Bulgaria to Become Transit Country for Gas from Azerbaijan

Traicho Traikov, Bulgarian Minister for Economics, Energy and Tourism, has announced that 10 billion cubic meters of gas from Azerbaijan will travel through Turkey and Bulgaria on its way to Europe every year. The transport will become possible when the gas pipeline between Turkey and Bulgaria is completed.

According to the contract between Turkey and Azerbaijan, 16 billion cubic meters of natural gas will travel on the pipeline, but 6 billion will stay in Turkey and the rest will be re-exported through Bulgaria to Europe. On the Bulgarian side, the connection between Stara Zagora and Komotino will begin construction in early 2012 and should be completed in less than two years.

Minister Traikov has stated that the aim of the gas pipeline from Turkey, and another connection with Greece, are an answer to the threat of disruption of imports of Russian gas. The aim is to have no supplier for more than 50% of the Bulgarian market, therefore aiming to create a security of supply and boosting energy security. In reminiscence of the Ukraine gas crisis of 2009, the Minister has re-assured the public that Bulgaria has two-months worth of reserves at the depot in Chiren. Yet, the question remains whether the 10 billion cubic meters planned to travel through the country will play a role in energy security or it will be completely re-exported. In case of emergency, Bulgaria might be allowed to siphon-off a certain amount from the pipeline.

Furthermore, an ecological investigation into the impact of the two pipelines remains to be conducted. This is a legal requirement needed to ensure that these gas connections will not have a negative impact on the environment. Still, it is expected that they will receive a green light and construction can begin without set-backs.

Belgian Report Shows Effect of Climate Change

The Flemish Ministry for Environment, the regional authority for the Northern part of Belgium, has released a report which shows dramatic temperature increases in the last 180 years. The report bases itself on the recently released Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation by the Intergovernmental Panel on Climate Change (IPCC).

The Ministry has taken key indicators and analyzed the situation in Belgium. The main conclusions are that:

• The annual average temperature in Belgium shows continuous increase since the early 19th Century. The average temperature is 2.3 degrees Celsius higher than that in 1830.
• The warmest years in the period analyzed are situated between 1989 and 2000. (see graph below)
• The major increases in temperature have occurred during the Spring and Summer seasons.
• Rainfall has increased an average of 5 mm per decade, with more precipitation observed in Winter and less in Summer.
• Average sea-level has risen on the Belgian coast by 103mm-133mm compared to 1970.

Since climate change is the long-term effect of human activity on the Earth’s climate, this study shows proof that there have been significant changes in Belgium. In simple terms, the facts that the average temperature has risen, that there is more rainfall in the Winter and less in Summer, and that the warmest years have been more recently recorded all show a tendency for a change in the Belgian climate.

The image below shows a graphical representation of the rise in average temperature in each season in Belgium since 1830.

Step-by-step to Durban and Beyond

Christiana Figueres at the Robert Schuman Lecture, oganized by the Lisbon Council

Only weeks before the Conference of the Parties 17 in Durban, South Africa is set to begin, Christiana Figueres, Executive Secretary of the UNFCCC, was in Brussels for the Robert Schuman lecture, organized by the Lisbon Council. Ms. Figueres outlined the priorities for the CoP 17 and urged civil society, business, and nations to do their part in fighting climate change.

Belgium to Decommission Nuclear Power by 2025

Two years ago, I took the Copenhagen School theory of security and built up a theoretical framework to examine energy security. According to my theory, energy security depends on economic and environmental policies and issues. One of the case-studies I examined was Belgium but, as time has passed, I have decided to re-visit the issue in light of new information.

Here are the facts: in 2007, Belgium imported 77.2% of its energy products; in 2009, nuclear power contributed to 51.7% of electricity generation; CO2 emissions were at 26.8 Mt. These facts were put together by the national `Commission Energy 2030`, which concluded that a decommissioning of all nuclear power plants (NPPs) would increase electricity prices, lead Belgium to become indebted through an necessity to purchase ‘carbon credits’, and would increase the import dependency of the country. These three economic arguments were supplemented by the environmental aspect of an increase in usage of oil and gas for electricity-generation leading to an increase in CO2 emissions.

