Putting energy in TTIP?

Guido Nelissen
EESC, 21 June 2016
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 Energy and trade: an uneasy relation
• Export restrictions are common in the energy sector, no global rules for
liberalisation of trade in energy
• No global energy governance, no global framework (not addressed in
GATT/WTO agreements)
• Energy Charter Treaty
 Extends general WTO provisions apply to trade in energy goods and services
 Protection of FDI and dispute settlement
 Principle of national sovereignty on energy issues
 Rules on energy transport
• Specific energy chapters in trade agreements are an exception (EU Ukraine)
• Energy chapter could deepen the transatlantic alliance but also create
opposition (environmental contentious controversial imports of shale
gas/oil)
• US is rather sceptical

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The objectives of energy policy

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 The energy transition: a serious social challenge
2005 2007 2010 2011 2012
Coal 233.000 222.400 215.100
Petrol 73.200 78.600 79.200
Metal ores 45.000
Other mining and quarrying 213.900 212.400 210.100
Mining support activities 52.500 60.100 64.500
Total Mining and quarrying 786.900 795.700 572.600 573.500 613.900
Paper 754.600 730.000 645.800 656.000 649.300
Coke 198.700 190.500 129.400 125.800 127.500
Chemicals 1.368.400 1.348.100 1.160.000 1.200.000 1.200.000
Rubber and plastics 1.703.300 1.724.700 1.615.500 1.659.200 1.626.600
Other non-metal products (glas, ceramics) 1.616.600 1.628.500 1.341.000 1.340.000 1.278.200
Basic metals 1.226.500 1.240.200 1.000.000 1.020.000 1.000.000
Total 7.655.000 7.657.700 6.464.300 6.574.500 6.495.500
Source: Eurostat

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 Green jobs in the EU
CEPAREMA 2004 2007 2010 2011 2012 2013
Total environmental protection and resource management activities
3.015.000 3.343.000 3.903.000 4.135.000 4.132.000 4.159.000
Total environmental protection activities 2.106.000 2.209.000 2.385.000 2.409.000 2.425.000 2.449.000
Protection of ambient air and climate 102.000 110.000 101.000 105.000 99.000 104.000
Protection of climate and ozone layer : : : : : :
Wastewater management 599.000 573.000 584.000 593.000 584.000 589.000
Waste management 873.000 949.000 1.090.000 1.093.000 1.105.000 1.109.000
Protection and remediation of soil, groundwater and surface water
226.000 241.000 275.000 286.000 301.000 313.000
Noise and vibration abatement (excluding workplace protection)29.000 26.000 24.000 22.000 23.000 23.000
Protection of biodiversity and landscapes 125.000 128.000 128.000 129.000 123.000 127.000
Protection against radiation; environmental research and development;
152.000 other182.000
environmental
183.000
protection
181.000
activities 189.000 186.000
Protection against radiation (excluding external safety) : : : : : :
Environmental research and development : : : : : :
Environmental research and development for the protection: of atmosphere: and climate: : : :
Other environmental protection activities : : : : : :
Total resource management activities 909.000 1.135.000 1.518.000 1.726.000 1.707.000 1.710.000
Management of waters 137.000 140.000 141.000 143.000 142.000 142.000
Management of forest resources : : : : : :
Management of forest areas : : : : : :
Minimisation of the intake of forest resources : : : : : :
Management of wild flora and fauna : : : : : :
Management of energy resources : : : : : :
Production of energy from renewable sources 295.000 332.000 646.000 814.000 753.000 715.000
Heat/energy saving and management 477.000 663.000 731.000 769.000 812.000 853.000
Minimisation of the use of fossil energy as raw materials : : : : : :
Management of minerals : : : : : :
Research and development activities for resource management
: : : : : :
Other resource management activities : : : : : :
Management of wild flora and fauna; research and development
: activities
: for resource
: management;: other resource
: management
: 5 activitie
 ‘Just transition’: easy to define, difficult to
implement
Restructuring of traditonal industrial sectors into sustainable structures
requires timely anticipation of change and
Smooth transition between jobs (socially acceptable restructuring,
regional reconversion)
Tackling carbon leakage
Ensuring that the new jobs are also high-quality jobs
Active labour market policies:
• Timely anticipation of new skills needs
• Upskilling in green skills
• Promotion of STEM-education
Sustainability strategies may not negatively impact the distribution of
welfare (eco-taxes or subsidies!)

