Regional Approaches to the Energy Transition: A Multidisciplinary Perspective 3031193571, 9783031193576

Table of contents :
Foreword
Preface
Contents
Opening Remarks: A Few Words on Energy-Related Considerations
The European Union and Renewable Energy Policies
1 The European Union and Renewable Energy Policies
The Environment in Contemporary Constitutionalism
1 The Constitutionalisation of Environmental Law
2 The Constitutional Horizons of Environmental Formulas: Environmental Protection, Future Generations, Quality of Life and Sus...
3 References to Future Generations in Latin American Environmental Constitutionalism
4 Environmental Protection as a Fundamental Constitutional Duty
References
The Italian Energy Transition in a Human Rights Perspective
1 Introduction
2 Environment and Human Rights in International Conventions and Case Law
3 Environment and Energy in Global Policies
4 Environment and Energy in the EU
5 Energy Transition in Italy
6 Conclusion
References
Beyond the Energy Transition and Towards a Just Transition
1 Introduction
2 The Energy Transition Through the Paris Agreement
3 The Energy Transition: A European Union Perspective
4 The Just Transition Fund in the EU and Its Impact on Energy Policies
5 Digitalisation of the Energy Supply: An Example
6 The Energy Justice Challenge for a Just Society
7 Conclusion and Future Perspectives
References
Wind of Change: A Scandinavian Perspective on Energy Transition and the `Greenification´ of the Oil and Gas Sector
1 Introduction
2 Growth of Green Energy in Scandinavia Through Electrification
2.1 The Scandinavian Energy Landscape
2.2 Electricity Supply
2.3 Patterns of Consumption
3 Norwegian Transition and Electrification Regarding Oil and Gas
3.1 Scandinavia as a Hydrocarbon Producer and Exporter
3.2 Law as a Tool of Success and Change
3.2.1 Strong State Intervention
3.2.2 Revenue and Market-Oriented Policies
3.2.3 Recovery Maximization and Exploration of New Areas
3.2.4 High Environmental Standards
4 The Greenhouse Gases Problem and §112 of the Norwegian Constitution
5 Greenifying the Oil and Gas Industry?
5.1 Oil´s Reign: Challenges and Opportunities
5.2 Electricity and Wind for Oil and Gas
5.3 Carbon Capture, Transportation and Storage
6 Conclusions
References
The European Green Deal and Regionalisation: Italian and Polish Case Studies
1 Introduction
1.1 Political Commitment and Financial Support
1.2 The EGD in the Legal Context: Exploring the Relationship Between the EGD and the Treaty Provisions
1.3 Regions, Communities, Cities and Villages: Top-Players in the Realisation of the EGD
1.4 The Urban Areas and the EGD Targets
1.5 Italian Smart Cities Going `Green´
1.6 Polish Cities Facing Transition
1.7 The EGD and the Challenges for the Rural Areas
1.8 Italian Rural Areas in Context of the EGD Objectives
1.9 Polish Rural Areas in the Heart of a Just Transition
2 Conclusion
References
Energy Auction in the European Union with Specific Reference to Member State Practice in Germany and France
1 Europe
2 Germany
2.1 Regulatory Framework
2.1.1 General
Enactment of the Renewable Energy Law 2021
Purpose of the EEG
Economic Impact of the EEG
2.1.2 Content of the Renewable Energy Act 2021
Overall Purpose of the Renewable Energy Act 2021
2050 Greenhouse-Gas Neutrality in the Power Sector Becomes Part of the Law
Alignment with More Ambitious EU Climate Target Pending
2.2 Renewable Tenders: New Expansion Paths to Reach the 2030 Goal
2.3 Specific Issues of the EEG 2021
2.3.1 Interim Solution for Pioneer Installations
2.3.2 Changes to the Renewables Levy on the Power Price
2.3.3 Raise Public Acceptance of Renewables Expansion
2.3.4 More Wind Turbines and Biomass in the South
2.3.5 Negative Power Prices
2.3.6 Solar PV
2.3.7 Incorporating Hydrogen
2.4 Some Examples of Previous Tenders
2.4.1 December 22, 2020: Clean Energy Wire
2.4.2 May 3, 2021
2.5 Tender Procedures
2.5.1 General
2.5.2 Description of the Tender Procedure in General
Basic Content of a Tender
Who Is Allowed to Tender
Bid Requirements
Frequency and Announcement of Tenders
Bid Submissions
Award Procedure
After the Award
Onshore Wind
Solar
3 France
3.1 Regulatory Framework
3.2 2016-2021: CRE4
3.3 Specific Tender Procedures
The Energy Transition and the Use of EU Funds in the Spanish and Italian Legal Systems
1 Introduction
2 The EU Normative Legal Framework
3 The Case of Spain
3.1 The Fossil Energy in Spanish Law 7/2021
4 The Case of Italy
5 Conclusion
References
State and Market in China´s Coal-to-Gas Transition
1 Introduction
2 A `New´ Primary Institution in China´s Energy Policymaking: The Influence of Environmental Stewardship on China´s Coal-to-Ga...
2.1 A Global Call for Coal-to-Gas Transition
2.2 The Double-Faced Primacy of the Environmental Stewardship Institution
3 The Sovereign Transition from Coal to Gas in China´s Energy Mix: Tensions Between the Sovereignty and Environmental Stewards...
3.1 A Sovereign Transition: The Integration of Environmental Stewardship into China´s Energy Policies
3.2 A Transitioning Role for Natural Gas: A New Cornerstone in China´s Energy Mix?
4 Tensions Among Primary Institutions: Sovereignty Vs. Trade/Market in the Context of the Coal-to-Gas Transition
4.1 Gas Pricing Reform: Towards a Supply/Demand Balance?
4.2 New Agencies for Old Dilemmas: Reforming the State-Companies Relationship in China´s Gas Market
4.3 China Integration into the Global Gas Trade/Market Institution
5 Integration and Tensions Unfolding in China´s Gas Import Dependency Amid the Covid-19 Pandemic
6 Discussion and Conclusion
References
Tendencies of Legal Regulation in the Sphere of Renewable Energy in Russia
1 Relevance of the Issue of the Conference
2 General Characteristics of Legal Regulation in the Field of Renewable Energy Sources
3 Legal Regulation of the Use of Renewable Energy Sources in the Russian Federation
4 Trends in the Further Development of Legal Regulation in the Use of Renewable Energy Sources
References
Energy Transition in Latin-American Countries, Example Cuba: Looking for Interconnections with Food Sovereignty
1 Introduction
2 Energy Transition in Latin America, Regional Projections
3 Cuba: Energy Transition, Present and Future Perspectives
3.1 Cuban Legal System Reform, a Long-Term Need
4 A Multidisciplinary Look at Energy Transition in Public Policies: National Plan for Food Sovereignty and Nutritional Educati...
4.1 Sustainability in the New Constitution of 2019 as a Link Among Energy Development and Food Security and Sovereignty: A Nec...
4.2 Why Energy Transition in Food Production from Food Sovereignty Perspective?
4.3 Renewable Energy Sources in Food Production: A Look at the National Plan for Food Sovereignty and Nutritional Education
5 Conclusions
References
Is There a Regional Approach to the Energy Transition in Sub-Saharan Africa?
1 Introduction
2 Methodology
3 Africa Union´s Energy Transition Programme
3.1 Potential Barriers to the African Energy Transition Programme
3.1.1 The Energy Trilemma
3.1.2 Lack of Well-Developed Supranational Institutions
4 Countries Specific Case Studies
4.1 Ghana
4.1.1 Legislative Framework
Key Features of the Renewable Energy Act - Act 832
4.1.2 Policy Framework
4.2 Kenya
4.2.1 Legislative Framework
Key Features of the Climate Change Act, 2016
Key Features of the Energy Act, 2019
4.2.2 Policy Framework
4.3 South Africa
4.3.1 Legislative Framework
Key Features of South Africa´s Electricity Regulation Act (REA), Act 2006
4.3.2 Policy Framework
5 Comparative Analysis of the Legislation, Policies, and Market Incentives
5.1 Similarities in the Approaches
5.2 Different Approaches
5.2.1 Legislation
5.2.2 Public Education and Capacity Building
5.2.3 Market Incentives and Interventions
5.2.4 Least Cost Development Plans
5.2.5 Public and Private Sector Investment
5.2.6 Clean Energy Investments in the Three Countries
5.3 Barriers to the Energy Transition
5.3.1 Institutional and Regulatory Framework
5.3.2 Attracting Investment Funding
5.3.3 Energy Trilemma vs Energy Transition
5.3.4 Energy Efficiency
6 Conclusion
7 Recommendations
Appendix
References
Ineluctable Transnationalism, and the Regional Approach to the Energy Transition
1 Scene Setting
2 Scope-Institutions and Territory
3 Paris Alignment
4 Public Fossil Fuel Finance
5 ECA´s Regulatory Regime
6 ECAs and Carbon Accounting
7 ECA Regional Divergences-How Do ECAs Operate Globally?
8 Climate Litigation, Campaigning, and Interventions
9 Conclusions
References
From Coal to Climate Change: An Australian Perspective on the Energy Transition
1 Introduction
2 An Inglorious Past: Energy Policy to 2019
3 The Shift-COVID-19, Climate Change and Consumer Sentiment
3.1 Energy Storage
3.2 Pumped Hydro Energy Storage
3.3 Hydrogen
4 Conclusion
References
A Comparative Analysis of Electricity Access Initiatives in Sub-Saharan Africa
1 Introduction
2 Methodology
2.1 Data Sources
3 Comparative Case Study Analysis
3.1 Ghana
3.1.1 Electricity Access Interventions
3.1.2 Barriers
3.2 Nigeria
3.2.1 Electricity Access Interventions
3.2.2 Barriers
3.3 Tanzania
3.3.1 Energy Access Interventions
3.3.2 Barriers
3.4 Kenya
3.4.1 Energy Access Interventions
3.4.2 Barriers to Universal Access to Electricity in Kenya
3.5 South Africa
3.5.1 Electricity Access Initiatives in South Africa
3.5.2 Barriers to Universal Electrification in South Africa
3.6 Zambia
3.6.1 Electricity Access Interventions
3.6.2 Barriers
3.7 Democratic Republic of Congo
3.7.1 Electricity Access Interventions in DRC
3.7.2 Barriers
3.8 Cameroon
3.8.1 Electricity Access Interventions
3.8.2 Barriers
4 Discussion
4.1 Similarities
4.1.1 Use of Decentralized Mini-grids and Off-grid Solution
4.1.2 Establishment of Rural Electrification Agency and Fund
4.1.3 Legislations on Energy Efficiency
4.1.4 Financial Support Schemes
4.1.5 Active Private Sector Participation
4.2 Different Approaches
4.3 Performance
4.3.1 The Dimension of Electrification Policy and Regulatory Framework
4.3.2 Investments in Energy Infrastructure
4.3.3 Percentage Change in Electrification Rates
5 Conclusion
Appendix
References
Conclusion: What Does the Future Hold for the Energy Sector?
References

Citation preview

Katarzyna Gromek-Broc   Editor

Regional Approaches to the Energy Transition A Multidisciplinary Perspective

Regional Approaches to the Energy Transition

Katarzyna Gromek-Broc Editor

Regional Approaches to the Energy Transition A Multidisciplinary Perspective

Editor Katarzyna Gromek-Broc Department of Political and Social Sciences University of Pavia Pavia, Italy Autorità di Regolazione per Energia Reti e Ambiente (ARERA)/Regulatory Authority for Energy, Networks and Environment Milan, Italy

ISBN 978-3-031-19358-3 ISBN 978-3-031-19357-6 https://doi.org/10.1007/978-3-031-19358-3

(eBook)

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Foreword

The book, edited by Katarzyna Gromek-Broc, provides a broad overview on the developments of the energy transition policies implemented in different regions in the world. It provides useful insights for students, scholars, and more in general for an audience interested in the energy policy developments driven by the decarbonisation process and innovation. From a unique, multidisciplinary perspective, this book aims to address the challenges faced by policy makers worldwide in their search for an equitable balance between socioeconomic and environmental goals. A shift away from fossil fuels in energy production and consumption is a necessary condition to achieve the most needed climate change goals. In fact, energy production still accounts for over 40% of global greenhouse gas emissions (IEA, Global Energy Review: CO2 Emissions in 2021, March 2022). At the UN Climate Change Conference in Glasgow (COP26) in November 2021, over 200 countries— among which the USA and China—reaffirmed the goal of limiting the increase in the global average temperature to well below 2 °C above pre-industrial levels, and stressed the urgency of action “in this critical decade”, when carbon dioxide emissions must be reduced by 45% to reach net zero by mid-century. The political initiatives adopted almost worldwide reflect to some extent the changed citizens’ perception about the relevance of climate change and more generally about the importance of environmental protection. According to the “People’s Climate Vote poll”, the biggest climate survey conducted worldwide by UN Development Program in January 2021, almost two-thirds of over 1.2 million people interviewed worldwide affirmed that climate change is a global emergency and urged a greater action to address the crisis. In Europe, according to a Eurobarometer survey, 93% of citizens believes that climate change is a serious problem and that it requires action, 70% also believes that adaptation measures to the impacts of climate change can have positive effects for citizens (Special Eurobarometer 490, Climate change, April 2019). This book, edited by Katarzyna Gromek-Broc, provides a rich overview of different approaches to energy transition adopted in Europe, Australia, China, v

