ideas for liberty the energy challenge for europe – and lithuania vilnius, 21 october 2008 carlo...
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Ideas for liberty
The Energy Challenge for Europe – and Lithuania
Vilnius, 21 October 2008
Carlo StagnaroDirector, Research & Studies
Istituto Bruno Leoni
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Istituto Bruno Leoni
Energy security
• A priority for 35% of Europeans (Eurobarometer January 2007);
• Security = Availability of reliable, sustainable energy at a reasonable price;
• An economic, environmental, and geopolitical issue.
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Istituto Bruno Leoni
Fear is the path to the dark side.
Fear leads to anger.
Anger leads to hate.
Hate leads to suffering.
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Istituto Bruno Leoni
Economics of security
• Security = cost;• Security ≠ price stability;• Trade off tra between “security”, “price
stability”, and “low prices”;• Liberalizations: the system becomes more
flexible and reactive– Investments need to be driven by the
markets;– Network unbundling.
• Globalization: arbitrage becomes easier.
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Istituto Bruno Leoni
What does “liberalization” mean?
• Competition between sources– Nuclear; – Renewables;
• Competition between companies– Privatization;
• Deregulation– Demand;– Supply;– Prices;
• Unbundling– Proprietary is better – require less
regulation;– Non discrimination;– Investment policies.
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Istituto Bruno Leoni
20-20-20‣ Fail to meet a target? Commit
to a stricter one!‣ 20% less consumption below
the baseline‣ 20% emissions reductions
below 1990 levels‣ 20% renewables
✦ Three major questions
1. Is it feasible?
2. Is it significant?
3. Is it efficient?
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Istituto Bruno Leoni
The Death of the Free Market
Investments displacement: who needs more natural gas?
✦Demand control (consumption reduction)
✦Supply control (renewables + emissions reduction)
✦Price control (renewables + emissions reduction)
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Istituto Bruno Leoni
Economic freedom as an alternative
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Istituto Bruno Leoni
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Istituto Bruno Leoni
Geopolitics
• Peace is the best strategy to pursue (energy) security;
• Integration vs. Protectionism– EU integration;– Integration with Russia;
• The Challenge is not to reduce reliance on imports, but to better integrate our economies;
• Europe can play a major role– Internally: Build networks, promote
unbundling;– Externally: create conditions for the free
market;– Create a market, not a bureaucracy;– Avoid inconsistencies!
• Promote an Energy Doha.
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Istituto Bruno Leoni
Lithuania and Europe
• How to pursue economic growth while achieving security and sustainability?
• Are Lithuania’s interest opposed to Europe’s interests?• Environment• Russia
• Renewables, nuclear power (Ignalina), power trade, and natural gas.
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Istituto Bruno Leoni
Lthuania’s per capita emissions…
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Istituto Bruno Leoni
…and carbon intensity
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Istituto Bruno Leoni
Lithuania’s challenges / 1✦ Meet its energy demand
✦ New power plants – especially to substitute for Ignalina nuclear power plant (state-owned, 70% of the country’s need) – but not “too many”!
✦ More interconnections with the rest of Europe;✦ Deregulate electricity/gas imports
✦ “Electricity interconnections with Western and Scandinavian electricity systems would enhance the level of competition.” (Source: National Control Commission for Prices and Energy, 2007)
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Istituto Bruno Leoni
Lithuania’s challenges / 2
✦ Deregulate prices even though “this may lead to increasing electricity prices for small, thus more vulnerable customers whose electricity consumption is usually less efficient” (NCCPE, 2007);
✦ Rationalize consumption✦ Technological improvement;✦ Remove regulatory barriers;✦ Let the market do its job!
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Istituto Bruno Leoni
Lithuania’s challenges / 3✦ Create a real market for energy
✦ Ownership – not just legally – unbundling; and privatize!
✦ Privatize state-owned former monopolists:✦ “In the absence of competition in both the generation and
supply sector, the actual opening of the electricity market is equal to 13% out of possible 74% of the national electricity consumption” (NCCPE, 2007);
✦ European integration;✦ Consistent policies.
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Istituto Bruno Leoni
Final thoughts
✦ You (and we) need more Europe…✦ …but the right Europe, not the wrong one:
✦ The market for power is not a national market;
✦ More imports, but also more security✦ The Russian problem;
✦ Impact of financial crisis: need for fresh capitals…✦ …to fund economically efficient, socially desirable
investments:✦ More capacity, more competition, more
interconnections.
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An energy policy like…
Kung Fu Panda?
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Istituto Bruno Leoni
Thank You for Your Attention
Carlo StagnaroDirector, Research & Studies
Istituto Bruno [email protected]