Automakers Race to Adapt

In today’s world, concerns for the environment are permeating all parts of people’s lives. From energy efficient light-bulbs to washing machines and airplanes, new standards are being set for the amount of energy consumed by every-day activities. The auto industry has not escaped the trend.

International Energy Agency Chief Outlines Outlook for Nuclear Power

Due to copyright restrictions, I cannot post this article here. However, it can be found on: http://www.neurope.eu/articles/107672.php

Out with the old, in with the new

In the midst of energy politics, one question is always on the table: if we want to reduce the usage of fossil fuels, what are we going to use? Every nation seems to have its own opinion on the matter. However, this question is always examined from two perspectives – economic and environmental.

‘Modern’ Electricity Production

It is a matter of fact that there are many different ways to produce electricity. The most widespread means at the moment are burning of coal, gas or oil to heat water and produce steam, which in turn spins a turbine and generates electricity. However, this is obsolete technology  dating from the industrial revolution, much like the Thomas Edison-style lightbulb, which has now been replaced by more efficient means of illumination.

In terms of ‘renewable energy’, people are constantly hammered by information on solar pv panels, wind turbines, and hydro-power. The fact of the matter is that the Sun’s energy is abundant, wind is commonplace in many areas of the world, and rivers always have and always will keep flowing. Harnessing this energy is simple through technology that already exists and their effect on the environment is clear – there are no greenhouse gasses released in the process.

The economic side is more difficult to swallow. The two concepts to keep in mind are cost and efficiency. The installation of solar pv panels is costly and, in some regions of the world, not very effective due to long periods of cloud cover. Wind turbines, although less expensive, also vary in their electricity production due to changing wind speed. In these terms, hydropower is the best bet, since its costs are not high, but output is guaranteed due to the continuing flow of rivers. However, the construction of dams or hydro-installations has a hidden environmental cost related to ensuring water-supply.

“The Power of the Future” from the 1950’s

In light of these facts, the question of nuclear power always comes up. Yes, nuclear power does not produce greenhouse gas emissions, but it does create nuclear waste – a radioactive by-product. Although the technology exists for its safe storage, it remains highly controversial and dangerous. Also, nuclear accidents in history have shown that atomic energy is hard to control. For this reason, Germany announced in June 2011 that it will dismantle all its nuclear power plants (NPPs) by 2022. This is a hard decision since atomic power currently produces 25% of Germany’s electricity. How will it be replaced in light of growing demand?

To highlight the problem of dismantling nuclear energy production, a simple case study of Belgium shows how hard it is to take a decision. The country imports 97.4% of its oil and 99.8% of its natural gas. In the potential scenario of decommissioning nuclear power plants, a further increase of fossil-fuel usage would also increase the import dependency and the pollution resulting from it.According to a law passed in 2003, all NPPs have to be deactivated after a lifetime of 40 years after their commissioning and no new operating licenses for NPPs may be granted. Nevertheless, there is an exception included in the law, which states that it can be disregarded to guarantee the supply of electricity for a limited amount of time. In August 2008, when a project for a modification of the 2003 law was proposed and discussed in the Parliament, the main concerns brought up were that a decommissioning of the NPPs as scheduled would increase electricity prices, would lead Belgium to become indebted through obligation to purchase ‘carbon credits’, and would increase the import dependency of the country. These issues were the result of a report published by Belgium’s ‘Commission Energy 2030’ in 2007 and presented to the Parliament in July 2008, which outlined the economic threats posed by the proposed deactivation. In such a scenario, Belgium remains dependent on nuclear power.

