of anonymity, in accordance with E.U. policy.

In a separate development, the commission has begun releasing previously confidential reports showing that biodiesel and other fuels grown from crops can have unintended consequences for tropical forests and wetlands.

Environmental groups and some E.U. officials are seeking to scale back a goal, agreed upon by E.U. governments at the end of 2008, that 10 percent of road fuels should come from renewable and low-carbon sources by the end of the next decade. One of the models examined by commission officials shows that E.U. targets for using biofuels could destabilize crop prices, leading to food shortages.

“The simulated effects of E.U. biofuels policies imply a considerable shock to agricultural commodity markets, but precise magnitudes need to be treated with some caution,” according to one of the draft reports prepared for agricultural officials.

Europe’s biofuels targets would create “strong incentives” for land that was previously not used for agriculture to be cleared and switched to agricultural use, according to the report.

That process “reduced the carbon-storage role played by the land that is switched, resulting in a loss of sequestered carbon that will take many years” to cancel out by the use of bioenergy, the report found.

Marlene Holzner, a spokeswoman for Mr. Oettinger, said the reports showed that the commission had been considering the matter “very seriously,” but she added that the available results indicated there was no definitive answer on the size or character of the issue at this stage.

In another initiative to cut greenhouse gas emissions, the commission said it wanted to propose legislation to create an E.U.-wide carbon tax. Such a tax would supplement a carbon trading system operated by the bloc since 2005. The tax would require unanimous approval by E.U. countries. But Britain has long opposed E.U.-wide taxes, raising doubts over whether it could be approved.

By James Kanter for The New York Times. March 4, 2010.

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New York Times: "E.U. Tries to Head Off Future Natural-Gas Shortages"