EUCERS/KAS Energy Talks 2017
The role of natural gas in the EU energy
mix in the context of the Paris
Agreement
EUCERS/KAS Energy Talks 2017
It is expected that the Paris Agreement will trigger changes in the global energy mix that will
become increasingly reliant on climate friendly fossil fuels and renewable energy (International
Energy Agency 20161; Energy Information Administration 20152). An important role in the
transition process to a greener energy system will be played by natural gas. The data released by
the Energy Information Administration (EIA) shows that starting with 2005 the presence of
natural gas in the energy mix prevented over a billion metric tons of CO2 from being released by
power plants in the US (Energy Information Administration 2015). Gas is the only fossil fuel
whose consumption will increase in the future (International Energy Agency 2016). According to
the Agency, gas can help gradually decarbonise the energy system by replacing more carbonintensive fuels and by supporting the integration of renewables in the energy mix.
Europe played an important role in the architecture and negotiation of the Paris Agreement. We
would expect the EU to act as a role model when it comes to implementing the Agreement.
While gas can help the EU to decarbonize its economy and reach climate commitments taken
under Paris, it also renders the European Union’s high dependency on gas imports. Gas
constituted 21% of overall EU gross inland energy consumption in 2014 (European Commission,
DG Energy 20163, p.22). The EU’s gas imports will most likely increase in the foreseeable future
as domestic gas production is declining and there are little prospects for a European shale gas
revolution to replicate the revolution taking place in the US in the last few years. Will a greater
reliance on natural gas render the European Union more dependent on external energy sources
and, implicitly, more energetically insecure? What contribution should natural gas make to the
future energy mix of the European Union, while responding to security of supply and climate
considerations? What regulatory and financial incentives can support that contribution?
The talk will discuss the role that natural gas can play not only in the EU, but also in the national
energy mixes. The case of Germany is particularly interesting to examine as Germany plans to
phase out its nuclear power plants by 2022 opening a window of opportunity for other energy
resources. In Germany, gas-fired power generation accounted for 5% of the total generation in
the fourth quarter of 2014, 10% in the fourth quarter of 2015 and its share increased to almost
12% in the first quarter of 2016 (European Commission 20164, p.7). This was a result of the
1
http://www.iea.org/newsroom/news/2016/november/world-energy-outlook-2016.html.
http://www.eia.gov/environment/emissions/carbon/.
3
https://ec.europa.eu/energy/en/data-analysis/energy-statistical-pocketbook.
4
https://ec.europa.eu/energy/en/data-analysis/market-analysis.
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EUCERS/KAS Energy Talks 2017
increased competitiveness of gas in Germany in this particular sector. Nevertheless, price-wise
gas continues to face a lot of competition from coal. It will be interesting to hear from both the
German government and industry on the challenges faced by the gas sector in Germany and the
potential measures that can be taken to overcome those challenges. At the same time, the
event will discuss the prospects of natural gas in the UK, a country that underwent a ‘dash for
gas’ starting with the early 1990s and is currently in the process of leaving the EU. There is a
need to evaluate the degree to which Brexit might directly or indirectly impact on the European
and British commitments taken under the Paris Agreement and the degree to which such
changes might impact on the future of natural gas in the UK.
The talk also aims to cover the main financial and regulatory incentives that can support a
greater role for natural gas in the European energy mix. The Paris Agreement is already
triggering changes in national and EU regulatory and investment frameworks applicable to the
fields of energy and climate. One of the main goals of the agreement as set in Article 2 is:
‘Making finance flows consistent with a pathway towards low greenhouse gas emissions and
climate-resilient development’ (Parties to the Agreement 2015, Article 25). Signs of change in
energy financing were already visible at the moment when the Agreement was signed. For
instance, in the framework of the programme Mission Innovation twenty leading economies
promised to double (from $10 billion to $20 billion/ year) their clean research and development
(R&D) spending in the next five years. It is unclear what financial resources can be mobilized by
governments to cover this spending. As it is unlikely that tax revenues can cover the bill, carbon
pricing can constitute an additional source of funding for technological development in the
energy sector (Grubb 20156). The industry itself will most likely need to invest more in R&D in
the future and to change its business model. In the context of the Paris Summit, world’s top
investors such as Bill Gates and Mark Zuckerberg took the commitment to finance new energy
technologies without expecting immediate returns by forming the ‘clean energy investment
coalition’ (Milman 20157).
The talk will also address the role that energy companies will play in the EU energy
governance system developed after Paris. An important goal that the EU sets for the next
5
http://unfccc.int/files/meetings/paris_nov_2015/application/pdf/paris_agreement_english_.pdf.
http://www.euractiv.com/section/climate-environment/opinion/the-early-success-of-cop21/.
7https://www.theguardian.com/environment/2015/nov/30/bill-gates-breakthrough-energy-coalition-markzuckerberg-facebook-microsoft-amazon.
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EUCERS/KAS Energy Talks 2017
years is to develop a new energy governance system that will ‘ensure stronger investor
certainty, greater transparency, enhanced policy coherence and improved coordination
across the EU’ (European Commission 20178). Windows of opportunity to participate in
energy governance will open in particular for industry that can show it can help fight
climate change (this is the case with the gas and renewable industry). In addition to their
financial contribution, companies are in a good position to provide advice on the most
economical, efficient and technologically feasible ways of ensuring the transition to an
energy system low in carbon.
The second EUCERS/KAS Energy Talk of 2017 builds on the more general, framing debate
provided by the first EUCERS/KAS Energy Talk on ‘Energy and Climate Policy between the
Trump Presidency and the Paris Agreement’. Our experts from different sectors (government,
academia, consultancy, industry, etc.) will attempt to assess the degree to which the Paris
Agreement can impact on the role of natural gas in the EU energy mix, while addressing the
questions raised in the paragraphs above. The second part of the event will provide the audience
with an opportunity to engage the panel in a conversation by raising additional questions and by
commenting on the interventions made by the panel. The event aims to foster debate and
generate policy recommendations. Join us for a very promising discussion!
8
https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/2030-energy-strategy.