Yet, in the wake of Germany’s nuclear shut-down, and the persistent idea that fossil fuels have to be phased out, what is going to happen? The truth is that the country will increase many of its solar pv and wind-turbine investments, which are already quite high, even though solar currently produces a mere 1% of electricity and wind is already destabilizing the grid. In this case, an increase of natural gas will occur. This is unsustainable in the long run and a more tangible solution needs to be found.

Groundbreaking Technology – figuratively and literally

So, where is the panacea? One solution is geothermal power. It is less costly than any other renewable alternative, including advanced nuclear power. It also has no hidden environmental cost. The technology is available and in use in 24 countries around the world. Most notably, Iceland produces 30% of its electricity using this technology. On a grander scale, the USA generates 3 GW using geothermal power (which is still 0.3% of the total, but shows the potential).

The technology is simple – drill a hole into the Earth, close enough to the molten lava below the hard surface (which can be between 3 and 100 meters), where temperatures are above 150 degrees Celsius, install a pipe through which you let water run, and it will come back up as steam. The electricity generation is the same as in a conventional power plant, but it uses the Earth’s heat to create water vapor rather than fossil fuels. This process can be made even more efficient if organic chemicals such as isobutane or pentafluoropropane, which boil at lower temperatures than water, are used. The beauty of it – it is natural, does not produce greenhouse gasses or any waste, and does not require large amounts of land.

Geothermal power-generating process

On the economic side, there are certain obstacles. Geothermal power plants require a large initial investment, just like nuclear power plants. This includes capital for exploration, drilling wells, and plant construction. However, this investment is significantly lower than any other renewable energy alternative. From this point on, the plant entails little operational cost. In the typical scenario, approximately 75% of the plant’s costs are from the initial investment, and 25% are operational expenditure. As a point of comparison, a gas-fired power plant’s initial investment is 33% of its cost, while operational expenditure (including fuel) constitute 66%. Take into account that as the cost of fuel increases, so does this percentage, while the fuel for geothermal energy is free.

There is also the issue of where such technology can be used. Just like solar and wind power, geothermal cannot be installed just anywhere. The following two maps show the potential for geothermal capacity in the USA and Europe as proven by extensive research.

Europe geothermal potential

USA Geothermal Potential

 

 

 

 

Out with the old…

In the end, geothermal power is not actually “in with the new”. It has been around for centuries. It was used in Paleolithic (Stone Age) times for bathing and the Romans used it to heat their homes. A more picturesque example are the natural hot springs in Finland, which attract numerous tourists every year. Politicians have embraced the idea of de-carbonizing the economy and decommissioning nuclear power. Research shows that they might just embrace geothermal power as well.

An opportunity you might never have thought of before – taking a bath next to a power plant:

Geothermal power plant next to a natural hot-water spring

European Commission to Revise Energy Taxation

The European Commission has announced that it will be revising the Union rules on energy taxation. This comes at a crucial moment for the Member States, who are now coming out of the financial crisis, and will help meet the EU 2020 targets. This revision of the existent energy taxation rules is expected to introduce many benefits from taxation and at the same time support sustainable growth.

Currently, taxation of energy products is harmonized on the EU level only to a certain extent. The Energy Taxation Directive from 2003 set minimum rates for taxes of products used for energy, such as motor and heating fuels. However, these rules are now considered outdated and inconsistent with the Union’s changing goals. Revision of the Directive is aimed at addressing the EU’s higher goals in energy and climate policies, in particular increases in energy efficiency, consumption of more environmentally friendly fuel, and removing distortions in competition within the Single Market.

The Problem

“A fair and transparent energy taxation is needed to reach our energy and climate targets. Our common goal is a more resource-efficient, greener and more competitive EU economy.” -Algirdas Semeta, EU Commissioner for Taxation, Customs Union, Audit and Anti-Fraud.

