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Stronger Together?

The alliance between Washington and Brussels is being sorely tested by the latest divisions.

by Sara Stefanini
31 January 2019
16 min read
by Sara Stefanini
31 January 2019
16 min read

This article is taken from World Energy (WE) number 41, "The Big Reversal". Read the magazine.

America’s energy relations with Europe were about as strong as they ever could be when Barack Obama bid goodbye to the White House in early 2017. In his last year, the two sides worked together to bridge a long-standing divide with developing countries and clinch the Paris climate agreement; secured a second landmark deal to lift sanctions on energy-rich Iran; and committed to further cooperation on securing clean energy supplies, liberalizing trade and combating climate change.

“We are stronger when we work together,” Obama and German Chancellor Angela Merkel wrote in a joint op-ed in November 2016, soon after Donald Trump’s election. “The partnership between the United States and Germany has also played a central role in reaching the Paris Agreement on Climate Change. It gives the world the framework for the common protection of our planet.”

Two years later, the European Union headed to the global climate summit in Katowice, Poland in early December carrying the heavy burden of leadership on its own. The aim of the two-week COP24 is to agree to a dense and technical set of rules to ensure that countries meet the Paris goals for limiting global warming by 2100. It should also set the scene for them to raise their pledged action by 2020, as the deal requires.

Yet the outlook for the summit is cloudy at best. The rulebook negotiations reignited old differences between rich countries and China and other emerging economies. The U.S. remains a party to the Paris Agreement, as Trump cannot legally pull out until late 2020 at the earliest, but the U.S. presence has dwindled to a team of civil servants working quietly behind closed doors. They often fight alongside Europeans for the same principals as previous administrations, only with far less political clout.

What's missing from the talks is leadership from the top

While civil servants negotiate, Trump continues to refute scientific findings on climate change and the damage linked to it. He blamed the recent California wildfires on poor forest management, rather than a rising global temperature, and said he did not believe the findings of a U.S. government report on the economic effects of climate change in the U.S.

Meanwhile, Trump’s energy and foreign affairs policies have stoked more differences between the U.S. and Europe, first with renewed sanctions against Iran and now with the threat of sanctions against the Nord Stream 2 gas pipeline from Russia to Germany. “We are probably going through the most difficult period of the E.U.-U.S. relationship since the Second World War,” Maroš Šefčovič, E.U. vice president for the energy union, said at a conference organized by the think-tank Globsec in May. “Paris was the first stepping out of an international treaty and the Iran deal was the second walking away from a treaty jointly negotiated. To be quite honest, we do not understand very well how we could be in this shape when we’re talking about our closest of allies.”

Brussels and Washington have taken steps to reinforce their cooperation on energy more recently, particularly natural gas trade. They held the first E.U.-U.S. energy council under Trump in July and discussed the modernization of energy infrastructure, clean energy innovation and diversification of energy sources, supplies and routes, among other things. However, there was a notable omission from the joint statement, any mention of climate change or greenhouse gas emissions.

The statement struck a distinctly more ambiguous tone compared to the last bilateral meeting under Obama, in mid-2016. Riding high off the excitement of the Paris accord, the two spelled out lengthier and more specific commitments to planned European gas pipelines and regasification terminals designed to diversify supply, and said they could learn ways to meet their clean energy and climate targets from each other. They also underscored the need for “close U.S.-E.U. coordination” in implementing the Paris commitments. That will be missing in Katowice.

Europe's awkward position

European leaders in Brussels and the capitals were quick to defend the Paris Agreement when Trump announced plans to withdraw in June 2016. They masterminded a G7 environment statement saying the deal was irreversible and non-negotiable, with a footnote clarifying the U.S. objection, and formed a partnership with China and Canada to maintain support and iron out differences that develop in negotiations.

Yet America’s absence accentuates the awkward position Europe finds itself in on the global climate stage. Simultaneously there is demand from the developing world to increase its goals for cutting greenhouse gas emissions, both in the near- and longer-term, and resistance from poorer and more coal-reliant E.U. countries.

“The potential for the E.U. to go further is very much there and critical,” said David Wascow, director of the international climate initiative at the World Resources Institute. “How the E.U. engages with other countries is very important—being able to build bridges and common fronts with the [least developed countries bloc], with the small island states, with other key vulnerable countries.”

