Shale gas: What are the Implications for Europe’s Competitiveness?
On 28 May 2013 the German Marshall Fund of the United States together with the Bureau of European Policy Advisers (BEPA) co-hosted a high-level seminar entitled “Shale gas: What are the implications for Europe's competitiveness?”, which featured several panels and high level speakers. The event took place very timely as European leaders had just gathered one week earlier in Brussels for the European Energy summit, discussing energy issues in the context of growing unemployment, rising electricity prices in Europe, and increasing economic uncertainty. Therefore, the competitiveness angle of the event was widely welcomed and helped further shaping the debate on the future role of shale gas for Europe’s energy mix and economy. With Vice-President and Commissioner for Economic & Monetary Affairs Olli Rehn, and Commissioner for Energy, Guenther Oettinger, the seminar featured two key European decision makers and provided an in-depth view of main stakeholders involved. The event embraced an inward and outward looking dimension of the shale gas nexus and brought together a crowd of about 120 high-level participants from both sides of the Atlantic, allowing framing the discussion in the broader picture of dropping energy and electricity prices in the U.S. due to increasing development of natural gas from unconventional sources.
By accessing shale gas and oil in a commercially feasible way through new techniques – horizontal and directional drilling, and hydraulic fracturing – the U.S. has managed to evolve from a chronically energy dependent nation to a net energy exporter within only a few years’ time. This development has not only huge geostrategic repercussions, with the U.S. potentially becoming less involved in energy rich countries elsewhere, but also entails potentially profound economic potential. This auspicious prospect cherishes the hope of energy intensive industries in the U.S., and could eventually revive the “Made in U.S.A.” label on the global market. Cheap energy might also impact upon manufacturer’s location decisions and make it more appealing to produce in the U.S.. These prospects both thrill and concern manufacturers in Europe, as they fear to lose their competitive edge to U.S. competitors, if no equivalent measures were taken on the European side.
Following an introduction by Prof. Alan Riley, City University London, on Competitiveness and the shale gas revolution in the U.S. and Europe, speakers and participants discussed the impact of shale gas on Europe’s competitiveness and policy choices in four panels.
The first panel raised the question whether or not shale gas is essential for Europe’s economic future. The panel featured Olli Rehn, Vice-President and Commissioner for Economic & Monetary Affairs, Peter Chase, Vice President Europe, U.S. Chamber of Commerce, Harald Schwager, Board Member for Europe, BASF, and Laurence Tubiana, Founder of IDDRI and Facilitator of the French government's steering committee on energy transition. It was chaired by Philippe Legrain, Principal Adviser and Head of the Analysis Team, BEPA. During the discussion a lack of knowledge concerning quantities, risks, and potential was criticized. It was also mentioned that policy measures were needed to tackle problems of productivity and to counterbalance increasingly competitive industries elsewhere. The discussion brought up a scenario in which shale gas would allow compensating the decline of conventional production in Europe. However, the overall relevance of energy intensive industries for the overall GDP was questioned, while other economic energy related projects, e.g. completing the EU internal marked and increasing energy efficiency, were identified as important, and, in indeed, decisive for Europe’s competitiveness. Yet, the spill-over effect from one industry to another was mentioned and could potentially generate jobs and growth beyond energy intensive industries. While shale gas could be part of a wider sustainable approach in Europe, its role is unlikely to be as important as in the US.
During the second panel, discussants and participants explored how Europe can reconcile competitiveness with environmental leadership in an era of natural gas. This panel featured Robin Miège, Director of Strategy, DG ENV, Humberto Delgado Rosa, Director of Mainstreaming Adaptation and Low Carbon Technology, DG CLIMA, Hendrik Bourgeois, Vice President European Affairs, GE, and Adam White, Project Officer Climate and Energy Policy, WWF. It was moderated by Pierre Dechamps, Adviser, BEPA. The discussion identified key differences between the U.S. and EU in terms of environmental regulation, population density and infrastructure. It explored the potential negative environmental impacts of shale gas, while demanding further studies on the effect on water quality and other potential contaminations of the soil. Industry obligations regarding monitoring were asked for. Moreover, the discourse embraced the wider prospect of a decarbonizing economy and climate change, while asking the question to what extent shale gas could contribute to CO² emission reduction. Yet, the danger of replacing an era of fossil fuels with another era of fossil fuels came up during the discussion, asking for more sustainable options to be pursued. However, the notion of shale gas supplementing the evolution of more technologically sufficient renewables was brought up.
In the third session, the overarching question focused on the implications of shale gas for energy security. Discussants included Philip Lowe, Director General, DG Energy, Lena Kolarska-Bobinska, MEP, Member of the ITRE Committee, Wolfgang Behrendt, Communication and Information Officer of the EU Delegation to Moldova, EEAS, and Derek Magness, General Director for Onshore Europe, Chevron. The panel was chaired by GMF’s Senior Adviser Sir Michael Leigh. The discussion involved the view that shale gas can support European energy security, and enhance European bargaining ship vis-à-vis current energy suppliers, and transform the relationship to Russia into a more business minded one. LNG imports coming from the U.S. could also increase flexibility. A shared view was that diversification is essential for the EU. The geopolitical potential benefits of accessing domestic resources were stressed, so was the potential for enhancing the economic situation in less developed regions in Europe.
The final panel discussion entitled “Shale gas and competitiveness: a challenge for Europe?” featured Günther Oettinger, EU Commissioner for Energy, Niki Tzavela MEP, Rapporteur for ITRE Committee's report on 'Industrial, energy and other aspects of shale gas and oil', Dieter Helm, Professor of Energy Policy, University of Oxford, Markus Beyrer, Director General, Business Europe, and Magda Stoczkiewicz, Director, Friends of the Earth Europe. Sylke Tempel, Editor-in-Chief, Internationale Politik moderated the discussion and the subsequent lively debate. During the panel discussion the geopolitical importance of energy was stressed. The need for additional resources to allow the European economic to recover and eventually to flourish was mentioned. The idea that shale gas could play a balancing and adjusting role in Europe’s overall energy mix entered the discussion and shale gas was proposed as a cleaner alternative to coal. The necessity to have access to cheap energy for certain energy industries was stressed and the danger of those industries leaving Europe for the U.S. and potentially other regions was endorsed. It was suggested that engage in an combined efforts and dialogue of policy makers, engineers, scientists, politicians to understand which resources are needed and to explore what can and must be done before allocating any resources. The discussion also elaborated on Europe’s role and relevance for tackling global climate change and whether or not Europe would be better off by seeking pragmatic solutions in economic and environmental terms.