The energy market in the EU is generally governed by two principles – economic and environmental. Since the effects of the financial crisis are wearing off and the Member States are now facing a new challenge due to a rise in oil prices, a financial incentive to decrease the use of fossil fuels seems necessary. Also, the EU’s aim of obtaining 20% of its energy from renewable sources, having 20% energy efficiency, and decreasing greenhouse gas emissions by 20% before 2020 (the 20-20-20 Strategy), play an important role in revising the Energy Taxation Directive.

From an economic viewpoint, the EU’s current rules for taxation of energy fuels set a minimum rate above which the Member States are allowed to place their own tax rates. This has created obstacles and distortions in the Internal Market because of two economic factors – 1) current minimum rates are based on volume (EUR/1000l) and are set according to the historical rates in each state, and 2) different levels of taxation of certain fuel types has led to market price signals not fulfilling their role. The first factor means that an unfair competition between fuel sources is created and there are tax benefits for some fuel types without justification. For example, coal is currently the least taxed fuel source, and biodiesel is taxed on the same rate as conventional diesel. The second factor has resulted in artificial differences in fuel prices. For example, before taxation, diesel is more expensive than petrol. In most Member States, a lower tax is levied on the former than on the latter, resulting in the fact that the pump price does not reflect the original one.

From the environmental viewpoint, the EU’s current system of taxation does not address the issue of CO2 emissions reduction in any way. In fact, as stated above, some cleaner fuels are taxed at the same rate, or even more heavily, than the polluting fuels they are expected to replace. However, four Member States (Denmark, Ireland, Finland, Sweden) have introduced a so-called ‘carbon tax’ to address this issue by making consumers pay for pollution. Still, these states have very different rates and are not synchronized with rules under the EU Emissions Trading Scheme. This also contributes to distortions in competitiveness within the Internal Market.

Comprehensive Modern Solutions

The aim of the new Energy Taxation Directive is to steer the Union’s way into a low-carbon and energy efficient economy. The values which steer the revision are the need to contribute to sustainable growth, promotion of resource efficiency, and the creation of a greener and more competitive economy. It comes as a result of calls by the European Council of March 2008, and echoes the UNFCCC CoP 16 in Cancun in 2010.

The Commission’s answer is a comprehensive solution to a modern problem. The current minimum tax rate is to be split in two parts. One is to be based on CO2 emissions of the specific energy product and is to be fixed at 20EUR per tonne of CO2. The other concerns the energy content of the fuel and will reflect how much actual energy is generated in Gigajoules (GJ). The minimum tax rate is to be set at 9.6 EUR per GJ for motor fuels and 0.15EUR per GJ for heating fuels.

The single minimum rate for CO2 emissions would harmonize pollution taxation in the whole Union. To complement the ETS, it will apply only to sectors not covered by the scheme by the introduction of a ‘carbon tax’ on sectors such as households, transport, smaller businesses, and agriculture. For example, biofuels, which are currently taxed at the same rate as conventional fuels (due to the ‘per volume’ rule), would be subject to an exemption under the new rules, due to their better CO2 emissions. Logically, renewable energy sources are also exempt from the CO2 element, since they do not produce pollution in the energy-generation process. At the same time, the most polluting fuel – coal – will become the most heavily taxed.

The second element is more complex and has to do with how efficient the fuel source is. When it comes to energy consumption, the efficiency of the source is more important than the volume and would create a level playing field for all fuel types. For example, the current distortions in the price of petrol and diesel will come to and end. Currently, diesel is taxed at lower rates than petrol in all Member States (except the UK), despite the fact that it has a higher energy content (more energy is generated per liter). This has led to the price of diesel being lower at the pump than petrol, which has created artificially high demand for the product, also in spite of its shortage in the EU. Under the new rules, a neutral taxation method will be applied and a more realistic final price will be the result. In essence, this will contribute to the removal of distortions in the market.

A combination of the two elements will be used to determine the final rate of the tax. The EU will still set the minimum for each product and Member States would remain free to set their own rates above that. This approach has been dominant since 1993 because of a compromise solution which gives the Member States some flexibility due to their different budgetary needs.

