Example of a First Class Law Essay (Post-Graduate)

Here is an example of a first-class EU law essay that was written by a post-graduate law student at a Russell Group university.

Please explain the «triangle » of « Lisbon, Moscow and Kyoto » in relation to energy regulation and consider whether the European Union has addressed this in its recent legisation

The EU Energy Ministers reaffirmed that the Energy Policy for Europe should contribute in a balanced way to the following three objectives: 1) increasing security of supply (“Moscow”) 2) ensuring the competitiveness of the European energy industry so as to provide energy at the best possible prices for citizens and companies (“Lisbon”) and 3) promoting environmental sustainability (with emphasis on the objective to limit the rise in global temperatures to 2°C by 2050) (“Kyoto”)

On Kyoto, the green issue

It was built upon the fact that energy related environmental issues became in the late 1980’s a truly European domain to fight acid rain and to save migrant birds and fish. When Kyoto happened, the EU adopted it, as earlier attempts to start an EU carbon tax failed dramatically. The EU’s leadership produced two surprises, one to translate Kyoto rather overnight into a market based system, i.e. the Emissions Trading Scheme. The other one, launched without very much analytical basis so it appeared almost as some kind of “gift from heaven”, was about long term (i.e. burdening successors) non-binding common “political” targets in the form of the ‘Triple Twenties’ for 2020.

With the European Commission wanting the EU to draw 20 percent of its energy supply from renewable sources by 2020, cut carbon emissions by 20 percent and increase energy savings to 20 percent of projected levels, this has led it to a collision course with industry.

In October 2013, CEOs from 10 major European utilities publicly called on policymakers in Brussels to end subsidies for the solar and wind power industries. They argue that the power they add is counterproductive in an electricity generating industry already subject to overcapacity. Moreover, they should now be designated as ‘mature industries’ that no longer require subsidies. The informal Magritte Group, which collectively owns more than 50 percent of Europe’s generating capacity and includes Germany’s E.ON and RWE, France’s GDF Suez, Italy’s Enel and Eni, Spain’s Gas Natural and Sweden’s Vattenfall – also called on Brussels to implement a Europe-wide capacity mechanism that would pay utilities for keeping electric power generating capacity on standby.

The group also wants the EU to boost its carbon emissions scheme, whose low prices have failed to boost low-carbon fuels like natural gas and nuclear energy. Against this backdrop, energy efficiency measures coupled with declining demand for power as the continent’s economic recovery continues to play out have seen wholesale electricity prices slump by half since 2008. And yet consumer prices have stubbornly remained at near record levels. Unsurprisingly, this is because national government tax policies in some states have ensured electricity prices have continued rising. Indeed, on average, after-tax power prices rose 17 percent for households and 21 percent for businesses in Europe over the past four years, according to Eurostat data.

In 2003, 9 large banks created what became known as the Equator Principles. The Principles serve as a checklist for financial institutions before acting as lenders in project financing. The Principles apply to any new project with a capital cost of US$ 10 million or more and require an Environmental and Social Assessment (ESA) under Equator Principle No.2 to evaluate the environmental impacts and the effects on local communities. Principle No.6 provides for a grievance mechanism much like the Ruggie Framework. The fact that Equator Principles now have over 80 signatories demonstrates the influence that soft law has in the energy sector. Soft law in the form of the Principles could potentially halt financing of a project if it is determined that the project does not abide by certain labour and human rights standards. Having said that, soft law such as the EP still have disadvantages. This can be seen in the Baku-Tbilisi-Ceyhan pipeline where Equator Principle Financial Institutions (EPFI) were found to have breached the Principles on 157 counts. However, soft law may also be subject to hard law judicial enforcement. This was seen in the case of EPA v Shell Australia (1999) interpreted a petroleum development contract to include international best practices.

On Lisbon, the market issue

Lisbon was born in 1986 when the European Community enacted its project to create a Common Market by 1992. The Single Act for the Internal Market was core business for the EEC, the Economic Community. The goal was to have market based economies with no internal barriers to trade, and a centralised monitoring system to review progress and to solve ongoing discrepancies. Energy was included in the plans, but made very slow progress due to the domination of national monopolies with their strong national government ties and behaviours (including with strategic national interests, rightly or wrongly) and many cross-subsidisations throughout the value chain. Many battles emerged with UK market-led. Thatcherite approaches. Two steps were taken during 1990-1991 on cross border transits in gas and electricity, followed in 1996 to 1998 with a first liberalisation package. Market liberalisation gained momentum in 2003 with a more comprehensive second package, and then a third one in 2009 that is probably not the final word.

