EU leaders take steps to curb fossil fuel habit

BRUSSELS Fri Feb 4, 2011 9:42pm IST

A man poses with a gasoline pump at a Budapest petrol station January 19, 2011. REUTERS/Bernadett Szabo/Files

A man poses with a gasoline pump at a Budapest petrol station January 19, 2011.

Credit: Reuters/Bernadett Szabo/Files

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BRUSSELS (Reuters) - European Union leaders agreed on Friday to merge and strengthen energy networks in a move that gives fresh impetus to the renewable energy industry and will help curb Europe's growing reliance on fossil fuels.

Europe sends 2.5 percent of its GDP overseas each year for energy imports but should rein that in, European Commission President Jose Manuel Barroso told leaders at the EU's first energy summit.

That equates to 270 billion euros ($372 billion) a year for oil and 40 billion euros for gas.

"Major efforts are needed to modernise and expand Europe's energy infrastructure," leaders said in a summit accord.

"Reducing greenhouse gas emissions by 80-95 percent by 2050 ... will require a revolution in energy systems, which must start now."

At the heart of the summit declaration is the realisation that industry is not delivering some critical infrastructure and that taxpayers will soon have to step in.

The EU's 27 governments committed in 2008 to a goal of getting 20 percent of their energy from green sources by the end of this decade, to reduce climate-warming emissions, create new technology jobs and reduce reliance on fuel imports.

Friday's accord acknowledges that further green growth requires a high-tech power grid -- estimated to cost about 200 billion euros -- to carry wind power from the north and solar power from the Mediterranean to central cities such as Paris and

Prague.

Leaders called on the executive European Commission to develop standards for charging electric cars, building computer-assisted "smart" grids and growing sustainable biofuels, as well as a strategy for financing an overhaul of the energy grid.

Energy Commissioner Guenther Oettinger is expected to respond before June with a plan for what are called "project bonds" to finance the most crucial gas and power links.

ENERGY SECURITY

The economic crisis has slowed EU industrial output, aiding its plan to cut climate-warming emissions to 20 percent below 1990 levels over the next decade. They are currently down by about 17 percent.

But the crisis has also hindered investment.

Governments are now split between those that have put money and action behind the promised green-tech revolution, such as Germany and Denmark, and those that have merely paid lip-service to the goal. Industry is likewise split.

Europe invests around 30 billion euros a year on green energy, but about 290 billion needs to be spent annually to meet its targets, according to a report this week by Accenture and Barclays Capital.

"We are simply not moving fast enough," Lars Hansen, Europe president of Danish biotech company Novozymes, told Reuters.

"Look around and you will see massive competition taking off in the U.S., China and Brazil ... We are about to lose our competitive edge," he added.

ENERGY DEFICIENCY

The European plan to boost renewables will also help the bloc's energy security -- a hot issue since imports of Russian gas via Ukraine were cut during three weeks of freezing weather in January 2009.

Leaders agreed that funding should be found for those strategically useful gas links that industry has ignored in its quest for profits -- for example a link across the Pyrenees to carry northwards Spain's glut of natural gas from Algeria.

"No EU member state should remain isolated from the European gas and electricity networks after 2015 or see its energy security jeopardised by lack of the appropriate connections," the accord reads.

Oettinger was successful in strengthening his mandate for negotiating with foreign energy suppliers such as Azerbaijan.

France negotiated wording in the declaration to promote its nuclear industry, and Poland did likewise to promote shale gas exploration.

But leaders resoundingly failed to confront the fact that they are on track to fall halfway short of a 20 percent energy efficiency goal by 2020.

"This is a mistake," said Friends of the Earth Europe campaigner Brook Riley. "The cheapest, cleanest and most secure energy is that which a country doesn't need."

(Reporting by Pete Harrison; Editing by Jason Neely and Jane Baird)

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