The Balkans: Energy Independence or Energy Interdependence?
The aim of energy policy is to secure a reliable and sustainable supply of energy for economic and social development. As roughly 50% of the EU’s energy supplies come from without the Union, there is a high risk regarding the availability and accessibility of energy resources. Diversification of sources and routes might lessen the problem, provided investments are sufficiently protected. Thus, the aims of the EU’s external energy policy are: Enabling access to mineral resources (via stable transit countries); ensuring sufficient protection of investments; and establishing definitive procedures for the settling of disputes. On the other hand, the EU and its member states are trying to decrease their dependency on fossil fuels by developing climate-friendly energies, by increasing the economic viability of green technologies, by limiting the negative environmental impacts of energy production, and by exploring markets for their technologies and services.
Diversification of sources and routes
Instruments for the EU’s external energy policies include bilateral arrangements with Russia, Norway, and the US, as well as regional treaties, e.g. the Baku initiative, the Eastern Partnership, and the Union for the Mediterranean. The EU is also trying to reach legally binding agreements that regulate the access to markets, the rules of trade, transit, protection of investments, intellectual property, and environmental measures. The Energy Community Treaty is such an instrument. It is the first multilateral treaty between the European Union and the countries of South East Europe. The aim of the Energy Community is to establish an integrated energy market with the same set of rules as within the European Union (“extension of the acquis communautraire”). The members of the Energy Community have committed themselves to adopting relevant EU legislation relating to energy, competition, and the environment, i.e. to liberalise the energy sector, implement market-oriented reforms, change pricing policy, and restructure the energy industry.
However, it is to be expected that the liberalisation of prices (as to reflect true costs) will lead to a rise in prices and that a restructuring of the energy industry will cause job losses. It is likely that this will significantly decrease the affordability of energy and thus lead to energy poverty. On the positive side, it is expected that alignment with EU rules will provide a stable regulatory framework and attract investments, which in turn will enable economic development. It is uncertain which of the two factors will prevail – the main challenges facing energy policy (availability, accessibility, affordability, and acceptability) are all interlinked.
Balancing sustainable energies and social justice
Improvement in one area can lead to deteriorations in others. To balance divergent energy policy goals and to harmonise them with other policies (e.g. sustainable development, protection of the environment, social justice, employment, investment, privatisation) is a complex task that requires careful sequencing and implementation.
The South East European countries face similar problems. For this the Energy Community provides a framework for co-operation and co-ordination. Still, in this respect, the institutions of the Energy Community (primarily the Ministerial Council) lack initiative and governments are still trying to follow their own national energy policies – as seen, when Serbia struck an energy deal with Russia. As the South East European countries generally have no coherent medium-term strategy for reform, priorities are very much determined by short-term policy considerations and by the process of integration into the European Union.
Interdependence of energy and development policies
Based on the above, it can be concluded that co-operation within the region and with the EU can strengthen the position of the Balkan countries in regard to potential investors and suppliers. Yet, there has to be more awareness of how interdependent energy and development policies are. Only when this happens, will it be possible to create a framework for reform and the management of political and public expectations.
Primary energy sources are very limited in South East Europe; the dependency on fossil fuels is significant. An increase in energy efficiency and the use of renewable energies will reduce the dependency on imports. The statistical relation between energy intensity and the level of competitiveness implies that countries that are more competitive use energy more efficiently. The energy intensity in South East Europe is significantly above the EU average. Key facilities are at the end of their life cycle and use antiquated technology.
No energy independence in a globalised world
The age of South East Europe’s energy infrastructure represents a risk for supply security and the environment. Investment is necessary. The choice of technology and equipment is dependent on investment and maintenance costs, the rate of return, and energy prices. In the short run, investment decisions thus might lead to higher prices and the energy poverty of vulnerable social groups. Positive effects, however, are to be expected in the long run.
Having said this: It has to be kept in mind that the risks related to energy security are viewed differently by civil society organisations, governments, energy industries, financial institutions, and international organisations. Moreover: Some risks related to energy security can be managed by governments, some by the energy industries, and some by the international financial sector. Multilateral frameworks of intergovernmental co-operation, programmes, and initiatives can also have an impact on risk management. In a globalised world, energy independence can not be achieved. Successful energy policies require inter-sectoral co-operation, supervision, and long-term public policies concerning employment, the environment, and investment.
This project has been funded with support from the European Commission.
This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.