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Russia, Cuba, and Sub-Saharan Africa. The central question of this comparative policy study, “Is there a regional approach to energy transition?”, is answered from a multidisciplinary perspective by authors with an economic, social policy and legal background. Reducing greenhouse gas emissions is a major paradigm shift that will have a wide and profound effect on our lives and economies as it will gradually change the ways we produce and consume goods. As any major paradigm, energy transition is deemed to have a strong redistributive effect on our societies, particularly in countries that are most dependent on fossil fuels and CO2-intensive industries. The costs of energy transition are therefore not equally distributed; this raises a problem of equity as well as of economic and social sustainability of climate policies. The potential differences in the allocation of the costs of the transition derive from a variety of factors, such as the production structure, the availability of natural resources, and the availability of a workforce with adequate skills. The book, a unique collection of experiences and analysis of energy transition policies in different area in the world, demonstrates there are no recipes or “one solution fits all”: the socio-economic and legal characteristics of the region or geographical area must be carefully taken into consideration when designing energy transition policies. The rich and broad overview of different perspectives collected in the book—economic, social, legal, and institutional—provides many interesting and stimulative ideas for a better understanding of the complexities and dynamics of policy changes. Different regions in the world are and will be impacted in a very different manner by the present energy crisis started in the second half of 2021 as an energy supply shortage at global level in the post Covid recovery period. The strong increase of demand for natural gas in Asia—pulled also by the energy transition policies adopted by China illustrated in one of the papers—increased competition for natural gas supplies diverting LNG flows to South-East Asia causing energy price spikes, never recorded since the oil crisis in the ’70s. The growing geopolitical tensions culminated in the invasion of Ukraine by Russia at the end of February 2022 raised in Europe new attention and serious concerns on issues of energy security of supply, affordability for domestic consumers, and competitivity of the industrial production which will necessarily impact on the pace of the decarbonisation strategy in the continent. The more recent crisis of the energy prices, deriving from economic and geo-political factors, will add a new dimension to an already complex scenario for future-proof energy transition policies in which multi-regional and multidisciplinary approaches are going to be needed more and more: the contribution provided by this book is already a step in that direction. ARERA, Milan, Italy Board of Regulators of ACER, Milan, Italy

Clara Poletti

Preface

Energy supply, production, and saving have dominated the political debate for some time now. Soaring prices and the potential energy shortage continue to occupy the front pages of the newspapers. The war on Ukraine and its consequences on energy supply created a pressing problem for the EU, instilling a sense of anxiety and uncertainty in the EU population, fearing for shortages in the forthcoming winter months. The current energy crisis is acutely affecting the whole of our planet. In this context, the book on “Regional Approaches to Energy Transition” is perfectly timed. The idea for this book emerged from an international conference organised by the Department of Political & Social Sciences at the University of Pavia in December 2020. The conference favoured an interdisciplinary perspective, which is well-reflected in the contributions to this volume. The interdisciplinary and comparative method can best connote the specificity of the energy sector in different parts of the World, reflecting different dynamics. In addition, a contextual approach is needed to explore the energy problematics consisting of a constant interaction between politics, economy, and the law. The book “Regional Approach to the Energy Transition—A Multidisciplinary Perspective” discusses the key challenges the energy transition is facing at the European and International level. It is an edited collection bringing together internationally renowned scholars, researchers, EU officials to address the current trends in the energy transition and its dilemmas. As mentioned, the book places the energy transition in a wide multidisciplinary context looking at energy policies, legal framework, regional agendas, and the difficulties in their implementation. It argues for a regional approach to the energy transition, questioning at the same time the strategies and measures put forward for its realisation. It looks first at the EU commitment to the energy transition and its initiatives providing some examples of good practice from the Member States but also considers the difficulties they are currently facing. Furthermore, it offers a comparative perspective and the different approaches to the energy transition from Latin America, China, Africa, and Australia.

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The book also engages with the theoretical debate. It explores the place of environment in contemporary constitutionalism and discusses the Human Rights concerns. In relation to the territorial application, it appraises the EU renewable energy policies, and the use of EU Funds in Italy and Spain. It looks at the European Green Deal in the regions and energy auctions in the EU. Moreover, it includes the Scandinavian Perspective discussing the greenification efforts in the oil and gas industry in Norway, and the tendencies in legal regulation on renewable energy in Russia. Furthermore, it examines the situation globally by bringing together some interesting examples such as the ‘state and market’ in China’s coal-to-gas transition, the energy transition in Latin-American countries, the regional approach to the energy transition and electricity in Sub-Saharan Africa, and the regional approach to the energy transition in Australia. In addition, the book provides the regional examples of the difficulties the energy sector encounters world widely proposing some local solutions to the local problems. It promotes the exchange of good practices and experiences necessary to carry out a just and sustainable energy transition. The book is a reference and study material not only for academics and students but also for policy makers, officials, and practitioners dealing with the energy transition. The introductory chapter written by Mercedes Bresso, a former president of a Committee of Regions, sets up the scene for the further debate articulating the conditions for the successful energy transition in the EU. She argues that the EU must seize the opportunity to redefine the EU economy in light of the challenges of climate change and move towards green economy. Professor Cordini in his introduction looked at Energy as a multidimensional concept that interacts with other disciplines at all levels, while the recent debate on energy production creates new avenues affecting other fields. Yet, it would be difficult to discuss the merits of each of the sixteen chapters in this book. However, all the contributions bring the new arguments, new ideas, and their own vision of the energy transition. Lastly, I would like to express my gratitude to all the speakers who, while not appearing in this volume, took part in the conference, in particular Ilaria Galimberti, Francis Botchway, and Alessandro Venturi, and other friends who helped with the conference and with the preparation of this volume: Jorge Freddy Milian Gómez, José Grabiel Luis Cordova, Damiano Fuschi, Giulia Baj, Nikolaos KontrarosTsiokos, and Zuzanna Brocka. I would also want to thank Brigitte Reschke at Springer for her support and patience. Finally, my wholehearted thanks to all the authors for their contributions. Pavia, Italy 10 August 2022

Katarzyna Gromek-Broc

Contents

Opening Remarks: A Few Words on Energy-Related Considerations . . . Giovanni Cordini

1

The European Union and Renewable Energy Policies . . . . . . . . . . . . . . . Mercedes Bresso

3

The Environment in Contemporary Constitutionalism . . . . . . . . . . . . . . Giovanni Cordini

7

The Italian Energy Transition in a Human Rights Perspective . . . . . . . . Giulia Baj

19

Beyond the Energy Transition and Towards a Just Transition . . . . . . . . Raphael James Heffron and Luigi Maria Pepe

33

Wind of Change: A Scandinavian Perspective on Energy Transition and the ‘Greenification’ of the Oil and Gas Sector . . . . . . . . . . . . . . . . . Ignacio Herrera Anchustegui and Aleksander Glapiak

49

The European Green Deal and Regionalisation: Italian and Polish Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Katarzyna Gromek-Broc

75

Energy Auction in the European Union with Specific Reference to Member State Practice in Germany and France . . . . . . . . . . . . . . . . . 105 Koen Byttebier and Kim Van der Borght The Energy Transition and the Use of EU Funds in the Spanish and Italian Legal Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Damiano Fuschi State and Market in China’s Coal-to-Gas Transition . . . . . . . . . . . . . . . 145 Francesco Sassi

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Tendencies of Legal Regulation in the Sphere of Renewable Energy in Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Victoria Romanova Energy Transition in Latin-American Countries, Example Cuba: Looking for Interconnections with Food Sovereignty . . . . . . . . . . . . . . . 187 Jorge Freddy Milian Gómez, José Grabiel Luis Cordova, and Yanelys Delgado Triana Is There a Regional Approach to the Energy Transition in Sub-Saharan Africa? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Elias Zigah Ineluctable Transnationalism, and the Regional Approach to the Energy Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 Navraj Singh Ghaleigh From Coal to Climate Change: An Australian Perspective on the Energy Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Tina Soliman Hunter and Madeline Taylor A Comparative Analysis of Electricity Access Initiatives in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 Elias Zigah and Anna Creti Conclusion: What Does the Future Hold for the Energy Sector? . . . . . . 307 Katarzyna Gromek-Broc

Opening Remarks: A Few Words on Energy-Related Considerations Giovanni Cordini

Abstract Energy is connected to issues studied in several fields, such as legal sciences, history, political, economic and social sciences, and as a part of different research fields, it is promoted in the interdisciplinary manner by the University of Pavia. Energy sources raise crucial problems for our future. These problems are deeply rooted in our society, some other energy related issues have emerged with time. This book, considered the competence and quality of all the authors, will certainly offer an insightful reflection on this subject.

I am very grateful to Prof. Katarzyna Gromek-Broc for this initiative and I welcome thank all the authors who have contributed to this book. Energy is connected to issues studied in several fields, such as legal sciences, history, political, economic and social sciences in generale and, as a part of different research field, it is promoted in the interdisciplinary manner by our the University of Pavia and, in particular, by the Department of Political and Social Science. Energy sources raise crucial problems for our future. These problems are deeply rooted in our society, some other energy related issues have emerged with time. The central role gained by the energy supply in politics during the last century is well known. The energy still poses fundamental questions which affect crucial topics, such as the environment, human health, economic sustainability, and social policies. Not surprisingly, legal scholars from all over the world have dedicated more and more attention to energy, highlighting the merits and shortcomings in its complex regulation. Primary energy sources, just like other essential resources, are a matter of international relations decided at the international level and are crucial in the dynamics governing global political relations involving not only states but also other consolidated multinational powers.

Contribution translated from Italian. G. Cordini (✉) Department of Political and Social Sciences, University of Pavia, Pavia, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_1

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G. Cordini

Considering the relation between energy and waste two trends must be noted: on one hand, our Legislator has adhered, albeit with some difficulties, to the definition of waste provided by EU law, which establishes that waste is everything that does not have a market value and cannot be recovered. In time, almost all states have adopted policies aimed at incrementing recycling, in all possible forms applying new technologies, and avoiding landfill disposal. This approach has required research on innovative materials and the new possibilities for reuse. Consequently, Legislators in different countries have promoted, through various supporting measures, the transformation of waste into energy sources. However, this policy can create various problems regarding health and environmental protection; therefore, every action must be normatively balanced, from a sustainability point of view. Lastly, it must be noted the growing importance of regional and national policies focusing on the role of energy in circular economy. The results provided by current experimentations, especially in the agricultural sector, appear encouraging. Current agriculture is increasingly important to ensure ecological balance and biodiversity, also through experimentations in the energy field. This book, considered the competence and quality of all the authors, will certainly offer an insightful reflection on this subject. Giovanni Cordini is Emeritus Professor at the University of Pavia. He was the Head of Department between 2009 and 2017 in the Department of Political and Social Sciences of the University of Pavia. He was a Member of the Board of Directors and Academic Senate of his University. He was also a Professor of Public Law of the Union European at the European School of Advanced Studies in Integrated Environmental Management, University Institute of Higher Studies of Pavia (from 1998 to 2005). In addition, he is also a Director of the Institute d’études Européennes Antonio Rosmini, Bolzano. Previously, he was a Professor of Food Law and European Environmental Law at the University of Gastronomic Sciences of Pollenzo-Bra (from 2007 to 2011), Visiting Professor at the University of Aix-En-Provence III “Paul Cézanne” (Institute de Management Public et Gouvernance Territoriale IMPGT) in Marseille and Aix-En-Provence. He is a Member of the “Collegio garante della costituzionalità delle leggi” of the Republic of San Marino and President of the Association: “Club Giuristi dell’Ambiente”.

The European Union and Renewable Energy Policies Mercedes Bresso

Abstract The renewable energy sector is very important for the European Union. The EU wants to be a leader in green economy and in policies to combat climate change, of which, of course, the energy transition is the key element. The Next Generation EU Fund is the instrument with which Europe wants to get out of the pandemic crisis by rethinking its entire economy, with special emphasis on the green economy and the fight against climate change. It can be stated, without a doubt, that regional strategies for energy transition is a way forward. Politics will matter only if it could help the economic, technical, legal and humanistic disciplines, as well as businesses, families and individuals, to do their work to the best of their ability and to participate enthusiastically in this fundamental project for the future of our continent and our Earth.

