The development of renewable energy in Europe faces a host of environmental, economic and political hurdles.
Imported fossil fuels represent more than half of European energy consumption. At projected growth rates, the share of imported hydrocarbons will rise to 70 percent of total energy consumption by 2020.
Europe’s heavy reliance on oil, gas and coal hinders international efforts to mitigate greenhouse gases, which if unabated threaten to boost global temperatures by two to six degrees Celsius by 21001. The environmental repercussions of global climate change (including rising sea levels and growing incidence of extreme weather events) not only imperil local populations, but place a mounting burden on the insurance industry.
Europe’s continued dependence on imported hydrocarbons also raises serious concerns about energy security. The Russian Federation is Europe’s foremost energy supplier, accounting for one-third of the European Union’s oil imports and nearly 40 percent of natural gas imports. For some small EU countries (e.g., Bulgaria, Estonia, Finland, Latvia, Lithuania), dependence on imported Russian gas exceeds 90 percent. Even larger, better-endowed EU countries such as Germany and Poland rely on hydrocarbon imports from Russia.
This article addresses the following questions:
- How well are European countries performing in the renewable energy arena?
- What measures is the European Union taking to promote the expansion of renewable energy sources in member countries?
- What role does Norway (a non-EU country that aspires to leadership in alternative energy technologies) play in Europe’s renewable energy future?
EU’s 20/20/20 Mandate
In response to growing anxieties about Europe’s energy future, the EU issued a Renewable Energy Directive (2009/28/EC) setting the following targets for 2020: 20 percent energy consumption from renewable sources; 20 percent reduction in primary energy use; 20 percent reduction of greenhouse gases below 1990 levels.
EU member states are formulating National Renewable Energy Action Plans covering the key segments cited in the Directive (electricity, heating/cooling, and transport). National governments are obliged to apprise the European Commission of their progress toward the 20/20/20 targets. While not formally bound by the EU’s Renewable Energy Directive, the three members of the European Economic Area (Iceland, Liechtenstein, and Norway) are participating in the programme.
As shown in the exhibit below, current shares of renewable energy vary widely among the 27 EU member countries, ranging from renewable energy leader Sweden (44.4 percent of gross final consumption) to laggard Malta (0.2 percent).
These variations in the starting positions of member states, together with large differences in national income levels and resource endowments, prompted the European Commission to negotiate individual country targets within the broader 20/20/20 framework. Wealthy EU states with well established renewable energy sectors received aggressive 2020 benchmarks (Denmark 30 percent, Finland 38 percent, Austria 40 percent) while coal-dependent countries in Central and Eastern Europe secured more forgiving targets (Czech Republic 13 percent, Slovak Republic 14 percent, Poland 15 percent).
Cooperation Between EU States
Recent progress reports submitted to the Commission raise doubts about the EU’s ability to fulfill the Renewable Energy Directive. These reports indicate that ten member states (Bulgaria, Estonia, Germany, Greece, Lithuania, Poland, Portugal, Slovak Republic, Spain, Sweden) expect to surpass their 2020 targets. Five member states (Belgium, Denmark, Italy, Luxembourg, and Malta) anticipate falling short. The remaining members (Austria, Cyprus, Czech Republic, Finland, France, Hungary, Ireland, Latvia, Netherlands, Romania, Slovenia, United Kingdom) are on track to meet their national targets by 2020.
In light of these varying rates of renewable energy development, the European Commission is focusing on the joint goal of 20 percent renewable energy while promoting collaboration between member states to accommodate country-level differences.
For example, countries exceeding their targets can transfer renewable energy surpluses to sub-performing countries and thereby smooth out national discrepancies. The Commission is also encouraging groups of member states to undertake joint energy projects to boost country-level renewable energy shares and hasten movement toward the aggregate EU goal.
By Lars Løyning
RSM Hasner AS