Can Shale Gas Transform Europe’s Energy Landscape?

• Shale gas is a divisive issue in Europe because it highlights the growing tension between the EU’s energy and climate policies.
• Shale gas could be valuable in providing much-needed gas to complement renewables in Europe’s low carbon strategy. However, while strict regulation can minimise the risks of pollution, extracting shale gas would be an intensive industrial operation in a continent that is mostly densely populated. 
• Without financial support, shale gas is unlikely to be cheap enough to squeeze coal out in power generation, as it has done in the US. 
• Shale gas production might make a difference to the energy security of individual EU memberstates, but it is unlikely to do so for the region as a whole. At best, it will slow the increase in Europe’s dependence on imported gas. It will not, therefore, be the game-changer in terms of energy security that it has been in the US.

The issue of shale gas sharply divides Europeans. With economies across the region in the doldrums, and energy and climate policy in some disarray, shale gas looks to some like a heaven- sent get out of jail free card. At first sight, it appears to press all three buttons of energy and climate policy – competitiveness, security of supply and a cleaner alternative to coal. 

Shale gas offers the hope of cheaper, US-style, gas prices, and hence a way to prevent energy-intensive industry from crossing the Atlantic to the US. It promises to weaken Russia’s ability to impose high, oil-indexed prices for its gas in many European markets, especially in Central and Eastern Europe, where countries have little
or no other source of supply. And, for these price-related reasons, it would help relatively clean gas win back some of the share of power generation that it has recently lost to dirtier coal and lignite. In short, its proponents argue that shale gas would allow Europeans to become masters of their own destiny. 

The issue of shale gas has become part of a wider debate about the perceived conflict between Europe’s competitiveness and its unilateral climate policy. This debate is increasingly cast in terms of ‘cheap shale gas versus expensive renewable energy’. In this debate, the contrast is made between an economically depressed Europe and an America that has both embraced shale 

gas and avoided saddling itself with a burdensome climate policy. The fear that Europe’s energy-intensive industries will migrate to the US in search of cheaper input costs is voiced, among others, by the EU’s energy commissioner, Günther Oettinger. “We need industry, and we cannot be the good guys for the whole world, if no one is following us [in climate policy]” he told a conference jointly hosted by the Commission and the German Marshall Fund in May.

However, any or all of the above benefits of shale gas depend on it being at least as cheap in Europe as conventional gas imported from areas other than Russia. 

Moreover, before shale gas could prove its cost competitiveness at scale in Europe, it would have to win widespread public acceptance. This will not be easy. Shale gas has acquired a bad image with the public, largely because of the air and water pollution risks associated with ‘fracking’ (the hydraulic fracturing required to release gas from shale rock). Such risks have been well aired by shale gas’ detractors. Shale operators may be able to build on US experience, and convince European publics that pollution risks can be avoided by following good practice. But even if they can, there are other side-effects that are largely unavoidable, because extracting shale
gas is a more intensive industrial activity than extracting conventional gas. “Once drilling starts, it is generally a 24-hour-per-day operation, creating noise and fumes from diesel generators, requiring lights at night and creating a regular stream of truck movements”, says the International Energy Agency (IEA). It adds that “drilling operations can take anything from just a few days to several months”.

So there are sharply contrasting costs and benefits to be weighed in deciding whether, and how, shale gas development should go ahead in Europe. Because decisions on a country’s energy mix are a national prerogative, it is up to individual states in the EU to decide whether or not to allow shale gas development (as it is in the US). So far, EU institutions have stayed on the touchline (as has the federal government in the US). However, in the past year the European Parliament has passed several resolutions which broadly affirm the right of all member-states to exploit shale gas, but call on them to do so under strict regulations that might require amending or extending existing EU environmental legislation. In response, the European Commission will propose by the end of 2013 a pan-EU framework designed to give shale gas developers a positive signal, but also to close any gaps in the EU’s environmental legislation and its enforcement. This paper examines what that EU role should be. It starts, however, by discussing what shale gas is, how much Europe is estimated to have, and what is currently being done to exploit it.