1 The European Union and Renewable Energy Policies Thank you again for the invitation, I’m very pleased, to be here because Pavia was the first university where I taught and so I’m delighted to be back there, albeit virtually. As you know, for the European Union the renewable energy sector is very important, we want to be the leader in the green economy and in policies to combat climate change, of which, of course, the energy transition is the key element. The Recovery Fund, which is also called the Next Generation EU, is the instrument with which Europe wants to emerge from the pandemic crisis by rethinking its entire economy, with particular emphasis on two issues: one, on which we must catch up, the digital economy; and the second, on which we think we are now the Translated from Italian. M. Bresso (✉) Foundation for European Progressive Studies (FEPS), Brussels, Belgium Turin Polytechnics, Turin, Italy © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_2

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M. Bresso

leader, which is the green economy and the fight against climate change as well as adaptation to it. The Paris agreements on climate change have shown that it is the European Union that leads and drives the large continental regions in other parts of the world, in this field. In relation to the question in the title of the conference (which is also a title of a book):1 whether there are regional strategies for the energy transition, I think we can only answer: yes. First of all, we need a policy, setting the objectives and instruments for each macro-region, in our case the European Union with its Members but also with all the countries that are in the accession phase (Albania, Montenegro, Serbia, Macedonia, Bosnia Herzegovina, Turkey) or that have agreements with the EU, to give some examples, such as Norway, Iceland or Switzerland. Resources are also needed for the massive investments that will be required to meet and exceed the jointly defined targets. These will have to be made available to the EU countries by the EU and other governments for their part. Secondly, there is a need for territorialised projects that are adapted to the specific features of the large macro-regions, in our case Europe, and their territories. For example, we have certain characteristics at the European level: industrial production is spread across the territory and is characterised by many small and medium-sized enterprises, and a widespread level of rail transport and public transport in general, requiring a widespread supply of electricity throughout the territory, but also high concentrations of electricity. Therefore, an energy transition policy must take into account investments to develop the interconnection of networks at European level, which also means working on superconductors. This would make it possible to transfer the energy produced by renewables, which is highly variable, from one country to another and to take it to where it is needed. A second issue concerns how to store the energy produced, which is why, as you will have noticed, there is a very strong investment in research into hydrogen, which is the most promising way of storing renewable energy while avoiding huge concentrations of polluting batteries. Hydrogen production must come from renewable sources, otherwise, we risk unnecessary steps that only waste energy. If an electric car uses electricity from oil or a lorry uses hydrogen produced from fossil energy, the CO2 balance will be worse than if combustion engines had been used directly. This should not be forgotten when imposing the use of electric vehicles without first solving the question of how to obtain clean electricity. It should also be considered that the development of the digital economy requires absolute stability of the connection and thus of the electricity supply, and so here again is the issue of the possibility of exchanging the energy produced. To summarise, on a regional and continental scale, the stable production of large quantities of electricity from renewables, their storage and the interconnection of networks to guarantee supply must be ensured. Common objectives, instruments and

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Text in brackets added.

The European Union and Renewable Energy Policies

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resources must also be defined. In addition, research must be developed, because currently, the production of energy with solar panels is very polluting, as is its storage with batteries. Positive developments are under way with thin plastic films capable of capturing solar energy and, as I said, storage through hydrogen production can be a good alternative. All of this is more efficient if done jointly. At the level of territories, however, the specific features of our continent must be taken into account. In particular, we have areas with strong winds and therefore with an impressive potential for wind energy production, including offshore, areas with tides that are not yet sufficiently exploited but which have great production potential, we have mountain areas where forest maintenance, hydroelectricity and light solar energy can produce important renewable energy resources. And we could go on, recalling the extraordinary prospects of low-enthalpy geothermal energy, coupled with heat pumps. We have areas where the sun is particularly efficient in energy production, and where therefore solar energy can guarantee the independence of families, territories and small and medium-sized enterprises; in others, micro wind power or other small-scale renewable sources can meet the modest needs. Finally, we have the issue of cities and productive areas, where energy saving is probably the most efficient and cheapest source. And, it requires heavy investment in buildings and infrastructure, combined with great design capacity to completely rethink urban organisation. What we can say, in conclusion, is that now is the right time to start a real energy transition, because the resources are there—we have already talked about the postCovid funds—and the will is there, both in the European Parliament and in our national parliaments, which are all very committed to this issue. And, also because the position of the US, under Biden is changing, returning to sign the Paris agreements. China has also taken up the challenge, and we have continents like Africa and Australia or Latin America with huge potential for renewable energy. So we can all hope together, because the objective can only be common, to break through what we could call the glass ceiling and start to reduce CO2 emissions substantially. And, finally, since this is a multidisciplinary conference, I think it is essential to remember that legal interventions are needed, because for many environmental policies simplification of the rules is essential, if we want to move forward quickly. The economy is needed, not only for resources but also for a profound rethinking of production and exchange systems and the role of finance. We also need architecture and engineering, because we need to redesign cities if we want to make good use of renewable energy, we need engineering and we need chemistry because we need to work on batteries, which are currently one of the weak points in the energy transition. Finally, politics is needed, because wills must be forged and steered towards the right path. I would like to conclude on this point: I believe that politics will count if it can help the economic, technical, legal and humanistic disciplines, as well as businesses, families and individuals, to do their work to the best of their ability and to participate

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enthusiastically in this fundamental project for the future of our continent and our Earth. And, let us not forget, it is a common heritage of all human beings. Mercedes Bresso President of the Committee of Region, 2010–2012. Since 2002, she is the Italian Vice-Chairperson of AICCRE. 2000–2004, she was Chairperson of the World Federation of United Cities, and, 2004–2005, founding Chairperson of the Organisation Cités et Gouvernements Locaux Unis. Between March 2005 and October 2008, she was President of the Union of European Federalists (UEF). In February 2010, Bresso was elected the first female president of the European Union Committee of the Regions. She was a member of the Committee of the Regions and its Bureau 1998–2004. In May 2015, she was elected for a second time as member of the European Parliament.

The Environment in Contemporary Constitutionalism Giovanni Cordini

Abstract The text observes that the basic orientations on environmental protection in the Constitutions and legislation adhering to the principles of liberal democracy reveal some common tendencies. The protection of environment is indicated as one of the fundamental values of the legal system, where the conditions for ensuring the well-being and progress of people are expressed so that legislators and public authorities are assigned specific functions of promotion, protection, and guarantee. The paper develops this consideration by proposing a comparative comparison of constitutional principles and provisions.

1 The Constitutionalisation of Environmental Law The inclusion of a principle of environmental protection in the constitutional text, in a positive sense, guides the decisions of the ordinary legislator and offers an orientation for the environmental policy choices while, in a negative sense, it tends to prevent a political majority from disposing, without constraints, of assets and interests that have constitutional significance. In many Third World countries, community commitment is still convincing for indigenous population and finds expression in the social organisation of villages. Thus, community commitment is not only an interesting anthropological fact but provides material for establishing more solid and respected rules for the defence of the natural heritage. In the constitutional texts and basic legislation that expressly refer to environment, there is a tendency to recognise the “right to a healthy and ecologically balanced environment”; the tasks of the State include to ensure the “gradual and rapid

Giovanni Cordini is Emeritus Professor at the University of Pavia. Contribution translated from Italian. G. Cordini (✉) Department of Political and Social Sciences, University of Pavia, Pavia, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_3

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improvement of the quality of life”, and to preserve and restore “suitable environment for the development of the person”. The common datum consists of statements of principle that are characterized by a high degree of abstraction and, because of this, can be widely shared. This generic nature of the basic constitutional provision relating to environment, in part, derives from the “structural complexity of the object of protection”,1 that can only be determined and circumscribed by reference to sectoral legislation and complex technical regulations. A comparison of the texts makes it possible to enucleate general principles of ‘environmental protection’, mostly expressed in topical formulas of heteronomous derivation. These formulas enunciate principles that acquire a universal connotation, making it possible to argue the thesis according to which the needs of environmental protection seem to consolidate the trend of contemporary legal systems in favour of the institutionalisation of a cosmopolitan law.2 The general principles for environmental protection seem to take on the characteristics of what has been termed the ‘institutionalised political formula’.3 In this case, the environmental formula would not only represent the essence of a specific constitutional system, but could also be assumed at a universal level, referring to the conditions of existence of the whole of humanity, regardless of the particular legal system that recognises its importance. This observation, however, should not make us lose sight of the differences between the systems and legal models. In the systems of Roman-Germanic cultural derivation, environmental protection tends to be configured in relation to human life and health, with both individualistic tensions, typical of the historical experience of the rule of law, and communitarian, for the role recognised to autonomies and intermediate social formations between the citizen and the State, relying on experiences that have been fundamental for the affirmation and evolution of the constitutional state. In ‘common law’ systems, the main characteristic is that they do not enunciate constitutional environmental principles in the abstract, as the marked individualism of those models tends to promote constitutional customs and to contain within very narrow confines the limitations of rights included in constitutional texts. In these systems, it is a widespread rule to leave the determination of environmental policy directions to ordinary legislation, assigning to jurisprudence and to public authorities the task of guaranteeing, both in the concrete development of initiatives and in the resolution of disputes, respect for environmental rules, and the goal of ensuring an adequate level of protection, thus confirming a pragmatic propensity in the use of the law.4

1

Grassi (1994), p. 393. The transnational dimensions of environmental issues are proven in relation to both principles and management techniques. See Di Plinio and Fimiani (2008), pp. 34, 119. 3 The effective expression ‘institutionalised political formulae’ is coined by Giorgio Lombardi. Institutionalised political formulae would operate both as “elements of integration” and as “fundamental elements of identification” of constitutional systems in Lombardi (1986), pp. 69, 73–74. 4 See Meiners and Morriss (2000). 2

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Environmental protection is considered among the fundamental requirements to ensure the well-being and progress of the civil community.5 If anything, to differ are the size and organisation of the powers responsible for the realisation of the purposes of environmental protection, as are the priorities that guide their action, the effectiveness of the rules, the concrete sensitivities of the rulers and the spontaneous adhesion of the governed, supported by environmental education.6 The neat distinction is the one that, on many occasions confronts, industrialised states, emerging countries and resource-poor third world states, both in terms of the direction of environmental policy and the rules to be concretely adopted. Environmental pronouncements similar to those of Western constitutionalism can be found in the post-communist constitutions of Russia and Eastern countries. Principles relating to the protection of the environment are related to similar constitutional formulations referring to the fundamental rights of the individual in liberal-derived rule of law systems. In these constitutional texts of the post-communist era, the ‘universal natural and inviolable rights’ are enunciated according to formulas that adhere to the solemn international declarations, of Enlightenment imprint, on the freedoms and fundamental rights of the person. Environmental protection is placed in this context and is related to human rights.7 Therefore, the idea of a human right to the environment, worthy of protection in the international sphere, seems to be accepted in these countries. In this sense, the

5

See Amirante (2006). At the disappointing World Summit in Johannesburg (26 August to 4 September 2002) all the differences that pitted industrialised countries and Third World countries against each other in Rio de Janeiro in 1992 (see U. N. 1998), have clearly re-emerged, confirming the difficulties related to the effective application of environmental protection measures adopted in the international sphere (for some significant examples provided by the United Nations see UNEP 2000) and the contrasts that prevent the indication of strict deadlines within which to implement the programmatic agreements reached on the individual issues tackled at the Summit: from aid against poverty to energy issues, from measures to contain atmospheric emissions to the use of water resources, from measures to inhibit the use of chemical products harmful to human health to rules for the rational exploitation of fish stocks, from biodiversity to the management of ecosystems, etc. On the preparatory work for the summit see United Nations (2001). For documentation relating to the work of the Summit, see the United Nations Internet site United Nations (2022). With regard to the Johannesburg Summit, the political scientist Giovanni Sartori, in a background article published in the Corriere della Sera on 8 September 2002, used highly critical expressions where he spoke of a “fiasco” that was “certain and foretold” even before the World Summit began. For Sartori, Johannesburg “teaches that mega-barrels, macro-carnivals, must come to an end. By now they do far more harm than good’. 7 On 8 February 2022, the Italian Parliament definitively approved by a very large majority the revision of Articles 9 and 41 of the Constitution to include specific references to the environment: Article 9 which is placed among the ‘fundamental principles’ is supplemented as follows: the Republic. . . . Protects the environment, biodiversity and ecosystems, also in the interest of future generations. State law regulates the ways and forms of animal protection. Article 41 in the new text states that private economic initiative may not be carried out . . . .in such a way as to harm health, the environment, etc. and that the law determines the programmes and appropriate controls so that public and private economic activity may be directed and coordinated for social and environmental purposes. 6

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protection of the environment is proposed both as a guideline and as a limit to the exercise of public powers. Environmental principles, although translated with different formulas are also present in contexts where, not all the values expressed by Western constitutionalism, are accepted. Alternative ideological and cultural orientations are proposed: from the theocratic models of Islamism to the legal systems still influenced by Marxism, to the transitional and unstable models of many ‘Third World’ countries that aim to combine, sometimes with contradictions and antinomies, ancient cultures with contemporary reality, to which the legal system has been subjected and transformed due to the influences of post-colonialism and modernisation.8 In fact, China, while retaining its communist regime, took part in the Rio Summit, 1992 and 2012 International Summits in Johannesburg and Cancun and introduced initiatives for the implementation of Agenda 21, adhering, at least in principle, to the approach aimed at promoting the idea of a ‘sustainable development’ compatible with a system of rules that respects the differences between advanced and developing countries.9 Based on Article 11 of the Constitution, the first Environmental Protection Law was passed on 13 September 1979, later replaced by the Environmental Protection Law of 1989. This is the legislation of principle based on which various sectoral regulations were adopted and numerous supplementary acts were issued for narrower territorial areas (cities and provinces) or particular economic zones.10 Chinese authors admit that from 1949 until 1978, due to a strictly planned economy, economic underdevelopment and an inadequate legal system, China had not developed any civil law legal theory on remedies for torts in general and in particular on violations of environmental provisions. It was not until 1979 that Article 32 of the Environmental Protection Law recognised the liability of public entities for violations of environmental regulations. However, to date, the People’s Republic of China lacks special legislation on environmental torts despite the substantial economic liberalisation that has been driven by the rulers.11 Over time, China has intensified its environmental protection efforts both by participating in numerous international summits, in particular conferences held under the auspices of the United Nations, and by adopting stricter domestic legislation. The country’s environmental conditions have deteriorated sharply as a result of both intense urban transformation and land development, and the whirlwind development of many sectors of the Chinese economy. This ‘leap forward’ has not been matched by a parallel policy of pollution containment and land governance, so, on several occasions, emergency measures have been taken under conditions that made

8

See Grassi (1994), pp. 389, 396. See also, In general, on the transformations of the constitutional arrangements of the twentieth century in de Vergottini (1998). For the aspects considered here, in particular see p. 127 and following. 9 Castellucci (2003), pp. 59, 84. 10 Castellucci (2003), p. 69. 11 Luo and Peng (2007), pp. 243 and following.

