By announcing the suspension of the authorization for the Nord Stream 2 gas pipeline – which was supposed to be commissioned shortly – the German Chancellor, Olaf Scholz, sheds harsh light on the inconsistency of German energy policy.
After more than three years of work, Nord Stream 2 had been put into pre-service in October 2021. In the midst of the Ukrainian crisis, the certification procedure for the gas pipeline had however been interrupted on the European side, delaying the start of new deliveries of Russian gas to the west of the continent.
This is the big comeback of the debate on the desirable energy mix for Europe.
Earlier this month, on 2 February 2022, the European Commission approved in principle a Complementary Climate Delegated Act including, under strict conditions, specific nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy.
Under the Taxonomy Regulation, the Commission had to come up with the actual list of environmentally sustainable activities by defining technical screening criteria for each environmental objective through delegated acts.
But two fields were conspicuously absent of the original “climate delegated act” formally adopted on 4 June 2021: natural gas and nuclear energy. The delay was blamed on the long-standing and deep-rooted disagreements among EU countries around the future of the two controversial resources.
The decision of the Commission was finally to opt for a path that would give all sides of the debate something to be satisfied with in order to prevent the emergence of a blocking majority (that is, at least 20 EU countries representing at least 65% of the bloc’s population).
Whether you like it or not, it’s pragmatism.
In our Aristote position paper dated July 10th, 2020 about taxonomy, we were writing : “The Commission should determine a more granular approach (several thresholds), which will determine a transition pathway for each sector and hence allow the economy and the markets to reward compagnies that engage on this pathway. The purpose is clearly not to implement punitive legislations but help all stakeholders to work together to contribute to the transition.”
On gas, the solution of the Commission was to qualify as “transitional activity” (through a sunset clause ending end of 2030) generation from gaseous and liquid fuels if they are lower than 270 gCO2/kWh provided that yearly emissions of the plant are lower than 550 kgCO2/kW (in order to work as a back up for intermittent renewables).
It’s exactly what the gas sunset clause philosophy is about.
But things could accelerate in the wake of Olaf Scholz announcement.
And as well summarized by Maria Pashtukova, Senior Policy Advisor, Energy Diplomacy, E3G Berlin: « This is a historic moment, breaking with German decades-long politics of detente and “Wandel durch Handel”. By requesting the halt of Nord Stream 2 certification process the German government takes Russian gas exports back from the administrative-regulatory sphere where it tried to put it in the last couple of years, to the realm of geopolitics, acknowledging that there is a geopolitical price tag that comes with cheap Russian pipeline gas, and it is very high.”
One thing is certain: Europe must seriously reevaluate its energy security position vis a vis Russia and act now.
Iconography : construction of a pipeline © Roman Pentin on Unsplash
After working as an international banker for emerging countries, Laurent Lascols became global head of country risk / sovereign risk (from 2008 to 2013) then global director of public affairs (from 2014 to 2019) for Societe Generale. In 2021, he founded Aristote, an advisory firm and training organization dedicated to environmental economics, sustainable finance and impact finance.