The future governance system for the Energy Union needs to be about collectively addressing and responding to the risks that Europe’s energy systems face, write Jonathan Gavanta and Quentin Genard, quoted by euractiv.com.

In EU energy policy, the term ”governance” is often both politically fraught and utterly opaque.  As member state Directors General meet this week to thrash out positions on the governance arrangements for delivering the EU Energy Union and 2030 climate and energy targets, it is still far from clear what ”governance” actually means.

A Commission paper leaked to EurActiv last week to be discussed at this week’s meeting sets out plans for an ”integrated governance and monitoring process of the Energy Union”.  This will involve integrated national energy and climate change plans, aggregated into an annual ”State of the Energy Union„ report.  So far, so good.

Delivering the huge sums of investment needed to renew Europe’s energy system will require transparent, stable and predictable regulatory regimes

But – perhaps out of fear of sparking an unwanted fight with certain member states – the Commission paper stops there. There is no mention of iteration or enforcement. There is nothing about what happens if the national plans do not add up to meet the EU targets, what measures will be in place to ensure the national plans are actually followed or even about what kind of assessments will be made of the aggregate information.

This is not ”governance” in the conventional sense of putting in place institutional and legal arrangements to manage outcomes. The proposals are closer to a statistical exercise: a useful task perhaps, but far from the “reliable and transparent governance system” that EU heads of government called for at the March EU Council. The key question must be: as a result of this exercise, would anyone do anything different to what they would do otherwise?

To move beyond this impasse, governments and the Commission need to return to first principles and remind themselves what an Energy Union governance system is for.

First, delivering the huge sums of investment needed to renew Europe’s energy system will require transparent, stable and predictable regulatory regimes, including clarity on how EU-level targets will be met.  Erratic regulatory regimes and weak governance raise the risk profile for investments and as a result push up financing costs and energy costs for consumers.

This is not a problem that can be resolved within national boundaries alone: the interconnected nature of the European energy system means that states are affected by the decisions of its neighbours.  In this context, it is in the interest of all member states have a stable and workable governance regime in place that enables predictability of outcomes. This requires a governance system underpinned by a firm legal basis.

Risks

Second, the governance system needs to be about collectively addressing and responding to the risks that Europe’s energy systems face. EU-level energy security assessments are undertaken for a limited range of potential shocks (eg stress-tests for adequacy of gas storage). However no one is currently in charge of monitoring systemic risks.

This has worrying parallels to economic crisis, where individually-rational decisions by different actors made the system as a whole collectively vulnerable. The new governance system needs to be able to ensure EU energy and climate objectives are met even in the face of unexpected shocks.  As a result we need a system for stress-testing national and European energy plans, as well as a clear view on both the rights and responsibilities required from participants in Europe’s Energy Union.

Finally, we must recognise that governance is not a zero-sum game between member states and the Commission. There are many more players with a direct stake in the Energy Union, from individual citizens to national parliaments. In particular, cities and regions will be critical to ensuring the Energy Union actually works in practice. They are active actors in the low carbon transition, with many cities being even more ambitious than their national governments. However, they face a number of structural barriers that need to be addressed: access to finance, lack of capacity or an unclear legal basis to undertake the necessary changes.

Governance should open the space to rethink the role of local actors within the low-carbon transition and give them the means matching their ambitions.  The Energy Union governance proposals must be clear about what cities and regions are being asked to do, and what cities and their citizens can expect from both member states and European institutions.

Jonathan Gaventa is Associate Director of E3G, focusing on European energy. Quentin Genard is a researcher working in E3G’s Brussels office.