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the situation of danger evident. Lastly, environmental policy seems to be integrated into public policy both at central level and in the governorates, but difficulties are encountered due to the extent of the problems and the vastness of the territory, and imbalances are noted due to the extent or otherwise of decentralised powers and the effectiveness of controls.

2 The Constitutional Horizons of Environmental Formulas: Environmental Protection, Future Generations, Quality of Life and Sustainable Development The constitutional legislators of several countries have shown sensitivity to the protection of the environmental heritage and the preservation of its assets, aware of the risks of depletion, intensive exploitation and undue appropriation that can threaten these resources. Consequently, the awareness of the importance of considering inter-generational implications seems vivid. The contemporary constituent intended to refer to future generations as being aware of the need to reinforce a limitation that could prevent contemporaries from acting ‘by depriving or dispossessing’ their posterity, as the draftsman of the Virginian Declaration of 1776 declared. The comparison of positive law texts confirms the widespread diffusion of the scheme based on the correlation between rights and obligations,12 where the recognition of a fundamental right to the environment is matched by an equal number of duties. This duties are presented as ‘limits’ to constitutional rights: the general duty to respect and protect the environment, which is specified in sectoral regulations; the duty to abstain from activities that damage environmental assets; the duty to take precautions in the presence of potential dangers to man and the environment.13 The side of duties can be better understood if environmental programmes provide for special initiatives to extend environmental education and to strengthen citizens’ civic sense, regardless of legal sanctions. This propensity to consider respect for nature as a collective duty, to which exaggerated individualism, partisan interests and categorical selfishness must be subordinated, seems to find greater consideration

12 The Chilean Constitution (1980, reformed several times, most recently in 2005), in this regard, since the 1991 revision, it offers an example that has since been accepted by other legal systems: In Chapter III dedicated to constitutional rights and duties in Article 19, no. 8 it recognises to all persons: ‘El derecho a vivir en un medio ambiente libre de contaminación. Es deber del Estado velar para que este derecho no sea afectado y tutelar la preservación de la naturaleza. La ley podrá establecer restricciones específicas al ejercicio de determinados derechos o libertades para proteger el medio ambiente’. For a doctrinal comparison on the subject of environmental law. Institucionalidad e Instrumentos de Gestión Ambiental Para Chile Del Bicentenario : Actas de Las Terceras Jornadas de Derecho Ambiental, Actas de Las Terceras Jornadas de Derecho Ambiental (2006). 13 Mezzetti (1997) and Ruiz-Rico Ruiz (2000).

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in geographical areas. Those where in ancient cultures the social community, which originates and develops based on the family clan, plays an important role and is given prevailing juridical consideration over the affirmation of the subjective rights of its members. The community bond, which still enjoys consensus and is convincing for indigenous peoples, finding expression in the social organisation of villages, not only represents an interesting anthropological datum but also explains the basis for stricter and more articulate constitutional disciplines in defence of the natural heritage. In many Latin American countries, it is important in this regard to consider certain values that were originally deeply rooted in the indigenous peoples’ beliefs for whom the ‘sacredness of the Earth’ was not only related to the profound spirituality of each individual but also to the foundation of community life. The conflict between the North and the South of the world that, in the area of environmental protection, has become apparent at international summits such as Rio de Janeiro and Johannesburg. It could be better understood if it were also considered in the light of the comparison of different legal systems by comparing their cultural, social and religious roots while accurately reconstructing their respective historical developments. Thus, it could be noted that not all forms of thought that inspire the political regimes and inform the institutional arrangements of our time postulate the need to guarantee a constant increase in living conditions, without measuring all the consequences in terms of responsibility towards future generations. The extreme faith in the omnipotence of man, in the advanced societies of the West, is summed up with the expressions ‘development’, ‘welfare’ and ‘progress’. Legislators often seem to rely exclusively on ‘science’ and ‘technologies’, sometimes without a critical evaluation of the ends and effects, thus placing themselves in contradiction to the principles.14 With specific regard to the environment, it has already been said that in democratic constitutional systems this propensity finds a constitutional tempering in the articles that refer to the formula ‘quality of human life’ to draw a line between development and environmental sustainability. Nonetheless, it is difficult to concretely indicate programmes and establish rules to reconcile the needs of development and environmental protection, identifying a suitable path to safeguard future generations.

14 It is interesting, in this regard, to consider the understandable distrust of indigenous peoples towards free trade treaties. In the Guatemalan city declaration of 2 April 2008, the organisations of the Central American ‘Via Campesina’, in opposition to the proposed free-trade orientations, noted, among other things: ‘We reaffirm our task of fighting for the unity and integration of peoples, on the basis of unity, justice, equity between men and women, equality, solidarity, full democracy, and the preservation and rational use of our resources. We want fair and solidarity-based, sustainable trade and exchange, for the benefit of the peoples and not of transnational corporations. We demand respect for the collective and individual rights of indigenous and peasant peoples and communities, food sovereignty, the implementation of integral agrarian reform and the respect, access and control of our territories: the right to land, water, forests and seeds.

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In some constitutional texts, the reference to future generations is recognised in the framework of the provisions of principle in environmental matters, especially where environmental protection is correlated with the sustainability of development. In this case, it is proposed to take into account medium- and long-term evaluations and experiences, where it is appropriate to act with precaution in the use of new technologies and applications of the most advanced research. Indeed, a review, albeit a cursory one, of contemporary constitutional texts shows that sustainability can be closely related to ‘quality of life and environmental protection’. Article 20a of the Basic Law of the Republic of Germany, introduced with the 1994 reform and entitled ‘Protection of the natural foundations of life’, assigns the state the protection of these natural foundations due to ‘its responsibility towards future generations’. In the preamble of the 2004 ‘Charte de l’environnement’ updating and supplementing the French Constitution of the Vth Republique, it is recognised that: “biological diversity, the well-being of the individual and the progress of human society are affected by certain modes of consumption or production and by the excessive exportation of natural resources”, therefore “in order to ensure long-lasting development, the choices that intended to meet the needs of the present[population] must not compromise the ability of the future generations and other peoples to meet their own needs”. The Constitution of the Canton of Ticino of 14 December 1997 states in its Preamble that the people of Ticino are “aware that their responsibility towards future generations involves sustainable human activity with respect to nature and the use of human knowledge that respects man and the universe”. In a similar sense, the reformed Swiss Constitution (1999–2000) recognises that the people and the cantons are “conscious of their common acquisitions as well as their responsibility towards future generations” and in Article 2 assigns the Confederation the task of promoting “in a sustainable manner the common prosperity, internal cohesion and cultural diversity of the country”. In many constitutional texts that have been revised or completely reformulated in recent years, the protection of the environment also finds a constitutional basis in the fundamental right to ‘life’15 which has its roots in the oldest legal thought of western civilisation.16 On another occasion, I have had to observe that the rules and guarantees for the quality of human life have as their primary purpose of indicating the conditions that contemporary man must respect to coexist with his fellow human beings and for the benefit of future generations as well.17

15

Cordini (2002) and Cordini et al. (2017). Stein and Shand (1981), pp. 237 and following. 17 Cordini (2003), p. 647. 16

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3 References to Future Generations in Latin American Environmental Constitutionalism The Latin American Constitutions that have been reformed in recent times with reference to environmental issues have recognised principles that struggle to be universally accepted. Article 41 of the Argentine Constitution (revised in 1994) states: ‘Todos los habitantes gozan del derecho a un ambiente sano, equilibrado, apto para el desarrollo humano y para que las actividades productivas satisfagan las necesidades presentes sin comprometer las de las generaciones futuras, y tienen el deber de preservarlo’. The new Bolivarian Constitution of Venezuela of 1999 wanted by President Chavez in Article 127 recognises that ‘it is a right and duty of every generation to protect and preserve the environment for the benefit of itself and the future world’. The 2008 Constitution of Ecuador states in Article 12: ‘El agua es un derecho humano irrenunciable, y constituye patrimonio nacional estratégico de uso público, inalienable, imprescriptible, inembargable y esencial para la vida’. In this text, environmental law finds a solid constitutional basis in Title II in Articles 14 and 15. 18 The generational reference is explicit in Article 32 on health services: ‘La prestación de los servicios de salud se regirá por los principios de equidad, universalidad, solidaridad, interculturalidad, calidad, eficiencia, eficacia, precaución y bioética, con enfoque de genero y generacional’. The 2008/2009 Constitution of Bolivia states in Article 33: ‘People have the right to a healthy, protected and balanced environment. The exercise of this right must allow individuals and communities of present and future generations, as well as other living beings, to develop in a normal and permanent manner’. The constituents of these Latin American countries have treated environmental matters in greater detail than in less recent constitutional texts, and have taken care to make manifest their adherence to this principle as they configure it in terms of safeguarding their natural heritage and the individual environmental assets that constitute it. The fundamental theme around which the constitutional debate was 2008 Constitution of Ecuador: Art. 14: ‘Se reconoce el derecho de la población a vivir en un ambiente sano y ecológicamente equilibrado, que garantice la sostenibilidad y el buen vivir, sumak kawsay. Se declara de interés público la preservación del ambiente, la conservación de los ecosistemas, la biodiversidad y la integridad del patrimonio genético del país, la prevención del daño ambiental y la recuperación de los espacios naturales degradados”; Art. 15 “El Estado promoverá, en el sector público y privado, el uso de tecnologías ambientalmente limpias y de energías alternativas no contaminantes y de bajo impacto. La soberanía energética no se alcanzará en detrimento de la soberanía alimentaria, ni afectará el derecho al agua. Se prohíbe el desarrollo, producción, tenencia, comercialización, importación, transporte, almacenamiento y uso de armas químicas, biológicas y nucleares, de contaminantes orgánicos persistentes, agroquímicos internacionalmente prohibidos, y las tecnologías y agentes biológicos experimentales nocivos y organismos genéticamente modificados perjudiciales para la salud humana o que atenten contra la soberanía alimentaria o los ecosistemas, así como la introducción de residuos nucleares y desechos tóxicos al territorio nacional” (the introduction of nuclear residues and toxic waste into national territory). 18

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articulated and which gave rise to the formulas included in the texts appears to be aimed at containing and countering both certain endemic internal phenomena (not only degradation but also corruption and widespread environmental crime) and external ones (e.g. exploitation, patenting and biotechnology) that can increase resource depletion and economic dependence on foreign countries. In doing so, the Latin American constituents have shown that they are able to see beyond the blanket of abstract principles to indicate limits, set constraints, dictate rules, establish boundaries, grant actions and guarantee access to justice. It should not be forgotten, however, that these constitutional texts suffer from a populist ideological orientation to which policies of effective environmental protection do not always correspond. The constitutional rules, even if they were followed, would still apply to fragile societies constantly threatened by poverty and underdevelopment. The history of these peoples, moreover, teaches us that democratic governments have often been overthrown by military dictatorships and autocratic regimes that have denied and trampled on fundamental constitutional rights. These constraints are important because they allow one to measure the distance between principles and their legal effectiveness.

4 Environmental Protection as a Fundamental Constitutional Duty The earth’s environment is essential to humankind and its preservation and it constitutes a fundamental public interest. The degradation of the environment knows no frontiers so that, in many circumstances, pollution and harmfulness cannot be contained within the borders of a state. Effective protection, therefore, can only have as its spatial reference the entire globe19 when one considers that efforts must be directed at preserving the best conditions for human life and coexistence in their natural home, that is, in that environment that is essential for human life as its habitat.20 In such a perspective, proposals to consider environmental protection also as a fundamental human duty and not just a right21 would deserve attention. Several examples of the correlation between right and duty can be found in contemporary constitutionalism. In this sense, the right to the preservation of a non-degraded living environment corresponds to the duty to protect and respect the conditions necessary to ensure the proper management of the environment and its sustainability. The living environment of contemporary humankind, once degraded, can compromise the conditions of existence of future generations as well. Safeguarding the

19 The right to the environment as a fundamental human right has a “spatial dimension that embraces the entire planet and a temporal one that concerns future generations.” Postiglione (1982). 20 Grasso (1985), p. 68. 21 See Postiglione (2020).