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 The very different energy situation of the EU and
the US

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 EU
• Energy dependence increased from 40% in the 80’s to 53%: an
important strategic weakness
• Russia represents 30% of crude oil imports and 40% of natural gas
imports
• Currenty the EU produces about 34% of its internal natural gas
demand but domestic production is in decline
• On the other hand: an expected increase of demand for gas of 20%-
50% by 2035 (phasing out of coal fired pants)
●
Transport relies for 94% on oil, of which 90% is imported (also
European oil production is in decline)
●
Consumption of coal fell by 40% since 1990
 Today 27% of power generation (40% globally and in US, 80% in China)
• No imports from the US

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 ●
Industrial gas prices are twice as high as in the US
●
Industrial electricity prices are 30% higher as in the US
●
Ever growing share of renewables will reduce dependence of
imports of fossil fuels
●
EU has a share of 40% of all patents in renewable technologies
• 75% of the housing stock is energy inefficient

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 US
• US became world’s largest natural gas producer in 2012 and the largest oil
producer in 2013
• US crude oil imports have dropped from 67% of total demand in 2008 to 27%
in 2014
• US will become a net-exporter of gas from next year onwards
• The ‘unconventional revolution’: the energy event of the last decade
 End of discussion on peak oil
 Low energy prices for some time (- 50% between 2008 and 2013)
 US energy companies are pushing for selling their strongly risen production of
oil and gas overseas
 Cheap shale gas in the US displaced coal and by doing so it flooded non-US
markets with cheaper coal then ever before (result: reduction of CO2
emissions in the US, but increase elsewhere)
• Coal is still 39% of the power mix

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• 1938 US Natural Gas Act requires the authorization of LNG exports
to third countries (licenses based on the national interest), but
allows for automatic authorization of LNG exports to all countries
with which the US has a FTA
• Ban on oil exports dating back to the mid 1970’s lifted on 18
December 2015
• Opinions about exports are divided
Protectionists:
• (new) reserves have to power the domestic economy as long as possible (energy
security)
Maximalising US exports:
• Will support global growth over time and thus also domestic growth.
• Will increase domestic prices
• Fear that depressed prices will make shale gas uneconomic

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 An Energy Chapter should be good for the economy...
• A window of opportunity for the US
Oversupply of natural gas in the US
• Security of supply for the EU: Create a more stable market for gas
Tensions with Russia, our largest supplier of oil, coal and gas
• An energy chapter with the US will influence Russia’s behaviour
Tensions in the Middle East
• Imports of gas (and the consequent drop in prices) will lead to
substitution of coal imports
• Imports of crude oil will support the european refinery sector
• Locking in the US’s recent lifting of its crude oil ban and to secure
imports of LNG

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 • Reduce vulnerability to external energy shocks
• A lever to reinforce the Energy Union and for a more
integrated internal energy market
• Template for future agreements: setting a benchmark in terms
of transparency, non-discrimination and competition rules but
also for environmental goods and energy efficiency
• Step towards an improved global governance system for
energy

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 But
• No need of a specific chapter
 As US ban on exports of crude oil has been lifted, TTIP will have no impact on
trade in oil (perhaps indirectly bec of closer trade relations)
 TTIP provides automatically access to US gas
 Energy products also covered by other chapters of TTIP on goods and services
or investment (reduction of NTB’s, non-discrimination)
 WTO agreements such as national treatment, most favoured nation principle,
free transit apply also to energy products
• Devastating for the environment
 Will increase production of (unconventional) fossil fuels in the US (exports to
the EU)
 increase the EU’s reliance on fossil fuels
 Cheap US gas will undermine development of renewable energy
 Additional CO2 emissions because of the need to cool, liquefy, store and ship
LNG
 Challenge of cheap coal because of oversupply in the US (coal renaissance in
the EU between 2010 and 2012: share in the EU’s power mix from 24% to 28%)

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• Interconnectivity of Europe’s internal gas market needs to be improved
to fully benefit from US gas imports
• In the US investments in exports facilities ($1OObn) are needed, while
also in the EU terminals have to be created
• US exports will never offset Russian supplies
• Price of imported US LNG will always be more expensive than Russian gas
(transportation costs): the price to pay for independence from Russia
• The price has to be right (Asian prices are higher): LNG flows to the EU
must be commercially viable
• Provisions on energy could become hot political issues that make
acceptance of the agreement more difficult
• Most important advantage: mere availability of alternative sources
reduce risk of energy crises, probably no massive imports from the US

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 Topics proposed by the Commission
• Addressing deficiencies in existing WTO-rules
 Elimination of quantitative export mechanisms on energy goods
 Freedom of transit of energy goods (third party access to pipelines, access to
energy grids)
 Elimination of dual pricing
 Elimination of local content requirements
 Nondiscriminatory access for exploitation of energy resources
 State-owned entreprises required to act in commercially competitive ways
 Transparency in domestic processes of licensing for trade and investment
activities in energy
• Promotion of sustainable development
 Non-tariff barriers and trade irritants in environmental goods
 Regulatory cooperation renewable energy and energy-efficiency
 Regulatory cooperation regarding offshore oil and gas safety standards

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 Some recommendations for a Energy Chapter
• Not lead to delays in the energy transition
Respect of our objectives regarding renewables and energy efficiency
• Improve our energy mix (replacing coal by gas)
• Reduce duties and NTB’s on green technologies
• Common support to the plurilateral Environmental Goods
Agreement
• Envisage the development of common rules on emissions
trading and biofuels
• Tackle emissions from aviation and maritime transport
(emission reduction targets, operational efficiency, design,
carbon pricing)

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 • Promote transatlantic cooperation on sustainable
development (very limited so far)
Renewable energy technologies
Energy efficiency: energy neutral building stock
Energy storage
Smart grids
Smart cities
E-mobility
CCS
Reduction of GHG intensity of fuels

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 Thank you for your attention!

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