On Moscow, the security of supplies

Russian energy (gas) supplies played an increasingly important role for the EU since the early 1980’s. The peaceful dissolution of the Soviet empire gave opportunities for energy cooperation initiated in some national capitals and hence not applauded in Brussels. The question for Brussels was how to react in the absence of a formal role. The foreign policy dimension was very political and energy was not on the radar screens. The reaction from Berlaymont was to sell the internal market paradigm to the East, an approach that met with some success except in Moscow. Market opening was not in Russia’s interest, whereas maximising producer rents in the value chain was. After the Commission’s several attempts from the 1960’s onwards to start “une politique communautaire d’a pprovisionnement énergetique”, including the severely defeated initiative of its Vice President Loyola de Palacio in 2003, the 2005 “winter energy panic” in London, and the 2006 Ukrainian gas crisis, the creation of an EU Energy Policy combining Kyoto, Lisbon and Moscow suddenly emerged.

The European Union has announced a plan for a single continental energy market, as it tries to reduce its reliance on Russian-produced energy. Announcing the project, the European Commission said the move would boost energy security and efficiency and reduce the reliance on fossil fuels. The planned energy union would see resources pooled, meaning gas and power would flow freely throughout the bloc through improved infrastructure. But attempts to centralise energy policy in Brussels have often faced resistance from individual state governments, eager to maintain their grip on natural resources and protect closely-guarded energy supply information. Germany relies heavily on Russian gas, while Britain is expanding its nuclear power options. The EU Commission has asked member states to consult with it before making deals with big suppliers, such as Russia, as it seeks to reduce Moscow's power over individual EU members. The Commission issued also issued a report, saying that the "fundamental transformation of Europe's energy system," will require investment of 1tn euros. Environmental groups expressed concerns that the plans were not fully formed. "The left hand doesn't know what the right hand is doing with this plan," Greenpeace said in a statement. "Europe needs a coherent, joined-up plan if it's going to play its part against climate change and be the world number one in renewables."

Russian state-gas giant Gazprom last year cut off gas supplies to Ukraine for six months, ostensibly over a pricing dispute, although it came amid the conflict in eastern Ukraine. Gazprom had previously cut off gas supplies to Ukraine in the winters of 2006 and 2009, leading some European countries with a shortfall in supplies. The EU relies on Russia for around a third of its gas needs, half of which crosses through Ukrainian pipelines.

ConclusionThe European Commission has estimated the EU needs up to €1trn of investment by 2020 to ensure security of supply, diversification of sources, cleaner energies, and competitive prices within an integrated energy market. The key remains not the level of capital expenditure for energy infrastructure but how it dovetails with policy at the EU. In Germany, which in some ways is Europe’s poster child when it comes to the dash for renewables, cynics may charge that the government is happy to see some plants fall, especially if it makes it easier to meet greenhouse gas emission targets. For many consumers that will count for little as they’ll continue picking up the tab by paying for subsidies to bring more renewable capacity on stream. From a Europe-wide perspective the portents in the short term at least don’t provide much cause for optimism, so long as national governments continue to pursue divergent policies based on specific national needs.

But there are bigger problems with the EU’s strategy. First is that market integration dilutes the impact of renewables, which makes high levels of renewable penetration at the national level easier to manage, but it does not solve the underlying problem. As other national markets increase their renewable generating capacity, the problems associated with high levels of renewable penetration will resurface. The single market ideal is based around an EU-wide competitive wholesale market for conventional generation, but EU power markets have become a hybrid of social levies and Feed-in Tariffs for prioritized renewable electricity. The solution appears to be capacity markets, a solution that no one wants, but one that many believe has become necessary, despite that fact that it will further undermine the wholesale market. The EU’s build out of renewable energy sources is the world’s most ambitious attempt to address climate change concerns. The problem is that its single market philosophy was dreamed up in another age. Almost every part of its emissions mitigation strategy has depended upon measures that undermine markets. That is perhaps inevitable because markets, even perfect ones, are insular and incapable of addressing externalities without intervention.

Bibliography

Oliver Geden, Clémence Marcelis, Andreas Maurer: Perspecitves for the European Union’s External Energy Policy: Discourse, Ideas and Interests in Germany, the UK, Poland and France Working Paper FG1, 2006/17, SWP (Stiftung Wissenschaft und Politik) Berlin