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earth’s environment, therefore, must be a fundamental duty of every public authority. And, it entails duties for each member of the community. The State, the Regions and the other territorial authorities have important tasks in the subdivision of space and in dictating the rules for coexistence among the various political communities, but the need to preserve the living environment entails obligations that are incumbent on all subjects and not only on those who are holders of public functions.22 The legal concept expressed in terms of ‘quality of life’ makes it possible to establish links between subjects that are and remain distinct (environment, consumer, human health, research, culture and cultural heritage, technological applications, etc.), even though, all are addressed to a single subject, the human being as capable of posterity. Constitutional references to sustainability and future generations provide an orientation to which ordinary legislators and judges must pay attention when dictating rules and resolving environmental disputes. Similarly, effective environmental protection also involves private initiatives in all social articulations in which they are carried out. In this sense, one can speak of the responsibility of contemporaries as much for the consequences of their actions in the present time as for the effects that may affect future generations. The instruments of social participation, access to information, associative aggregation, and guaranteed intervention in proceedings are all aimed at extending citizens’ possibilities of intervention in the implementation of environmental policies to all levels of a territorial government. Guaranteed intervention in proceedings involved both structured ones such as environmental impact assessment and strategic environmental assessment and those that are envisaged in other contexts of environmental interest. These instruments are essential because there can be no full assumption of responsibility without being able to know and share choices.

References Amirante D (2006) La Forza Normativa Dei Principi: Il Contributo Del Diritto Ambientale Alla Teoria Generale. Cedam Castellucci I (2003) La Tutela Dell’ambiente Nell’ordinamento Giuridico Della Repubblica Pololare Cinese: Un Case Study Sul Funzionamento Del Sistema. Rivista Giuridica Dell’ambiente 1 Cordini G (2002) Diritto Ambientale Comparato. Cedam, Pavia Cordini G (2003) Uomo, Diritto, Ambiente. In: Loiodice A, Paul J (eds) Giovanni Paolo II: Le Vie Della Giustizia; Itinerari per Il Terzo Millennio; Omaggio Dei Giuristi a Sua Santità Nel XXV Anno Di Pontificato. Bardi, Rome Cordini G, Marchisio S, Fois P (2017) Diritto Ambientale: Profili Internazionali Europei e Comparati. G Giappichelli Editore de Vergottini G (1998) Le transizioni costituzionali. Il Mulino, Bologna

It is noted that environmental law, social law and economics are subject areas that ‘migrate’ from the internal state systems to the European Union and ‘grow as material constitutional law.’ See Häberle (1999), pp. 9 and following.

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Di Plinio G, Fimiani P (2008) Principi Di Diritto Ambientale. Giuffrè Editore Grassi S (1994) Costituzioni e Tutela Dell’ambiente. In: Scamuzzi S (ed) Costituzioni, Razionalità, Ambiente. Bollati Boringhieri, Torino Grasso PG (1985) Il Concetto Sanitario Di Ambiente e Le Teorie Dei Rapporti Fra Terra e Diritto. Economia Farmaceutica 2 Häberle P (1999) Per Una Dottrina Della Costituzione Europea. Quaderni Costituzionali 19(1) Institucionalidad e Instrumentos de Gestión Ambiental Para Chile Del Bicentenario : Actas de Las Terceras Jornadas de Derecho Ambiental, Actas de Las Terceras Jornadas de Derecho Ambiental (2006) Universidad de Chile, Centro de Derecho Ambiental, Santiago de Chile Lombardi G (1986) Premesse Al Corso Di Diritto Pubblico Comparato: Problemi Di Metodo. Giuffrè Luo L, Peng F (2007) Rimedi Giuridici in Caso Di Illeciti Ambientali in Cina. Rivista Giuridica Dell’ambiente 2 Meiners RE, Morriss AP (2000) The common law and the environment: rethinking the statutory basis for modern environmental law. Rowman & Littlefield Mezzetti L (1997) I Diritti Della Natura: Paradigmi Di Giuridificazione Dell’ambiente Nel Diritto Pubblico Comparato. Cedam Postiglione A (1982) Il Diritto All’ambiente. Jovene Editore Postiglione A (2020) L’albero Dei Diritti e Dei Doveri Umani. Edizioni Cantagalli Ruiz-Rico Ruiz G (2000) Derecho Comparado Del Medio Ambiente y de Los Espacios Naturales Protegidos. Editorial Comares, Granada Stein P, Shand J (1981) I Valori Giuridici Della Civiltà Occidentale, vol 9. Giuffrè, Milán U. N (1998) The north, the south and the environment: ecological constraints and the global economy, New York UNEP (2000) Policy effectiveness and multilateral environment agreements, New York United Nations (2001) Implementing Agenda 21. Report of the Secretary General - Second Preparatory Session, Commission on Sustainable Development Acting as the Preparatory Committee for the World Summit on Sustainable Development. New York United Nations (2022) Official website. https://www.un.org/en/

Giovanni Cordini is Emeritus Professor at the University of Pavia. He was the Head of Department between 2009 and 2017 in the Department of Political and Social Sciences of the University of Pavia. He was a Member of the Board of Directors and Academic Senate of his University. He was also a Professor of Public Law of the Union European at the European School of Advanced Studies in Integrated Environmental Management, University Institute of Higher Studies of Pavia (from 1998 to 2005). In addition, he is also a Director of the Institute d’études Européennes Antonio Rosmini, Bolzano. Previously, he was a Professor of Food Law and European Environmental Law at the University of Gastronomic Sciences of Pollenzo-Bra (from 2007 to 2011), Visiting Professor at the University of Aix-En-Provence III “Paul Cézanne” (Institute de Management Public et Gouvernance Territoriale IMPGT) in Marseille and Aix-En-Provence. He is a Member of the “Collegio garante della costituzionalità delle leggi” of the Republic of San Marino and President of the Association: “Club Giuristi dell’Ambiente”.

The Italian Energy Transition in a Human Rights Perspective Giulia Baj

Abstract Albeit not being formally recognized in conventional provisions, the right to a healthy environment has become a relevant topic, both globally and regionally. Indeed, Italy is called by regional and international instruments to undergo a process of energy transition, because of environmental reasons. Moreover, the economic crisis due to the measures adopted to prevent the spread of the COVID-19 disease may be a breeding ground for innovation; considering also the extraordinary funds for recovery allocated to Italy by the EU, the energy transition is possible and may be easier than before. This may have positive effects on national economy as well. The Italian action on the matter at issue has to be seen in a wider program on energy and environment. As sustainable energy is strictly linked to environmental issues, the energy transition is part of a process towards a stronger environmental protection, established at both the international and regional level. For instance, the sustainable development goal no. 7, established by the UN Agenda 2030, pursues the universal access to sustainable energy. The energy issue has been addressed by several EU strategies as well. This is particularly relevant, considering that Italy has to implement the measures adopted by the EU, submitting plans for the energy transition in the Country. In this regard, the European Green Deal, adopted within the context of the Next Generation EU, should be mentioned. Italy plans at improving implants and infrastructures for energy distribution in order to increase the percentage of energy from renewable resources. The energy transition would thus positively affect both the environment and the economy, with ultimate positive effects on the enjoyment of human rights.

Giulia Baj, PhD in European and International Law—Joint PhD Programme Università di MilanoBicocca and l’Université de la Côte d’Azur (Nizza). G. Baj (✉) University of Pavia, Pavia, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_4

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1 Introduction Today, the energy transition is globally required; of course, the Italian State has to participate in this process as well. As there are strong environmental reasons at the base of this request, it is not possible to analyse energy transition without considering environmental issues. The European region registers a continuous loss in biodiversity, despite some isolated improvements; an inadequate ecological status of more than half (60%) of the water bodies, due in particular to the excessive amount of nitrogen in waters; widespread degradation of the soil; pollution produced by chemical agents and industrial activities. In general, Europe, like the rest of the world, has been subject to, and is subject to, significant climate change, that has increased the occurrences of extreme atmospheric events, like intense precipitations, floods and drought.1 Italy is subject to these environmental degradation processes as well. The analysis of scenarios and expected climatic changes for Italy, in fact, reports increases in temperatures and changes in rainfall events, as well as more frequent and intense extreme atmospheric events. These changes, characterised also by fewer but by more violent precipitations, have several negative effects, also in the agricultural sector.2 Because of the particular geographic conformation of the Italian territory, it is important to note that climate change affects also the well-being of waters and marine fauna. In fact, the increase in superficial temperatures and sea level affects the entire coastal and marine ecosystem. As it constitutes a fundamental element of the socio-economic system of several Italian territories, these changes are particularly relevant.3 Thus, today all the States of the world, Italy included, are called to take action to fight climate changes, according to their conditions, level of development and environmental characteristics. These actions take place also through the adoption and implementation of plans of energy transition that pursue a better efficiency and the use of clean and renewable resources. Moreover, in the light of the events currently occurring in Ukraine, and the grave repercussions on the access to energy in Europe (with particular reference to the price of gas), the discussion of the energy transition in Italy as both a means to guarantee sustainability and the enjoyment of human rights appears more relevant than ever. In this sense, it has to be noted how the economic crisis has been, until now, breeding ground for innovative instances4,5 regarding technology and business infrastructures, aiming at reaching not only a higher, but also more sustainable

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European Environment Agency (2020). Universit et al. (2020). 3 Universit et al. (2020) 4 Devece et al. (2016), pp. 5366–5370. 5 Innovation, together with the ability to recognise opportunities, has been recognised as a key element for business development in periods of crisis. 2

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productivity.6 The situation of economic turndown has been worsened in the last months by the measures adopted worldwide to reduce the infections of SARS-CoV2; as far as Italy is concerned, ISTAT quantified a loss in the first trimester 2020 compared to the previous trimester amounting at 5.3% and has foreseen an only partial recovery of the loss of 2020 in 2021.7 This situation led to the adoption of extraordinary measures for the economic recovery, which have often considered environmental necessities. In particular, last May the EU presented Next Generation EU, for a recovery based on sustainability, digitalization and resilience.8 In fact, it is part of an EU financial report which aims at relaunching the EU single market resorting to a “green and digital transition”,9 also through relevant investments. The recovery is thus an opportunity for a sustainable economic evolution. Therefore, even the energy transition process cannot pursue only purely environmental objectives; in fact, this process not only has to protect the environment, but also to promote human rights. In this regard, analysing energy and human rights is significant not only for underdeveloped and developing Countries; in fact, all States, according to their level of development, shall pursue an energy transition process that takes into due consideration, and indeed promotes, the enjoyment of human rights.10 This paper briefly analyses the relation between environmental protection and human rights promotion, as they both should be duly analysed in order to plan a successful energy transition process. Then, the Italian normative framework is presented. This corpus of cannot disregard what is established by the EU, therefore the normative acts adopted at the EU level are preliminarily presented.

2 Environment and Human Rights in International Conventions and Case Law Today, energy transition processes must be based not only on economic claims, but also on the promotion of human rights and on the respect of the environment; the relation between the latter two is very close and widely known. Despite declarations wishing for such recognition,11,12 an autonomous right to the environment is not

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OECD (2009). ISTAT (2020). 8 European Commission (2020a). 9 European Commission (2020a). 10 United Nations (2015). 11 Knox (2018). 12 See, e.g., the declaration of the UN Special Rapporteur on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment, John H. Knox: “[p] erhaps the simplest way of expressing this interdependence (of human rights and the environment) is through the recognition of a human right to a healthy environment”. 7

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explicitly recognised at the global level. Conventionally, the right to environment is sporadically recognised in some texts, such as the UN Convention on the Rights of the Child, whose art. 24.2 lett. c) establishes that States shall take the appropriate measures “to combat disease and malnutrition, including within the framework of primary health care, through, inter alia, the application of readily available technology and through the provision of adequate nutritious foods and clean drinking-water, taking into consideration the dangers and risks of environmental pollution”.13,14 However, it has to be underlined that, in this convention, the right to the environment is still a component of a wider right of the child to health and medical care. Regarding non-binding instruments, art. 29 of the UN Declaration on the Rights of Indigenous People establishes that “[i]ndigenous peoples have the right to the conservation and protection of the environment and the productive capacity of their lands or territories and resources [. . .]. States shall take effective measures to ensure that no storage or disposal of hazardous materials shall take place in the lands or territories of indigenous peoples without their free, prior and informed consent”.15 The right to the environment guaranteed to indigenous people is here modified, as it becomes the right to conservation and environmental protection in consideration of the productive capacity of territories and resources belonging to the indigenous peoples. Despite this recognition (albeit in a non-binding instrument), the right to the environment is limited to indigenous peoples only, because of the particular relation between them and the environment in which they live in. Even though the international rules establishing the right to the environment (albeit functionally connected to the protection of other rights) are few and limited to particular categories of beneficiaries, several regional courts have discussed the topic, ultimately asking for the respect of the environment. However, some Courts request this protection only because of the functional link between the respect of the environment and the protection of certain human rights. Therefore, the case law of the Inter American court of human rights and of the European court of human rights are here briefly presented, in order to show two different approaches to the protection of the environment, in relation with human rights.16,17 The Inter-American Court of Human Rights has in several cases recognised the right to the environment of indigenous peoples, because of the functionality of the environment in the material survival of the peoples,18 and because of the relevance 13

United Nations (1989). Art. 24 co. 3. 15 United Nations (2007). 16 African Commission on Human and Peoples’ Rights (2002). 17 It is recalled that also the African Charter on Human and Peoples’ Rights establishes the right to a “general satisfactory environment” (art. 24). This right has been the topic of several decisions of the African Commission, which has, indeed, recognised the interest in the protection of the environment. See, e.g., African Commission on Human and Peoples’ Rights, Communication no. 155/96, SERAC and CESR Vs. Nigeria [2002], in which the Commission affirmed that the environmental degradation constitutes a violation of the mentioned right. 18 Inter-American Court of Human Rights, Comunidad indígena Yakye Axa Vs. Paraguay (2005). 14

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of the environment in the indigenous spiritual life.19 More tellingly, this Court has considered the right to environment as an autonomous right, especially with consultative opinion OC-23/17 (15 November 2017), which explicitly declares that “[l] a degradación del medio ambiente puede causar daños irreparables en los seres humanos, por lo cual un medio ambiente sano es un derecho fundamental para la existencia de la humanidad”.20 In this regard, it has to be recalled that the right to the environment is expressly recognised by art. 11 of the San Salvador Protocol.21,22 On the contrary, the European Court of Human Rights has not recognised the right to environment as an autonomous right; after all, this right is not mentioned neither in the European Convention on Human Rights, nor in any of its additional protocols. However, in its judgements the European Court of Human Rights has connected several issues of environmental protection to other explicitly established rights, such as art. 2 and 8, protecting the right to life and the right to respect for private and family life respectively. The environment, despite not having a direct protection as an autonomous right, is thus indirectly protected.23 For instance, the court has recognised that Article 8, which establishes the right to respect for private and family life, implicitly includes the right to a healthy environment.24 Moreover, it has to be underlined that this Court has recognised that there is a growing interest regarding environmental rights both at regional and international level.25 In its sentence Hamer v. Belgium (n. 21861/2003), the Court has even admitted that, in this case, the environmental interest had to prevail on the right to private property, established in Protocol no. 1, art. 1:26,27 as the environment has an intrinsic value, public authorities must protect it, even at the expense of economic interests. In conclusion, it is possible to affirm that the environment has been protected by regional Courts set for the protection of human rights, both directly as an autonomous right and indirectly as a functionally necessary component for the enjoinment of human rights.

