CIAO DATE: 06/06

European Affairs

Fall 2005

 

Energy

The U.S. and Europe Must Cooperate on Energy Strategy

By David L. Pumphrey

 

Cooperation between the United States and Europe is essential to global energy security because we face so many energy challenges and opportunities in common. The United States and Europe generate nearly 45 percent of the world's gross domestic product and account for 43 percent of world energy consumption. This combined demand for energy is expected to increase by about 28 percent between 2002 and 2025, or about 21 percent of the total world increase over the period.

While U.S. and European energy needs are projected to grow rapidly, however, they will be far outpaced by the growth of demand in the emerging economies. According to forecasts contained in the International Energy Outlook1, published by the U.S. Department of Energy, world energy demand is likely to increase from 411.5 quads (quadrillion British Thermal Units) in 2002 to 644.6 quads in 2025. Emerging economies will account for 151 quads, or nearly 65 percent of the total increase. Thirty-five percent of the world increase will be in China and India alone. And the same trend applies across the board in coal, gas, oil and electricity.

The projections indicate important strides toward greater energy diversification, thanks especially to a rapid increase in the use of gas and renewable energies. Oil, however, will continue to represent the bulk of our energy needs, and rising dependence on imported oil and gas means that energy security will remain a critical component of our national and international energy strategies.

Despite concerted efforts to conserve and diversify energy sources, oil could continue to supply over 40 percent of the energy needs of North America, Europe and the industrialized countries as a whole, largely because of continued growth in the transportation sector. Our oil import dependence will continue to rise, with nearly half our oil imports likely to continue to come from OPEC countries. This dependence exposes us to price fluctuations and is a drain on our economic growth. Oil imports already cost our economies over one percent of the total value of our gross domestic product.

The increase in energy and oil demand in the United States, Europe and other regions goes hand-in-hand with growing challenges to our energy systems. Both the United States and Europe suffered electricity blackouts in the summer of 2003, which brought home the vulnerability of energy structures, and the need to improve the reliability of our systems. We must also upgrade and expand our aging energy infrastructures, reduce the environmental impacts of energy use and enhance our energy and, particularly, oil security to guard against possible future disruptions.

A key feature of U.S. policy is the belief that the best immediate preparation for potential oil disruptions is the maintenance of emergency oil stocks and a collective commitment to use them during interruptions of supply. The effectiveness of this policy internationally was demonstrated in September 2005, when the International Energy Agency released supplies to the world oil market after Hurricane Katrina. Within a week of the hurricane, all 26 IEA member countries endorsed an innovative, market-oriented response and we appreciate the substantial role of the EU countries in this effort.

The United States and the European Union share much common ground in our responses to global energy challenges. As the world's two largest energy consumers, we are seeking greater energy efficiency and more diversification of energy supplies and suppliers. As the world's two largest nuclear power generators, we want to improve nuclear designs for the future, enhance nuclear safety and resolve the problems of waste disposal. We both recognize that our energy security requires close cooperation with other countries and regions and greater efforts to transfer our energy experiences to those countries.

“U.S. and EU energy policy strategies reflect many parallel themes”

As two of the world's largest oil and gas importers, we understand the importance of cooperation, outreach and dialogue with key oil and gas producing countries. As we face rising dependence on oil and gas imports, we are both seeking to improve oil and gas supply security through strong stock and response programs.

It is not, therefore, surprising that the United States and the European Union launched energy policy strategies in recent years (the EU in 2000 in its Energy Green Paper and the United States in its National Energy Policy Plan and subsequent Energy Policy Act) with many parallel themes. Both of us have embarked on a major restructuring of our electricity and gas markets and efforts to strengthen market competition. We are both placing greater emphasis on energy efficiency and studying the role of natural gas to see how future investment and infrastructure needs can be met.

We are encouraging the deployment of new technologies, for example through cooperation in the International Partnership for a Hydrogen Economy and the Carbon Sequestration Leadership Forum. We are both seeking closer integration with neighboring countries – the United States with Canada and Mexico, and the European Union with Eastern Europe and Russia.

“The U.S. spends more each year than any other nation on climate change-related programs”

We are each taking further steps to improve our environment and to tackle important global challenges such as climate change. In February 2002, President Bush committed the United States to an ambitious climate change strategy that will reduce domestic greenhouse gas emissions relative to GDP by 18 percent over the next 10 years. The United States is devoting the unprecedented sum of $5 billion a year to climate change-related programs, more than any other nation.

The United States leads the world in climate change research and has spent over $20 billion on climate and global warming research since 1990. We are also increasing our support to the developing world for climate change activities, and are cooperating bilaterally with countries representing nearly 70 percent of global emissions. We have a strong program of international collaboration to advance these common goals, and the United States and the European Union are engaged in broad-ranging cooperation on climate change, including a high-level dialogue on global warming.

