From the Brookings Institution

On February 16 the European Commission published its long awaited “winter package,” a series of legislative documents partly outlining the foundation of the often debated Energy Union. For those who have lost track, at the heart of the Energy Union lie concerns about single-source dependence on natural gas from Russia.

The good news about natural gas in Europe is that in recent years, significant progress has been made to complete the internal market. I have always firmly believed that European cooperation is the single most important strategy to increase overall energy security—the evidence is fairly overwhelming. Fortunately, European officials and most national policymakers have adopted this strategy, and as a result the European Commission can now conclude that with the exception of four or five member states, dependence on a single supplier is no longer an issue. This does not mean that imports of Russian gas have come down markedly, but rather that optionality has been created. Evidence has always suggested that pursuing this optionality is key to enhancing EU energy security.

European cooperation is the single most important strategy to increase overall energy security.

The Commission also rightly observes that some important final pieces of the internal market are lacking—in terms of a handful of interconnectors and storage facilities. But by and large, the EU internal market for natural gas continues to move in the right direction. Moreover, the Commission in its strategy markedly changed its tone, to noting explicitly the role that natural gas can play in the transition towards a low carbon economy. It enraged a part of the environmental community, which seems to expect a transition to a low carbon economy to take place overnight. Finally, natural gas prices have come down significantly, making liquefied natural gas (LNG) competitive with imports by pipeline, and effectively putting a ceiling on prices in the EU for at least the next couple of years.

Stuck in the middle

Is the future of natural gas in Europe all glorious, then? Not quite. In between the lines of the new strategy, one gets the sense that European Commission policymakers are not satisfied with the outcome of something it has itself created: a liberalized market for natural gas.

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