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Inter-American Court of Human Rights, The Mayagna (Sumo) Awas Tingni Community Vs. Nicaragua (2001). 20 Inter-American Court of Human Rights (2017). 21 Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights (Protocol of San Salvador) (1998). 22 It counts 17 States Parties. 23 Bradbrook and Gardam (2006), Tully (2006), and Löfquist (2020). 24 European Court of Human Rights (1994, 1998). 25 European Court of Human Rights (2010). 26 European Court of Human Rights (1952). 27 “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law”. Art.1 co.1.

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3 Environment and Energy in Global Policies As briefly presented, environmental protection is necessary to guarantee several human rights in an effective manner, therefore environment and human rights are inseparably tied. Therefore, they both must be taken into due consideration in the processes of energy transition. It is not surprising, therefore, that energy, environment and human rights are all part of the sustainable development goals (hereafter, SDGs), established by the UN in its Agenda 2030 for the sustainable development (hereafter, Agenda 2030).28,29 In fact, this “plan of action for people, planet and prosperity”30,31 sets 17 goals, based on the composite and inseparable nature of the three aspects of sustainable development: economy, society and environment. In this sense, Agenda 2030 depicts a world characterised by a “sustained, inclusive and sustainable economic growth and decent work for all”.32,33 Goal no. 7 is particularly relevant for the present paper, since it guarantees “universal access to affordable, reliable and sustainable energy”.34,35 On one hand, this goal constitutes the realisation of an environmental objective, while, on the other, it does not ignore economical aspects and, ultimately, the promotion of human rights. In fact, globally guaranteeing access to sustainable energy requires the production of energy not to be based on fossil, polluting and non-renewable resources anymore, but on renewable and non-polluting resources; a type of “modern”36 energy, accessible to anyone, hence guaranteeing the effective enjoyment of several human rights.37,38 Moreover, guaranteeing the access to reliable, affordable energy opens to new work and business opportunities. This is particularly true in relation to “fragile” categories of individuals, such as women and young people, hence helping their entrance in the job market and, consequently, widening and enhancing education (work and education are both human rights). Thus, a thorough energy transition has positive effects not only on the environmental level, but also on the economic and social ones, as it allows the development of more inclusive and integrated societies, based on a better protection of human rights, such as to health, work, education, 28

United Nations (2015). The text of Agenda 2030 is included in Resolution 70/1, adopted by the UN General Assembly. 30 United Nations (2015). 31 Preamble. 32 United Nations (2015). 33 Para. 9. 34 United Nations (2015). 35 Para. 7. 36 United Nations (2015). 37 United Nations (2015). 38 For instance, energy is necessary for the correct functioning of medical and hospital devices, which contribute to the enjoyment of the right to life. 29

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private and family life. Rethinking production and access to energy is essential for an inclusive and environmentally sustainable development. Energy is consequently one of the key goals of Agenda 2030,39 and the planification of energy transition is a critical component of environmental protection and human rights promotion.

4 Environment and Energy in the EU In order to describe energy transition in Italy, it is necessary to discuss the European normative framework first. In fact, art. 191 TFEU establishes that the EU policy regards environmental issues, taking into consideration the diversity that characterises the various zones of the EU.40 Considering this, several measures have been adopted at the EU level, eventually producing a complex normative framework on the energy matter as well. With the strategy “Europe 2020”, a first transformation (ending in 2020) towards a sustainable, intelligent and inclusive development was set. A “green” economic development based on innovation and efficiency, able to raise employment rates, was outlined. Significant is goal 20-2020, which consists in the 20% cut in greenhouse gas emissions, the 20% of energy from renewable sources and the 20% increase in energy efficiency. This strategy has been implemented through several instruments of EU economic policy, such as EU Council recommendation 2015/1184 and EU Council decision 2015/1848, and through national actions that set national goals and adopt specific measures. Later, the EU established even more ambitious goals in relation to energy transition through the so-called Clean Energy Package. The latter, subsequent to the Paris agreement (2015) and the Energy Union Strategy (2015),41 establishes the normative framework in which several normative acts have later been adopted. Given the profound differences among Member States (both in terms of economy and territory), the acts are directives, to be implemented by every State (also called to plan and submit to the EU organs an integrated national plan for energy and climate). Regarding the so-called Energy Union, the 2030 climate and energy framework sets goals of energy security and efficiency, decarbonation and consequently, of research, innovation and competitiveness. In particular, it sets the following objects:

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United Nations (2015) and United Nations Department of Economic and Social Affairs (2015). Article 191(1) TFEU states: “Union policy on the environment shall contribute to pursuit of the following objectives: –preserving, protecting and improving the quality of the environment, – protecting human health, –prudent and rational utilisation of natural resources, –promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change”. Article 191(2) TFEU adds that the EU policy “shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Union”. 41 European Environment Agency (2015). 40

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– at least 40% cuts in greenhouse gas emissions in comparison to the levels of 1990; – at least 32% share for renewable sources in final energy efficiency. This is part of a wider, long-term programme for energy planned by the EU, which sets as its final goal zero greenhouse gas emissions by 2050.42 After all, this is also the goal set by the European Green Deal, presented December 11 2019 and part of the strategy of the EU Commission to implement Agenda 2030 and the UN SDGs. It is difficult not to think about the famous Roosevelt New Deal, instrument for the US economic recovery after the 1929 crisis; at the same time, the adjective “green” highlights the attention paid to the environment. The term, thus, indicates that the aimed recovery within the EU is indeed economic—in fact, it pursues growth in business and employment—but it is also sustainable, resilient and environmentally sound. Given the topic in discussion, among the goals of the Green Deal the “[r] olling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe, cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in our cities and regions”43 has to be underlined. At the same time, the elimination of subsidies for fossil energy is planned.44 Ambitiously, the EU aims at achieving climate neutrality by 2050.45 While pursuing environmental goals, other claims are taken into consideration as well; in fact, in order to effectively reach the set goals, it is necessary to rethink clean energy policies in every sector of economy: industries, production and consumption, big infrastructures, transports, agriculture, construction, taxation and social welfare. In order to be really sustainable, environmental protection has to be connected to the promotion of economic interests and, finally, of interests and rights of individuals. Reading the EU provisions, it appears again that energy is not relevant only for environmental purposes. This is even more so considering the present scenario, after the adoption by Member States of measures to fight the SARS-CoV-2 pandemic and the consequent widespread economic crisis. This context led to the reaffirmation of the European Green Deal within the context of the recovery plan Next Generation EU (whose budget amounts to 750€ billions), proposed by the Commission in May 2020 and approved by the European Parliament, Council and Member States in November as part of the long-term financial plan (the package adopted establishes financing funds for €1800 billions). In particular, the allocation of €260 billions, to be used to reach the climate and energy goals set for 2030, was already established in January 2020. This sum has to be integrated with the funds assigned to the Just Transition Fund46 (to be used to support the transition towards a clean energy) and with the funds allocated to the Just Transition Scheme under InvestEU (which will

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European Union (2018a). European Commission (2020a). 44 European Commission (2019). 45 European Commission (2019). 46 European Commission (2020b, c). 43

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invest €45 billions, also in projects on energy and sustainable transport).47 In conclusion, the EU economic recovery is based on a green transition.48

5 Energy Transition in Italy Analysing energy transition in Italy, it should be first underlined how the Country has already implemented measures aimed at reaching environmental goals. Indeed, Italy reached the goal set by the EU 2020 Climate and Energy Package already in 2017.49 However, it is still possible to enhance environmental protection. For instance, even though the use of renewable sources in Italy has considerably increased, in 2018 renewable sources were just covering the 20% of national needs.50 In order to reach the ambitious goals set by the EU (in particular, the ones set by the Clean Energy Package and Green Deal), Italy must take action. Energy has been the object of national laws for years. In fact, already in 1991, Law 10/1991, containing “rules for the implementation of the national energy plan regarding the rational use of energy, energy saving and the development of renewable sources” was adopted.51,52 The national normative framework is coherent with the one set by the EU; after all, since it is a Member State, Italy has had to implement the numerous EU directives on the topic, which often discipline very specific aspects.53 In this context, the Integrated National Plan for Energy and Climate (INPEC) has been adopted. As asked by the EU, this instrument plans energy transition in Italy for the decade 2021–2030. By December 2018, in fact, every Member State had to present its plan, containing the measures to be implemented to reach the targets set by the EU. Then, the EU Commission issued its recommendations to improve the plan, leading to the adoption of the final text on January 21, 2020. As it implements the goals set by the EU, the INPEC is coherent with the Clean Energy Package. Thus, it pursues decarbonization, energy security and efficiency, the development of the internal energy market, of research, of innovation and of competitiveness.54 Like the EU normative framework, the Italian one presents a close link between economy and environment as well. In fact, the ENCP sets,

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InvestEU (2021). European Commission (2020a). 49 Fondazione (2019). 50 Fondazione (2019), p. 17. 51 Law 9: Norme per l’attuazione Del Piano Energetico Nazionale in Materia Di Uso Razionale Dell’energia, Di Risparmio Energetico e Di Sviluppo Delle Fonti Rinnovabili Di Energia (1991). 52 Law 9 Jan 1991, no. 10, containing dispositions on the implementation of the national energy plan regarding rational energy use, energy saving and development of renewable sources, trans. by the Author. 53 European Union (2018b, c, d). 54 Ministero Dello Sviluppo Economico. Energia e Clima 2030 (n.d.). 48

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among objectives, the support of the evolution of the energy system from a centralised one to a system mainly based on renewable sources (in particular in the electric sector), as well as the promotion of energy efficiency and the adoption of measures aimed at reducing the negative impacts of energy transformation processes. The INPEC follows two main trajectories, namely the decarbonation and energy efficiency, while always taking into consideration individuals and enterprises, especially SMEs. In this sense, it is sufficient to note that the improvement of energy efficiency has, as a consequence, the optimization of energy costs, also for privates. In order to reach these goals, implants and infrastructures, in particular related to energy transmission and distribution, have to be built. In particular, Italy aims at covering the 30% of energy consumption with renewable sources (especially resorting to wind and solar energy) by 2030,55 consumption divided between production of electricity, of heating and transports.56 Specifically, the electric sector, in which renewable energy is already widely used, is leading this transition process. With regard to the energy efficiency goal, the INPEC sets the reduction of primary energy consumption at 43% and of final energy at 39, 7% (compared with 2007).57 This reduction regards especially transports and heating, consequently it needs interventions by the building sector.58 The INPEC implements the EU legislation; in turn, it has to be implemented by national normative acts. In this sense, the Italian budget law 2020 (law 27 December 2019, n. 160) includes the so-called Italian Green New Deal and allocates €4 billions for the sustainable development in the period 2020–2023. After all, the goals set in the INPEC require several (especially infrastructural) actions, in order to raise the share of renewable energy used, while guaranteeing energy security. The INPEC, in fact, designs an internal energy system based more and more on non-programmable, small-scale energy sources; of course, its effective management requires the planification of a flexible and adequate system. Giving a practical example, it is necessary to realise new power lines and improve the ones already existing, considering the higher use of renewable energy.59 The period of lockdown during 2020 makes the realisation of these economic and environmental claims, through the implementation of sustainable economic development, even more compelling. As already said, The EU has expressed its favour in this sense: the recovery measures from the present grave economic crisis are necessary, the transition towards a greater 55 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019). 56 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019), p. 54. 57 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019), p. 65. 58 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019), p. 67. 59 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019), p. 79.

