Tuesday

16th Aug 2022

Opinion

Clean energy package needs market, not just targets

  • Outbidding each other on ever-more ambitious targets is little more than political point-scoring (Photo: Windwärts Energie)

The political groups are now clashing on all fronts over the aims and targets of the Clean Energy Package. Negotiations are tough and the outcome difficult to predict.

What is more, when the 2030 targets appear on the agenda, many tend to lose track of what is truly important, in an attempt to appear ambitious. This notion, that ambition requires one to advocate for higher and higher targets are draining the political debate of all content.

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While discussions on targets and objectives are important, the focus must not be on the percentage, but rather on delivering fundamental market reforms in order to be able to get within reach of any target in the first place.

Politically-set targets are simply political declarations, not capable of being achieved unless there are structures in place, which can pave the way for their fulfilment.

In order to achieve a fully functioning Energy Union, capable of delivering competitive technologies and consumer prices, security of supply and innovation, a few things are particularly important.

Three key steps

First, the energy market must in fact be a market. For such a market to function properly, it is essential that prices be set based on supply and demand. To achieve this, member states must first get rid of any politically-set obstacles to free price formation, and secondly make sure that consumers are given the necessary tools and information to fully and actively participate as market actors.

Second, in order to stimulate innovation and competition, which in turn would bring down prices and boost effectiveness, subsidies must eventually be a thing of the past.

Without a level playing field, investors and new market entrants face uncertainty. Keeping market-distorting subsidies will effectively keep old technologies on the market through artificial breathing, while also creating thresholds for new entrants.

Third, regional cooperation is key to achieving a fully-integrated energy market. In the hopefully not so distant future, the European energy markets will be highly interconnected and highly efficient.

This will happen eventually, not because EU legislation stipulates new institutional cooperation, but because this is the logic of the markets. The potential that deepened regional cooperation brings for further boosting cost efficiency, security of supply and for driving investments is substantial, and by adopting means to monitor, facilitate and promote such cooperation, steps can be taken in that direction.

However, unwillingly sitting at the same table is not the same thing as cooperating, and is certainly not a guarantee for achieving results.

Consequently, instead of creating new top-down structures ─ whether in the market design regulation or in the governance regulation ─ we should facilitate and promote regional cooperation where feasible, and make sure enough instruments are put to play to ensure that all options are taken into consideration and exhausted.

Instead of engaging in a vocal battle over who is more ambitious ─ a battle which, frankly, anyone can win by simply proposing higher targets than your opponent, in a never-ending circle of ambitiousness ─ we should expect from ourselves in the European Parliament to push for reforms which could actually be the real game-changer we're all so desperately looking for.

Gunnar Hoekmark is a Swedish MEP and member of the EPP

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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