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U.S. shale boom forces EU to rethink high-tax energy policy

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Anne Hobson Contributor
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Europe’s commissioner for energy this week urged the continent to avoid new energy taxes or tax increases, reflecting that competition from cheap U.S.-produced shale gas is making energy more affordable in international markets.

Guenther Oettinger told the Guardian, “To compete we must have a functioning internal market for electricity, with more competition (among energy suppliers).” Oettinger urged futher liberalization of energy markets to compete with US industry.

EU manufacturers have been increasingly concerned about the impact of competition from the U.S.

The recent U.S shale gas boom caused natural gas prices to decline to one fifth of prices in Europe and Asia. While the U.S. is moving toward energy independence, the EU is projected to become more energy dependent in the next decade. According to the International Energy Agency, 80 percent of the EU’s energy will come from imports in 2035, up from 60 percent currently.

“Energy efficiency is very important — we must consume less,” Oettinger said. “And no new taxes on energy, and no higher taxes on energy, to get to a suitable price for energy consumers (including energy-intensive businesses).”

Hydraulic fracturing, known as fracking, has dramatically changed the U.S. energy economy by allowing for the extraction of larger volumes of natural gas and petroleum. However, experts say that it is unlikely for shale gas extraction to play such a central role in Europe’s energy industry.

“We have different geology that makes it more tricky [to extract shale gas],” said Connie Hedegaard, the European commissioner for climate change, “we don’t have the same wide open spaces. We pay more attention to what local people think.”

On Wednesday, the European Commission published a green paper on climate and energy, jumpstarting energy lobbying and international debate  on EU climate goals.

The EU currently has a renewables target of 20 percent of energy by 2020. The overall EU target is a 20 percent total emissions cut by the same date.

The commission is pushing for a higher target for 2030; however, the UK wants to cut out the renewables goal.  This would allow member sates to use whatever methods they wish to cut greenhouse gases.

Oettinger and Hedegaard  think a 2030 renewables target is vitally important to progress toward energy independence in Europe. Hedegaard argues that economic growth and job creation would suffer if the renewables industry was allowed to falter.

“If there is no binding target, then member states can reduce renewable energy after 2020,” Oettinger said, predicting that progress made in the renewable energy industry may be reversed.  This standoff between the UK and the EU is expected to intensify in the coming months.

Draft proposals for the EU’s 2030 energy targets are expected to be drawn up and put before the European parliament by the end of the year.

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