Andris Piebalgs
Former EU Energy Commissioner, ProfessorEuropean University Institute
Latvia
The global paradigm shift toward clean energy provides a unique opportunity to elevate transatlantic relations to a new qualitative dimension. Both the European Union (EU) and the United States (US) have set ambitious targets to achieve climate neutrality by 2050. At the heart of this commitment is the pivotal transformation of the energy sector. While both aim for similar goals, the paths chosen involve diverse strategies, influencing the quality and nature of transatlantic relations.
Historically, the US's most significant successes in global challenges have stemmed from the dynamism of its private sector. In contrast, the EU is embarking on a path of carbon pricing combined with stringent regulations. While the US relies on tools and incentives presented by the Inflation Reduction Act, the EU is implementing a carbon border adjustment mechanism, strengthening the Emissions Trading System (ETS), and furthering regulations. This raises questions: Will these divergent strategies converge toward a common goal? And could a more collaborative approach spur greater innovation and efficiency in achieving climate objectives?
As the world's premier economies and major trading partners, the policies of the US and EU have the potential to set the tone for the global clean energy transition. The international repercussions of the European Green Deal and the US Inflation Reduction Act are evident. On one hand, they exemplify leadership in executing international climate commitments. On the other, investments from both regions in clean energy infrastructure can amplify the affordability of clean technologies.
However, certain provisions in the IRA, especially those emphasizing domestic content, have raised eyebrows in European countries. The IRA's focus on local production could deter investments in the European clean energy sector. The EU’s proposed Net-Zero Industry Act (NZIA) and Critical Raw Materials Act (CRMA) reflect a European effort to bolster its clean energy ecosystem. Although both regions provide comparable green subsidies, the IRA’s approach could challenge European competitiveness. Still, a historical analysis of EU-US energy relations suggests that collaboration, rather than conflict, will prevail.
Three priorities emerge as potential areas of collaboration: energy security and resilience, trade and investment, and capacity building with knowledge exchange.
Even before the geopolitical upheaval caused by Russia’s invasion of Ukraine, energy security was a cornerstone of transatlantic cooperation. Following the 1973 oil crisis, the International Energy Agency (IEA) was established to respond to physical disruptions in oil supplies, and a regular transatlantic energy dialogue began. The diversification of energy supplies and the establishment of transparent energy markets have been central to the transatlantic energy dialogue. The creation of the joint EU-US Task Force on Energy Security in response to the gas supply crisis caused by Russia's invasion of Ukraine showcased a joint commitment to address Europe's unprecedented energy crisis. Contrary to popular belief, there were no energy supply cuts to European households during the winter of 2022, even as prices soared to record highs and reliance on Russian energy supplies decreased significantly. The substantial increase in US gas exports to the EU in 2022 greatly mitigated gas shortages. In 2022, US exports to the EU were 56 bcm, up from 22 bcm in 2021. The US has become the largest supplier of LNG, with Norway supplying a significant portion of natural gas. The focus now shifts to challenges associated with accelerating the deployment of renewable energy technology, mitigating methane emissions, and pursuing energy efficiency. Both the EU and US spearheaded the Global Methane Pledge to drastically reduce methane, a potent greenhouse gas, by 2030. Much of the methane is released during the fossil fuel production process, making it logical to link fossil fuel supply to its environmental performance.
A coordinated transatlantic effort to increase clean energy-based power generation, electrification, and energy-efficient infrastructure reforms can address the global energy crisis and diminish fossil fuel dependence. Aligned standards and policies can streamline the flow of products, knowledge, and supply chains, facilitating cross-border trade and accelerating decarbonization. Reducing dependence on China through diversified supply chains also enhances economic security for both regions. Strategic autonomy is now gaining significant attention in both the US and Europe.
While many foundational technologies for the energy transition are ready for deployment, others require continued research and innovation. This presents another area for US-EU synergy. By pooling resources and expertise, both regions can hasten the development and commercialization of essential clean energy solutions. Sharing best practices and addressing skill shortages can greatly aid third countries in their transitions. As the EU and US nurture their clean technology sectors, aligned rules and standards will ensure that products, supply chains, and knowledge flow smoothly across borders. The evolving clean hydrogen market, in particular, demands attention. Different standards could slow the development of the hydrogen economy, increase costs, and complicate supply security.
The EU and US, as primary providers of technical assistance, can play a pivotal role in advancing the global clean energy transition. Their combined efforts contribute to global energy market stability, transparency, and the broader goal of achieving a net-zero emissions future. The EU-US Energy Council, the main forum for transatlantic energy cooperation, is instrumental in bolstering global energy markets, endorsing energy efficiency measures, and fostering technological advancements essential for attaining net-zero emissions by 2050. Strengthening energy security, hastening the energy transition, and minimizing fossil fuel dependence are vital for a stable and sustainable global energy landscape. Industry involvement in transatlantic dialogue is crucial. Under the Energy Council's auspices, high-level business forums have been held since 2019, focusing on topics like liquefied natural gas, small modular nuclear reactors, and offshore wind.
The energy transition marks a pivotal moment in transatlantic relations. Seizing this opportunity demands visionary leadership, unwavering commitment, and, most importantly, a collaborative spirit to tackle the challenges ahead. The rewards—a cleaner, sustainable, and secure energy future—are undoubtedly worth the effort.