For the developing side, one expectation of Europe emerged in the first few days of the COP summit: the need for more money. With the Trump administration reneging on previously pledged financial aid, the group of least developed countries said it wanted rich countries to fill the gap, even if temporarily.

It’s hard for the E.U. to mobilize climate finance as a bloc since it’s the responsibility of individual countries. But in a bid to satisfy international pressure for emissions cuts, the European Commission is now urging E.U. lawmakers to set a goal of slashing emissions to net-zero by 2050, meaning any last manmade emissions would be absorbed by forests or carbon capture technology. The climate strategy the Commission released ahead of COP24 sets out pathways for reaching “climate neutrality.” It remains to be seen, however, how far E.U. countries are willing to increase the existing emissions reduction target of 60% by 2050, compared to 1990.

Even if they do follow the Commission’s call, environmentalists say it is not enough to meet the Paris Agreement’s second goal to limit global warming to 1.5 degrees Celsius.

Plus, Europe remains under pressure to increase its target for 2030. Still, its position in Katowice received a slight boost from an otherwise gloomy report that showed global carbon emissions will jump to a record high at the end of 2018. The E.U.’s emissions were expected to be roughly flat following 10 years of larger declines. But America’s stood to rise by 2.5% as a result of cars and gas-fired power, after falling over the previous decade.   This previous decline in the U.S. was largely driven by the shift from coal to domestic shale gas and initiatives led by state and local governments and companies. But the effect of the Trump administration’s rollback of environmental policies will likely begin to show in future emissions results.

“While the U.S. was gaining in the short term, with the transfer from coal to gas, the Europeans have a much longer-term plan for a real energy transition,” said Randolph Bell, director of the Atlantic Council’s Global Energy Center. “We see that both at the government policy level, but at the corporate level as well, European companies are taking the lead on recognizing and acting on climate change.”

Filling the White House void

There is, arguably, one upside to Trump’s decision to back away from Paris: The rise of American governors, mayors, moguls, philanthropists and other non-state actors, all of whom Europe is openly embracing.

California Governor Jerry Brown visited Europe during last year’s COP23 summit in Germany and agreed with Miguel Arias Cañete, the E.U.’s climate action and energy commissioner, to step up cooperation between the state and E.U. bloc on emissions trading and zero-carbon transport. In September of 2018, Former New York Mayor Michael Bloomberg, now the United Nations’ special envoy for climate action, agreed with Arias Cañete to work together in managing the global shift away from coal. And in October, philanthropist Bill Gates signed a deal with Šefčovič to create a joint investment fund for breakthrough clean energy technologies such as batteries.

Even American oil and gas majors have started to shift, after being criticized for lagging behind Europeans in acknowledging the implications of climate change and the need to reduce fossil fuel use. Chevron, Exxon Mobil and Occidental Petroleum joined the Oil and Gas Climate Initiative in September, alongside European companies including BP, Eni, Equinor and Royal Dutch Shell, as well as China’s CNPC, Brazil’s Petrobras, Saudi Aramco and others. The initiative, launched in 2014, aimed to reduce emissions from oil and gas and created a USD one billion-plus investment arm for low-emission technology.   This kind of movement from non-state actors is crucial, as attention turns from the high-level negotiations needed to set out global goals in the Paris Agreement to the work and investment needed to fulfill it.

Washington’s leadership, however, is still clearly missed. “I’ve never seen such positive energy coming from states like California, New York and many others—from the mayors, but also from the business leaders, who simply want to convince us all that the U.S. can do it without the White House,” Šefčovič said in May. “But if it comes to global talks, green financing and overall diplomatic effort, which you need to maintain to have success in Katowice at COP24, of course we are missing our American friends.”

In fact, Trump’s assertions that the Paris Agreement is bad for U.S. interests have helped fuel a backlash to the deal elsewhere in the world. Australia, a coal-rich country that has long been resistant to strong climate measures, is pushing back more audaciously against the idea of quitting coal or funding green projects in developing countries. Brazil’s right-wing President-elect Jair Bolsonaro floated the idea of pulling out of Paris during his campaign and appointed a climate skeptic to be foreign minister. The government also withdrew its offer to host next year’s COP25 summit.