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sustainability likewise. All considered, the planification of a sustainable economic recovery is an obvious consequence. At the same time, it is worth recalling that, because of the exceptional circumstances of 2020, the EU has established extraordinary funds for recovery. Italy, which is geographically in a high-risk area in relation to climate change,60 would benefit from the improvement of the system of energy production and deployment, in particular considering that part of the consumers undergoes a period of poverty (situation worsened by the pandemic) and that the conditions of energy supply differ from region to region. Energy transition offers Italy the opportunity not only to reach goals of environmental sustainability, but also to promote human rights, such as the right to health and the right to work, considering the structural actions needed for economic recovery. Recently, the Italian Constitutional Court has indeed stated: “the support to renewable sources is functionally linked to the achievement of several objectives, including the environmental protection and the realisation of energy saving and efficiency mechanisms at all levels, which allow to accomplish the sustainable development of the society using less energy, thus satisfying the needs of present generations, without compromising the quality of life and the possibilities of future generations”.61

6 Conclusion Even though the right to environment is not unanimously recognised as an autonomous right, today the topic of environmental protection receives particular attention, both globally and regionally. In particular, the EU has adopted several measures throughout the years, and, in fact, it is considered the global leader in environmental protection by many.62 Since it is an EU Member State, Italy has to implement the EU regulation, and it participates in the achievement of the goal set at super national level. To this end, energy transition plays a key role, as it can reconcile environmental claims (in particular the fight against climate change) and economic needs. At the same time, it necessarily impacts on human rights. Indeed, energy transition in Italy, coherently with what has been established regionally by the EU and at globally by the UN, affects not only the environmental issue in a strict sense, increasing the use of renewable sources and reducing greenhouses gas and, ultimately, improving energy efficiency, but affects also strictly economic issues. A planification that effectively disciplines both environmental protection and economic promotion leads to the promotion of human rights; of course, this is true for Italy as well. Even though Italy has positive data regarding

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Universit et al. (2020). Italian Constitutional Court (2020). 62 Zito (2005). 61

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access to electricity (available to almost the 100% of population)63 and presents a growth in the use of renewable sources and energy efficiency, a lot can be improved. Moreover, the intrinsic union between energy and economy can easily have effects on a human right which is critical for Italy, especially during the current economic crisis: the right to work. The right to work is established by art. 4 of the Italian Constitution; however, in the third trimester of 2020, the Italian unemployment rate amounted to 10%.64 Beyond the recognition of this right, the mentioned art. 4 provides that the State “promotes those conditions which render this right effective”.65, 66 Moreover, under art. 3 all the citizens have equal social dignity and “[i]t is the duty of the Republic to remove those obstacles of an economic or social nature which constrain the freedom and equality of citizens, thereby impeding the full development of the human person and the effective participation of all workers in the political, economic and social organisation of the country”.67,68 Energy transition in Italy, like the other measures adopted for a sustainable transition, reconciles environmental interests (which, as observed, are indirectly protected at the EU level as they are functional to the enjoyment of other rights) and rights recognised not only at the international, but also at the national level by the Constitutional Charter. Surely, the Italian INPEC is an additional element to realise a circular economy, based on energy efficiency and security and on the use of renewable sources in a competitive energy market where individuals actively participate in environmental policies. However, the economic implications of these measures, designed to economically transform the Country, cannot be ignored. In this sense, the industrial development based on innovation and energy efficiency can lead, if well managed, to the promotion of human rights, including the right to a healthy environment, to health, to private and family life and to work.

References Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights (Protocol of San Salvador) (1998) El Salvador. https://www.oas.org/dil/1 988 African Commission on Human and Peoples’ Rights (2002) Communication No. 155/96, SERAC and CESR Vs. Nigeria. https://www.achpr.org/public/Document/file/English/achpr30_155_96_ eng.pdf

Tracking SDG 7 – The Energy Progress Report, Country Reports: Italy (n.d.). ISTAT (n.d.). 65 Senato della Repubblica (1948). 66 (eng. vers. Senato della Repubblica), art 4. 67 Senato della Repubblica (1948). 68 Art 3(2). 63 64

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Bradbrook AJ, Gardam JG (2006) Placing the access to energy services within a Human Rights Framework. Hum Rights Q 28(2):389–415. https://www.jstor.org/stable/pdf/20072742.pdf? refreqid=excelsior%3A43476d5b7137fdcb80d186deeef37e29&ab_segments=&origin=& acceptTC=1 Constitution of the Italian Republic. (1948) Devece C, Peris-Ortiz M, Rueda-Armengot C (2016) Entrepreneurship during economic crisis: success factors and paths to failure. J Bus Res 69(11):5366–5370. https://doi.org/10.1016/j. jbusres.2016.04.139 European Commission (2019) European Green Deal, COM(2019) 640 Final. https://ec.europa.eu/ clima/eu-action/european-green-deal_en European Commission (2020a) Europe’s moment: repair and prepare for the next generation, COM (2020) 456 Final (Brussels). https://ec.europa.eu/info/sites/default/files/communication-europemoment-repair-prepare-next-generation.pdf European Commission (2020b) Proposal for a Regulation of the European Parliament and of the Council Establishing the Just Transition Fund, COM(2020)22 Final. https://eur-lex.europa.eu/ legal-content/EN/TXT/?uri=CELEX%3A52020PC0022 European Commission (2020c) Commission Welcomes Political Agreement on InvestEU. https:// ec.europa.eu/commission/presscorner/detail/en/IP_20_2344 European Court of Human Rights (1952) Protocol No. 1 to the European Convention on Human Rights. https://www.echr.coe.int/documents/convention_eng.pdf European Court of Human Rights (1994) Application no. 16798/90 López Ostra v. Spain European Court of Human Rights (1998) Application no. 14967/89 Guerra et al. Vs. Italy European Court of Human Rights (2010) Application no. 12050/04 Mangouras Vs. Spagna European Environment Agency (2015) A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy - COM(2015) 80 Final. https://www.eea.europa.eu/ policy-documents/com-2015-80-final European Environment Agency (2020) The European Environment — State and Outlook 2020: knowledge for transition to a sustainable Europe. SOER 2020/Reporting on the environment in Europe. https://www.eea.europa.eu/soer/2020. Accessed 8 July 2022 European Union (2018a) Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.201 8.328.01.0001.01.ENG European Union (2018b) Directive (EU) 2018/849 on end-of-life vehicles, batteries and accumulators and waste batteries, waste electrical and electronic equipment. https://eur-lex.europa.eu/ legal-content/EN/TXT/?uri=CELEX%3A32018L0849 European Union (2018c) Directive (EU) 2018/852 on packaging and packaging waste European Union (2018d) Directive (EU) 2018/851 on waste. https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=celex%3A32018L0851 Fondazione CDP (2019) La Transizione Energetica in Italia e Il Ruolo Del Settore Elettrico e Del Gas. https://download.terna.it/terna/Transizione_Energetica_8d75215ad40fffa.pdf Inter-American Court of Human Rights (2017) Opinión Consultiva OC-23/17, p 59. https://www. corteidh.or.cr/docs/opiniones/seriea_23_esp.pdf Inter-American Court of Human Rights, Comunidad indígena Yakye Axa Vs. Paraguay (2005) Inter-American Court of Human Rights, The Mayagna (Sumo) Awas Tingni Community Vs. Nicaragua (2001) InvestEU (2021) Response to the COVID-19 pandemic with EU Investment Support. https:// investeu.europa.eu/index_en ISTAT (2020) Le Prospettive per l’economia Italiana Nel 2021–2022. https://www.istat.it/it/ archivio/264303 ISTAT (n.d.) Tasso Di Disoccupazione. http://dati.istat.it/Index.aspx?DataSetCode=DCCV_ TAXDISOCCU1. Accessed 5 Jan 2021 Italian Constitutional Court (2020) Case no. 237

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Knox JH (2018) Human Rights Council holds interactive dialogue with the special rapporteurs on a healthy environment and on the right to food. https://www.ohchr.org/en/press-releases/2018/03/ human-rights-council-holds-interactive-dialogue-special-rapporteurs-healthy Law 9: Norme per l’attuazione Del Piano Energetico Nazionale in Materia Di Uso Razionale Dell’energia, Di Risparmio Energetico e Di Sviluppo Delle Fonti Rinnovabili Di Energia (1991). https://www.anit.it/wp-content/uploads/2015/03/Legge10_91.pdf Löfquist L (2020) Is there a universal human right to electricity? Int J Hum Rights 24(6):711–723. https://doi.org/10.1080/13642987.2019.1671355 Ministero dello Sviluppo Economico and Ministero dell’Ambiente e della Tutela del Territorio e del Mare (2019) Piano Nazionale Integrato per l’Energia e il Clima. Italy Ministero Dello Sviluppo Economico. Energia e Clima 2030 (n.d.). https://www.mise.gov.it/index. php/it/energia/energia-e-clima-2030 OECD (2009) Policy responses to the economic crisis : investing in innovation for. https://www. oecd.org/sti/42983414.pdf Spano D et al (2020) Analisi Del Rischio. I Cambiamenti Climatici in Italia. Lecce. https://doi.org/ 10.25424/CMCC/ANALISI_DEL_RISCHIO Tracking SDG 7 – The Energy Progress Report, Country Reports: Italy (n.d.). https://trackingsdg7. esmap.org//country/italy. Accessed 5 Jan 2021 Tully S (2006) The human right to access electricity. Electr J 19:30–39. https://doi.org/10.1016/j. tej.2006.02.003 United Nations (1989) Convention of the rights of the child. Pub. L. No. 44/25. https://www.ohchr. org/sites/default/files/crc.pdf United Nations (2007) United Nations Declaration on the Rights of Indigenous Peoples United Nations. https://www.un.org/development/desa/indigenouspeoples/wp-content/uploads/sites/1 9/2018/11/UNDRIP_E_web.pdf United Nations (2015) Transforming our world: the 2030 agenda for sustainable development. Pub. L. No. A/RES/70/1. https://www.un.org/en/development/desa/population/migration/ generalassembly/docs/globalcompact/A_RES_70_1_E.pdf United Nations Department of Economic and Social Affairs (2015) Energy. https://sdgs.un.org/ topics/energy Zito AR (2005) The European Union as an environmental leader in a global environment. Globalizations 2(3):363–375. https://doi.org/10.1080/14747730500377156

Giulia Baj, PhD in European and International Law—Joint PhD Programme Università di MilanoBicocca and l’Université de la Côte d’Azur (Nizza). Giulia Baj graduated cum laude in Law at the University of Pavia, after a period as Visiting International Student at the Barnard CollegeColumbia University (NY). She taught as teacher assistant in the framework of Jean Monnet Activities on the Master Programme held in the Department of Social and Political Sciences of the University of Pavia. Currently, she is a Postdoctoral Fellow at the University of Pavia, a Researcher at The Bridge Foundation in Milan and Member of the Editorial Committee of the journal “Rivista Giuridica dell’Ambiente” (“Legal Journal on the Environment”).

Beyond the Energy Transition and Towards a Just Transition Raphael James Heffron and Luigi Maria Pepe

Abstract In this work we discuss how the energy transition is a multilevel challenge that must be conceptualized using the energy justice metric. From the Paris Agreement to the most recent European Union policies, energy justice is emerging as the leading energy principle that must guide and shape energy transition public policies. Adopting a comparative perspective, we see that governments are attempting to establish long- term energy policies, and they are beginning to recognize the opportunity to rewrite these objectives using the energy justice metric in order to identify problems and to propose potential solutions to make the energy transition fair and equitable. We discuss why the energy justice principle is important and the impact it can have on a just transition for the entire world.

1 Introduction The World Energy Council, an organisation that for almost a century has brought together institutions, major international companies, academia and experts from almost 100 countries in a single platform for dialogue, has defined the set of changes

Raphael James Heffron, Professor of Energy Justice and the Social Contract & EU Jean Monnet Professor in the Just Transition to a Low-Carbon Economy. Luigi Maria Pepe, PhD at Università degli Studi della Campania Luigi Vanvitelli. Lecturing in Comparative Constitutional Law and Environmental Law and Security. R. J. Heffron (✉) E2S UPPA, CNRS, TREE, Universite de Pau et des Pays de l’Adour, Pau, France e-mail: [email protected] L. M. Pepe University of Campania, Naples, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_5

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taking place in the energy sector as the ‘Grand Energy Transition’.1 The concept of energy transition is not a new phenomenon for the industry, which has seen a succession of different technologies and sources in the twentieth century, which have not replaced each other, but have enriched the range of solutions available to meet the increasing demand worldwide for heat, electricity and transport. We experienced the transition from biomass to hydroelectricity and coal in the twentieth century, both globally and in Europe, and from hydrocarbons to revolutionary renewables at the beginning of this century. It took decades for the shifts in the mix and the introduction of new technology to have a meaningful effect on global primary energy supplies. In some contexts, and countries, the transition from certain sources to others has been a faster process where the main drivers have always been traced in techno-economic factors (competitiveness, access to energy by populations) and security of supply policies (energy security of the country). Today the energy transition we are experiencing is also a political, technological and socio-economic process which has been unfolding for more than a decade and it will require a few more to be completed. Compared to the past, the evolution of the international debate on climate change and the following agreements made under the United Nations Framework Convention on Climate Change have brought the role of environmental and climate policies to the centre of the energy sector’s evolution. International policy makers, aware of the urgency of the issue of reducing emissions, have intervened in national regulatory frameworks to encourage a change in the energy mix towards the reduction of climate-altering emissions coming mainly from the use of fossil fuels. In this way, the traditional need for energy policies to combine and balance the securitycontinuity of supplies with the competitiveness-accessibility of energy for the population has been joined by the need to make the sources used increasingly sustainable. This new dimension has led to the identification of the Energy Trilemma as the new paradigm that all governments must follow when designing national energy strategies.2 Secondly, since the mid-1990s, there has been an exponential technological acceleration that has progressively contaminated other sectors including those of energy production, management and consumption. Over the last 15 years, so-called digital technologies have also begun to produce their effects in the world of energy, and their integration with the development of new energy technologies which have enabled innovative ways of producing and managing energy, starting from renewable energy production with small plants spread across the territory (wind and photovoltaic). The current energy transition phase can therefore be distinguished from previous ones by the effect of several driving forces: one downward, consisting of the

1

World Energy Trilemma Index 2020 (worldenergy.org, 2020) https://www.worldenergy.org/ assets/downloads/World_Energy_Trilemma_Index_2020_-_REPORT.pdf, accessed 24 February 2021. 2 Heffron (2021a). See also for the Italian edition Heffron (2021b), p. 224.