Where is the Catch?

The changes to the Energy Taxation Directive will apply to all fuels at the point of consumption. Essentially, when a person tanks-up their car at a gas station, both components of the new tax system will apply. When it comes to electricity though, neither component applies, since there is no CO2 produced or energy generated at the end of the chain. However, the electricity sector is subject to the ETS and therefore falls under the rules of that system. Also, when it comes to nuclear power, the new rules do not apply due to the same rule. And yet, small-scale electric installations falling outside the ETS would be taxed under the revised rules.

However, the environmental component of the revisions are set to impact household budgets. Currently, 10% of CO2 emissions come from the residential sector because of fuel used for heating etc. The new rules recognize that the family purse will come under attack, and propose that there should be solid safety nets and accompanying social measures, especially for low-income households. Currently, only the UK has defined the concept of ‘energy poverty’ as occurring when a family spends more than 10% of their income on energy. Yet, no such definition has been accepted on the EU level, and the regulation of this aspect is left to each individual Member State. The Commission has proposed that the revenue from the new tax could be ‘recycled’ to compensate households through lump-sum social payments, as is already the case in the states who have introduced a CO2 tax. How effective this will be in other Member States is uncertain. It is clear that heating will remain the main problem, since each state depends on different sources for warming its residential areas (gas, wood, coal etc.) and the differentiation between fuel types will result in diverse tax rates. Certainly, individuals would have to reconsider the way they keep warm during the winter.

Furthermore, the new Directive includes a long transition period for the Member States to adapt to the new rules. Most notably, nine states (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia) will have until 2020 to implement the CO2 component of the new tax rules, due to their generally lower income level. The basis of this idea remains vague, since fuel prices are already considered too high in these countries and the current minimum levels have come under scrutiny from national governments for placing them at an economic disadvantage. For example, Bulgaria’s petrol and diesel prices have been criticized recently for being extremely high for the population’s average income, even though the country has the lowest rates in the EU.

Considering alternative fuels, the current rules tend to favor liquefied petroleum gas (LPG) and compressed natural gas (CNG) due to their fairly new position in the market. As such, a transition period of 12 years is given for these fuel types, during which they can continue to enjoy beneficial treatment and allow them to reach a level of equal competition with traditional fuels. Whether such preferential treatments will cause distortions in the market is a question left unanswered. Yet, with oil prices on the rise, these alternative fuel types are looking increasingly more attractive to the consumer, even without the new taxation rules.

Also, two other sectors will continue to benefit from the revised Directive. The tax rates related to agriculture will remain lower, although they will depend on the environmental objectives that are supposed to ensure this sector’s contribution to saving energy. Less convincingly, the new proposal will not apply to aviation and maritime transport because of existing international obligations and the risk of competitive distortions. However, aviation is set to enter into the ETS in the near future and will have to comply with rules similar to those in the new Directive. The issue of maritime transport remains shrouded in mystery.

From Principle to Reality

For now, the new proposal revises the rules for fuel taxation as the Commission sees fit. It is up to the Council of the EU and the European Parliament to discuss and amend as they wish. Expectations are such that the Directive will be accepted and put into force as of 2013. The Commission sees this as ideal, since it would coincide with the ETS’s third working phase (2013-2020).

However, this will not mean that the new rules will apply directly. The phase-in period which allows the Member States to adjust their tax systems to the new rules is still unknown (the Commission estimates that it might take until 2023), but national administrators, as well as businesses, would expect sufficient time for implementation. Taking this into account, as well as the transition periods mentioned above, it could take a long time before we see taxation playing a role in the EU’s green economy initiative.

Spirit of Co-operation Weakens in Bangkok

The United Nation Framework Convention on Climate Change negotiations in Bangkok (April 4-8) are breaking down. The first climate talks of 2011 have brought about a feud between developed and developing nations in the process of trying to agree on a deal.