“You see that while the U.S. is not showing leadership, other countries are more likely to weaken their stance—Australia is a good example—or not feel under pressure to act,” Bell said. “Without U.S. leadership, it is really hard to get real global action on these issues.”

The next E.U.-U.S. chasm

While transatlantic climate change relations soured early in Trump’s term, his stance on energy security and diversification remained broadly unchanged: Europe, particularly its central and eastern countries, needs fresh sources of gas to free itself of Russia’s grip on the market. The difference from previous administrations is that Trump ramped up the commercial rhetoric, frequently arguing that the U.S. is ready to sell liquefied natural gas (LNG) as an alternative.

E.U. leaders have followed by touting the potential for American LNG in recent months. But their overtures amount to little more than political shows of support and are unlikely to bring tangible changes in European gas supply or policy.

When European Commission President Jean-Claude Juncker visited the White House in July, the two sides agreed to facilitate gas trade to help diversify and secure Europe’s supplies. Nonetheless, it is ultimately up to companies, not governments, to sign supply deals. And Juncker made clear it remains up to the U.S. to make its LNG commercially attractive to European buyers. “The growing exports of U.S. liquefied natural gas, if priced competitively, could play an increasing and strategic role in E.U. gas supply,” Juncker said. “But the U.S. needs to play its role in doing away with red tape restrictions on liquefied natural gas exports. Both sides have much to gain by working together in the energy field.”

Polish state-run gas company PGNiG then signed a deal with the U.S.’ Cheniere Marketing International in November to import LNG over 24 years. The supplies might reduce Poland’s dependence on Russian gas, but it will not make a large dent in a country that relies on coal for around 80 percent of its electricity generation.

Angela Merkel expressed support for plans to build Germany’s first LNG import terminal in October by saying the government is looking at the possibility of providing funding. But the project has yet to be formally approved, and Germany’s gas use will depend on if and how quickly the country decides to phase out its large coal-fired power capacity.

Now this tacit cooperation risks stalling as a result of American sanctions. Trump’s decision to pull out of the Iran nuclear agreement and reimpose sanctions has already chilled European excitement around investment in the country’s vast oil and gas reserves, as well as renewables and other projects. Even before Trump announced his withdrawal this spring, the uncertainty dissuaded many companies from committing to investment.

The U.S. is considering sanctioning the Nord Stream 2 gas pipeline, which is already under construction, and that would hurt the five Western European companies backing the project with Russia’s state-run Gazprom. Russia’s aggression against Ukraine in late November, firing at ships and seizing their crews off the coast of Crimea, could trigger sanctions sooner than expected.

Tensions over Nord Stream 2 and the role of Germany

Many argue the U.S. is right to target what is seen as a Kremlin tool to deprive Ukraine of revenue from Russian gas that crosses to Europe, while tightening its grip on the E.U. market. Punishing private European companies, however, may go a step too far.

Even the European Commission, which made numerous attempts to quash the project on the grounds that it will increase reliance on Russian gas, lobbied Capitol Hill in 2017 to narrow the reach of sanctions that could have touched projects such as Nord Stream 2 or the Zohr gas field in Egypt, which Eni is developing with Russia’s Rosneft.

Berlin made clear that sanctions on Nord Stream 2 would not shake its support for the project. “I have taken note of the criticism but nothing has changed in the basic view of the economic project, which is what Nord Stream is,” government spokesman Steffen Seibert said in late November, according to Reuters. It would therefore raise a number of challenges in the U.S.-European relationship and America’s ability to carry various policies, said Brenda Shaffer, a professor at Georgetown University’s Center for Eurasian, Russian and Eastern European Studies. For one thing, E.U. senior representatives are unlikely to be happy, even if they oppose the pipeline project, she said. For another, it could actually weaken Washington’s efforts to sanction Iran. “If these companies are already sanctioned, they might feel free to engage in trade with Iran, Shaffer said. “Germany would also most likely increase efforts to undermine the Iran sanctions if its energy companies and project were sanctioned by the U.S.”

The author: Sara Stefanini

Sara Stefanini is Climate Home News’ senior reporter, covering Brexit and broader stories. She is also a freelance writer, contributing to the Financial Times and other organizations. Previously she was a senior policy reporter at Politico Europe in Brussels, covering energy, climate change and environment, and has a master’s degree from the Columbia University School of Journalism. She is based in London.