Policy Problem

A. Stakeholders 

In order to cut reliance on Russian oil, EU leaders have discussed plans to diversify oil and gas exports, as well as progress in renewable energy development. For instance, the President of the European Council Charles Michel announced that the EU should negotiate energy supply issues with Qatar, United Arab Emirates, Saudi Arabia, and Algeria. Moreover, Commissioner Kadri Simson noted at the East Mediterranean Gas Forum Conference that Cyprus can become a crucial short- or medium-term gas supplier. The Middle East and North Africa (MENA) countries together amounted to 18% of the EU’s crude oil imports and 12.4% of natural gas imports, with Saudi Arabia, Iraq, Algeria, and Qatar contributing the heaviest. Another alternative oil source is the Scandinavian country Norway, which expects to bring in about $109 billion from the petroleum sector this year — an $82 billion increase from 2021. Nevertheless, Norway, along with U.S. companies, has also come under fire for profiting from the EU during the Russia-Ukraine War. Regardless, the EU, in the short term, will have to rely on the Scandinavian region and other nations to make up for its shortage in supplies.

B. Nonpartisan Reasoning

Europe’s insecure energy supply has been a problem ever since the breaking out of the Ukraine war, yet the latest decision by Gazprom would dramatically reduce supplies, with the northwest region’s supply nearing zero. The cost of electricity has subsequently skyrocketed, inflating the basic goods like food and nonindustrial goods by 10%. The Baltic countries have especially been suffering, with Estonia experiencing the highest levels of inflation in the Eurozone. This has directly hit European consumers financially and is expected to worsen with greater energy consumption in the coming months. As such, as prices rise and the supply of gas remains low, the circumstance does not bode well for EU citizens. 

Policy Options

As winter approaches, it remains to be seen how, when, and if Putin’s war in Ukraine will come to a close. While some politicians push for negotiations and others demand stronger armament, the reverberating consequences of the ongoing conflict will continue to present policy challenges to European governments. Ultimately, dealing with the coming weeks, months, and years of conflict requires European leaders to take two steps to minimize the harms of its present energy crisis: 1) engage in import diversification paired with demand-reduction strategies, and 2) pursue alternative energy investments, chiefly in the renewable and nuclear sectors.

Import Diversification and Demand-Reduction

Import diversification was the first strategy pursued by European governments in the wake of the sanctions placed on Moscow. Being a preeminent strategy early on, diversification provided an immediate relief valve to increasing energy prices with minimal political repercussions. But this strategy is also inherently short-term, as there is a severe diminishing returns problem. With diversification as a sole pursuit, governments will be led to partner with nations that are not just inefficient energy producers, but ones that are actively committing human rights atrocities — complicity coming at the cost of energy. 

As the list of potential (and reasonable) partners becomes shorter, the fact will be that European governments will have to reduce their domestic demand for energy, a task that will only become more challenging as the winter months approach. Such a strategy is already in development with the EU passing a resolution that commits all members to a 15% demand reduction, but cuts will have to be more extreme if Europe wants to avoid a crisis. Stronger enforcement mechanisms would also be required; the EU cannot simply rely on requests for state-level cooperation because cuts to energy consumption, such as mandatory teleworking or heavy taxes on gas consumption, are deeply politically unpopular. 

The demand-reduction strategy should thus prioritize: 1) efficiency solutions and 2) country-level required cuts. Efficiency solutions can cut consumption up to 30% within the decade, and investments from the EU and other multilateral institutions into high-efficiency firms and ground-level energy efficiency R&D can hasten the transition. Secondly, the non-binding, political commitment made by EU members in July should be institutionalized. Cuts will have to be made at some point and mandating reductions now (and giving countries some flexibility in how this is accomplished) reduces the risk of hard rations and power outages come winter. 

Alternative Energy Investments 

Furthermore, the growing trend toward renewable sources of energy in Europe seems to come too late. Now, countries risk sacrificing long-term climate gains in order to avoid a disaster in the winter.

It is not clear that even the strongest investment regime into renewable energy would provide immediate relief to the energy crisis, but it may help provide the incentive for oil-consuming firms to adopt greener, more energy-efficient practices, and consumers to wane off fossil fuel energy consumption. 

Nuclear energy revival, however, does present a more immediate — though admittedly more politically difficult — answer to the crisis. Before the war, waves of nuclear facility shutdowns and phasing outs were in process. There was some hope early on among nuclear-energy-proponents that the restriction in supply from Russia would encourage a sort of nuclear renaissance, but this has not been the case. 

The refusal by European governments to revive nuclear energy infrastructure was a mistake: within the proper regulatory framework, investments in nuclear energy by Europe and the restarting of currently inactive facilities might both lessen the burden this winter and help avoid similar crises for years to come. Some countries — most notably Germany, which has delayed the phase-out of two plants to ensure energy security through winter — have hopped on the broader trend of holding off on nuclear phase-outs for the time being. This new effort, combined with pushes to revive currently inactive but still functional plants, will provide Europe with some energy-supply cushion over the coming months.