At a U.S.-EU summit meeting in June 2005, the two sides committed themselves to continued close collaboration on energy and the environment. They noted their intention to focus on a number of critical areas, including cooperating with developing countries; deploying clean and efficient technologies and more efficient diesel vehicle technologies; advancing safe nuclear energy; and promoting the methane-to-markets partnership. This cooperation is well under-way and new areas of common interest are constantly emerging to strengthen it. In July 2005, for example, the United States and the European Union committed themselves to closer cooperation on biofuels.

The United States and the European Union cooperate through the Generation IV International Forum (GIF), a group of leading nuclear nations that agree on the importance of nuclear energy and are dedicated to the joint development and demonstration of Generation IV nuclear energy systems that offer advantages in the areas of economics, safety, reliability and sustainability.

There is active cooperation between the U.S. Clean Cities Program and the European Commission's CIVITAS project to promote cleaner urban transport. This has taken the form of exchanges of information on technical and management issues and participation in each other's conferences and discussion forums. Both entities are committed to building upon this relationship to create a more formal peer exchange program and to develop a train-the-trainer program in a developing nation on alternative fuels and energy efficiency. The United States is also planning to contribute 10 percent to the international ITER Project, formerly known as the International Thermonuclear Experimental Reactor Project, to be constructed at an EU site in Cadarache, France.

Carbon sequestration is a priority in both American and European research and development programs. The European Union was a charter member of the Carbon Sequestration Leadership Forum that was established in 2003 and serves on three of the Forum's Task Forces. The European Union and the United States are founding members of the International Partnership for the Hydrogen Economy, also established in 2003, which builds on President George W. Bush's announcement of a $1.2 billion Hydrogen Fuel Initiative, on the EU hydrogen program conducted through the European Hydrogen and Fuel Cell Platform, and on the determination of other members to cooperate in hydrogen research and deployment.

Beyond our individual national efforts and our bilateral cooperation, the United States and the European Union both recognize that it is essential to strengthen international cooperation if global energy challenges are to be addressed collectively. An important forum for developing a collective international response is the G8, in which energy and the environment have continued to play an important role, including the adoption of action plans at recent summit meetings in Evian, Sea Island and Gleneagles.

We are working continuously and closely with our partners in the International Energy Agency to promote sound energy policies, exploit collaborative research and development opportunities and implement the Gleneagles Action Plan. We maintain bilateral energy contacts and consultative mechanisms with key countries, including China, India and Russia, to encourage market reforms, increased energy investment and accelerated deployment of energy efficiency, clean coal, safe nuclear power and infrastructure expansion. While the world energy outlook presents both Americans and Europeans with significant challenges, the United States and the European Union have both reinvigorated their energy policy responses with new energy strategies, legislation and directives. Further new initiatives are under discussion. We look forward to continued close cooperation with the European Union toward a successful, sustainable energy future.

Energy Projections Twenty Years Ahead

• U.S. and European oil demand was 34.9 million barrels per day in 2002, or about 45 percent of the world total, and could rise to 44.3 million barrels per day in 2025.

• The United States currently imports about 52 percent of its oil needs, and the share could approach or exceed 60 percent by 2025. For the EU the respective figures are about 50 percent and 90 percent.

• The U.S. and Europe account for 44 percent of world gas consumption and their combined demand for gas is expected to rise from about 41 trillion cubic feet in 2002 to 59.1 trillion cubic feet in 2025. Gas is by far the fastest growing energy source on both sides of the Atlantic.

• Over the next 20 years, the United States will need 1,300 to 1,900 more power plants, equivalent to 60 to 90 new plants a year. An expected 50 percent increase in U.S. use of natural gas over the same period will require approximately 263,000 miles of new distribution pipelines and 38,000 miles of transmission lines.

• According to a European Commission study, €200 billion will be needed over the next 20 years to bring additional gas to Europe to meet rising demand.

• Combined U.S. and European net electricity generation represents 46 percent of the world total, but this share could decline to about 36 percent because of faster increases in emerging economies.

• The United States and Europe account for 37 percent of the world's production and consumption of hydropower and renewable energy sources.

• U.S. and European nuclear energy consumption is expected to decline from 1,735 billion kilowatt hours in 2002 to 1,695 billion kilowatt hours in 2025 as a result of the retirement of older plants, decisions by some countries to forego nuclear power and improvements in the operations of existing plants. While worldwide use of nuclear power will rise, much of the increase will take place in China, India, Russia and other emerging economies.

Source: U.S. Department of Energy

David L. Pumphrey is Deputy Assistant Secretary for International Energy Cooperation, U.S. Department of Energy. He previously worked with the Department's International Office on numerous projects, including the negotiation of energy provisions for the North American Free Trade Agreement, the creation of the Hemispheric Energy Initiative, and analysis of developments in international oil and gas markets. He also served with the Department's Office of Oil and Gas and with the Federal Energy Administration.