The conference in Bangkok had the modest goal of setting the agenda for negotiations in 2011, and a result had still not been produced in the final day of the meeting. The disagreement stems from developing countries pushing for more focus on what they can do to battle climate change (adaptation) rather than the developed nations’ actions on mitigation.

These talks show that the spirit of cooperation and multilateral negotiations which led to breakthroughs at the Conference of the Parties 16 in Cancun in 2010, has wakened. A stalemate and potential lack of agreement in Bangkok could mean taking several steps back in the negotiation process which should eventually lead to a global, comprehensive deal on tackling climate change.

In the course of negotiations, the developing countries demanded that developed nations take serious action on agreeing a cut-down in greenhouse gas emissions under a revised Kyoto Protocol. Japan blocked an extension of the protocol in Cancun, and the USA and China have now stated that they will not sign up for an extension to it. Developed nations, on the other hand, have been pushing for this year’s agenda to focus on implementing the Cancun agreement.

On the final day of talks in Bangkok, nothing is certain. If another Cancun-style breakthrough is made, then negotiations can move forward and perhaps provide a solid basis for the CoP 17 in Durban in December 2011. However, the lack of progress shows the reluctance of parties to make concessions and accept further multilateral talks.

European Parliament Rejects Resolution on Nuclear Safety

In the context of the ongoing nuclear crisis in Japan, the European Parliament discussed issues of nuclear safety in Europe on Wednesday, April 6th, 2011. During the plenary session in Strasbourg, among the items on the agenda was several proposals for a resolution on the future of nuclear power in the EU, none of which was accepted. In the midst of the debate, MEPs were divided over the topics of nuclear stress-tests (risk and safety assessments) and the need to progress to alternatives such as renewable energy.

In a mixture of realism and idealism, the MEPs debate centered on the safety of nuclear power plants in the 14 EU member states that have chosen to use atomic energy. One realistic viewpoint was presented by Giles Chichester (UK), who stated that the differences between Japan’s and Europe’s nuclear reactors and seismic activity are too great to make comparisons and to ban the technology immediately would mean “acting without evidence”. This viewpoint was officially supported by the motion for a resolution presented by a large number of political groups in the EP, stating that we have to bear in mind “that nuclear energy will continue to be part of the energy mix of several Member States for many years to come”.

On a more idealistic side, MEP Niki Tzavela (Greece) stated that “we are entering a new era of mega-disasters” and was supported by Marita Ulvskog (Sweden) who called for the need to find new alternatives to nuclear power. Such views were again to be found in the proposals for a resolution, with one text proposing that the EU should develop a “strategy beyond its borders involving consistent action at the highest political level”, pushing as far as “a ban on building nuclear power plants in high-risk regions, leading ultimately to a UN Convention”. A clearer ides of how this is to be done was lacking in the debate and the proposed resolution.

For the Council, Hungary’s Secretary of State Affairs, Eniko Gyori, stated that legislation will have to be revised in light of the proposed stress-tests. He further emphasized that a search for alternatives to nuclear power is ongoing, but no one expects the 14 Member States who use atomic energy to decommission their reactors immediately.

At the same time, Energy Commissioner, Gunther Oettinger, explained that the Commission was currently working on the criteria to be used for the stress tests, which will be sent to the Parliament and made public. He stated further that it is up to national nuclear energy regulators to carry out the stress tests because the EU lacks competence to do so. In response, MEPs attacked the voluntary basis for conducting the tests and MEP Rebecca Harms (Germany) went as far as to call them “suspicious” and stated that atomic regulators are a club, who know each other and tolerate very high risks.

At the end of the debate on Thursday, April 7th 2011, the MEPs voted on a resolution on nuclear safety, which was rejected by 300 votes against, 264 in favor, and 61 abstaining. The main reason for this outcome was a clear disagreement on many points of the text by the political groups. Evidence of this is the small margin by which the text was rejected.