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environmental policies of governments, both at international and European level, aimed at reducing greenhouse gases and other pollutants; another upward, consisting of the technological acceleration that is bringing new solutions and services to the market and consumers, with a consequent change in traditional business models. To uniting these forces there is a energy justice framework that not only raises important questions for institutions and legislators, but it also becomes itself a driver and target for the energy transition.

2 The Energy Transition Through the Paris Agreement Energy choices are strongly influenced by the territorial, economic and political characteristics of individual countries, and it is precisely this feature that leads to a differentiation in the world energy scene that both justifies and requires comparative research.3 As a matter of fact, the public-comparative approach offers two advantages: the first is that it identifies the institutional and constitutional framework within which the principles, legislation and policies governing the energy sector must be placed, without limiting the legal approach to the problems of economic development alone4 but broadening the scope of intervention by including social implications, such as environmental protection, the right of access to energy and the regulation of climate change.5 The second regards the comparative exercise: without wishing to claim that the comparative method belongs almost exclusively to public energy law, there is no doubt that the study of international and supranational legal systems, together with the comparison of different constitutional experiences, offers the advantage of identifying common problems and possible solutions.6 In the case of energy, the comparative methodology offers the possibility of investigating a field which is far from homogeneous and which, among the various legal systems both European and non-European, presents different choices and disciplines, especially as regards the use of sustainable energy. As a matter of fact, the international energy supply scenario can be divided into two macro-systems: the one predominantly using nuclear energy (for example in Europe the Euratom Treaty governs nuclear energy, and internationally there is the International Atomic Energy Agency) and the one predominantly using ‘traditional’ energy. In these two macrosystems it is possible to trace a more or less accentuated propensity to the use and promotion of renewable energy sources, with a diversified use that is affected by the characteristics and resources present on each territory. The decarbonisation of energy production and use concerns the phenomenon of the gradual exit from fossil sources towards forms of energy with low or zero carbon

3

Pérez et al. (2019). Legrand (1996), pp. 234 ss. 5 Cordini et al. (2017). 6 Frosini (2019). 4

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content. This is because the climate change that all countries are trying to mitigate is caused by the considerable increase in the concentration of greenhouse gases in the atmosphere that is directly or indirectly attributable to man’s use of fossil fuels over the last century. But the problem was already known to the 154 nations that signed the Framework Convention on Climate Change in Rio de Janeiro in 1992,7 which did not set mandatory limits on greenhouse gas emissions for individual nations, but included the possibility for the signatories to adopt, at special Conferences of the Parties (COP), further acts, the so-called Protocols, aimed at setting such limits. The most important of these was the Kyoto Protocol of 1997,8 which was a decisive breakthrough in terms of energy, the environment and future generations. In fact, after this agreement many countries started to seek for alternative energies able to respond to the increasing energy demand in a sustainable way. And in many countries nuclear energy seemed to be the potential answer. Indeed, many states especially in Asia (China, India, Japan, South Korea) embraced the energy transition path by relying on nuclear energy as the most suitable resource to support their growing economic development. The use of this sustainable and reliable resource represented the easiest way to not interrupt the huge energy investments they have planned in order to respect the international agreements on environmental protection and climate change as the Kyoto Protocol. In fact, in countries such as China, characterised by more permissive and less stringent environmental regulations, nuclear energy is still an important resource not only for meeting energy demand, but also for achieving a significant reduction in atmospheric pollutant emissions. But despite the numerous conferences that followed the Kyoto Protocol, this agreement, almost 20 years after its adoption, did not reflect the needs of the international community any longer.9 The most important moment for setting new standards of conduct for the continuation of decarbonisation was the Paris Conference (COP21) in 2015, where the new climate agreement signed in Paris established the need to limit global warming to 1.5 °C through aggressive energy policies, including raising fossil fuel prices to accelerate investment in clean technologies.10 The agreement sends a clear message that fossil fuels belong to the past, and that the energy of the future can only be renewable and clean. The Paris agreement, defined in the international literature as a historic event,11 represents an important moment of transition and evolution characterised by a rigid conceptual and regulatory framework. The only thing that is ‘legally binding’ within the Paris Agreement is the fact that it presents an emissions reduction target and the duty to share the progress achieved every 5 years, while there is no provision for sanctions in the event of

7

1992 Rio Declaration on Environment and Development adopted 14 June 1992. 1997 The Kyoto Protocol (United Nations Framework Convention on Climate Change). 9 Boer (2019). 10 Vasconcelos (2017), p. 22. 11 Manga (2018), pp. 309–338. 8

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non-achievement.12 As a result, the responsibility of states is essentially limited to accountability for their national contribution to the global action. The agreement does not seem to be accompanied by genuine sanctioning and coercive mechanisms against those who do not comply. The strategic intention is not to punish defaulting states either financially or in any other way, but to appeal to their sense of responsibility, as if to activate a ‘name and shame’ mechanism whereby the public disclosure of non-compliance can act as a deterrent.13 Although the absence of a sanctioning mechanism does not seem to be in line with the thesis of many that state the Paris Agreement is a hard law and not a soft law instrument, it is worth recalling the procedural obligations of states to review and update their national mitigation contributions every 5 years and the periodic review of the agreement by the annual conferences. This is certainly a positive element that differentiates the Paris Agreement from the Kyoto Protocol by establishing a regulatory framework of potentially infinite duration.

3 The Energy Transition: A European Union Perspective In the context of a comparative study, the European scenario would seem to be more suited to the criteria of consonance rather than dissonance, in order to verify possible actions to overcome regulatory differences that may hinder not only the realisation of the single market, but also the development of a European energy policy towards the achievement of the environmental protection objectives.14 On the other hand, beyond the analysis of individual cases, the interaction and influence between the energy choices made by individual countries cannot be overlooked to the extent that each of them is bound to have an impact on the choices of the others. This consideration takes on greater weight in the European energy system, given the need for regulations applicable to all member states and an energy policy aimed at guaranteeing security of supply, environmental protection and a fair transition. From the latter point of view, the use of the comparative method can take on decisive value in meeting the need for communication and harmonisation between the systems of the individual member states, which is the basis for achieving the objectives of the European Union. In the European energy scenario, the development of renewable sources is ensured through regulations and directives which identify the tools, programmes and strategic objectives to balance the transition to sustainable resources with the security of energy supply, environmental and health protection, respect for the principles of competition for the creation of the single European market.

12 Conference of the Parties (COP) (unfcc.int) https://unfccc.int/process/bodies/supreme-bodies/ conference-of-the-parties-cop, accessed 26 February 2021. 13 Montini (2017), p. 179. 14 Petteruti (2020), p. 256.

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However, the European orientation seems mainly directed towards the use of alternative energy sources compared to the use of widely used sources such as oil and gas. This is not so much because of the finite nature of these resources and their possible exhaustion, but because of the difficulty of determining the size of the reserves, their effective availability for the next few years and the costs of extraction and supply, which are inevitably set to rise, thus worsening the problems of access to energy.15 The lack of such data has led to rather diversified energy choices among European countries, often characterised by inexplicable contradictions, but in any case, conditioned by political, economic and social trends.16 This is the case with Italy, which, having given up nuclear power several years ago, imports electricity from abroad (around 15%) produced using nuclear power stations in neighbouring countries (France), thus bearing the risk of repercussions from nuclear accidents without deriving any benefit, especially in terms of cost reduction.17 In contrast, other countries such as France, Belgium and Sweden have shown a particular inclination towards nuclear power. However, in recent times, European countries have attempted to reduce their reliance on nuclear generation in favour of expanding renewable energy sources. France, which for many years has pursued a programme to develop nuclear energy production, has announced in its Integrated National Energy and Climate Plan (INECP) a reduction in the share of energy produced from nuclear sources in order to reach the objective of only 50% of energy from nuclear power by 2035.18 In addition, energy diversification should lead to the remaining 50% of energy being produced by renewable sources. Countries such as Germany and Spain have also reconsidered their choices regarding the development of nuclear energy production, and in recent years have introduced temporary or residual programmes that have had a significant impact on the energy sector, especially the electricity one.19 Germany has recently passed a law20 to gradually decrease the use of electronuclear energy, setting a time limit for the operating plants (2022) and replace the share of nuclear energy with other renewable energy sources21—though there are some question marks about whether this can be achieved. The move towards a massive use of wind power is opposed by those who believe it is necessary to preserve the landscape from the “contamination” of wind turbines, a fact which in other European countries such as Italy has slowed the spread of this

15

Pepe (2020), p. 51. Ibid. 17 Pepe (2019), p. 9. 18 Integrated National Energy and Climate Plan for France (ec.europa.eu, March 2020) https://ec. europa.eu/energy/sites/ener/files/documents/fr_final_necp_main_en.pdf, accessed 25 February 2021. 19 Colella (2019). 20 The 13th Act amending the Atomic Energy Act (Atomgesetz—AtG) adopted on 30 June 2011. 21 Haas (2019), pp. 200–210. 16

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type of energy source.22 The hope is that the drastic closure of nuclear power stations in the absence of a careful energy strategy to make up for that energy share will not lead Germany to rely once again on coal-fired power stations with the consequence of a steady increasing of costs and CO2 emissions.23 This would undermine and fragment the entire international and European energy transition project. Spain is also in the process of drawing up an energy programme based essentially on the use of renewable energy sources to achieve a self-sufficient supply system. Spain, together with Denmark and Germany, is one of the pioneering countries in the energy transition within the European Union. Since the 2000s, there has been rapid development in the renewable energy sector, especially in wind energy. A push in the direction of Spain’s energy transition has come from a strong anti-nuclear movement, vigorously pursuing alternatives to nuclear energy.24 Renewable energy sources have thus emerged as a possible solution to reduce the Spanish state’s high dependence on energy imports. However, there has been no particular activism on the part of Spanish society, which, mainly due to a recent depoliticization, has slowly assumed a largely passive role in relation to the energy transition. Recently, however, this lack of involvement of Spanish society in energy issues and the economic crisis that hit Spain between 2007 and 2014 have led the government to change course, introducing measures that are not very favourable to the completion of the energy transition underway.25 Among other things, there has been a decline in the use of solar energy due to an increase in the tariff deficit as a result of the support schemes introduced in the past for renewable energy.26 The Spanish government decided to slow down the energy transition considerably, introducing retroactive cuts in funding for existing facilities and a suspension of feed-in tariffs for new ones. This has resulted in a slight increase in the share of renewable energy compared to 2010 (35.3%) and 2020 (37.4%).27 On 19th May 2020, Spain’s Council of Ministers submitted a bill to Parliament on climate change and energy transition. Adopted on 3rd November, the bill builds on the National Integrated Energy and Climate Plan with the aim of providing for 97% of all the country’s electricity consumption from renewable sources by 2050 (around 20% at present).28 It also sets out targets and contributions for each economic sector, for example a target of at least 35% of final energy consumption from renewables by 2030.

22

Reusswig et al. (2016), pp. 214–227. The costs of nuclear phase-out in Germany (Toulouse School of Economy, 19 February 2020) https://www.tse-fr.eu/costs-nuclear-phase-out-germany, accessed 26 February 2021. 24 Van Boxstael et al. (2020), pp. 466–484. 25 Ibid. 26 Sorman et al. (2020). 27 Ibid. 28 Integrated National Energy and Climate Plan for Spain 2021–2030 (20 January 2020) https://ec. europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.pdf, accessed 26 February 2021. 23

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4 The Just Transition Fund in the EU and Its Impact on Energy Policies The 11 December 2019 sees the presentation of the European Green New Deal, a roadmap to make the EU economy sustainable, with the aim of turning climate and environmental problems into possible opportunities. The document includes actions to stimulate the efficient use of resources through the transition to a circular and clean economy, with the primary goal of halting climate change and reducing pollution. The first concrete steps were already taken as early as 2019, when the Clean Energy for all Europeans Package was published setting binding targets for Member States towards renewable energy consumption and energy efficiency.29 Instead, the main mechanism underpinning the European Green New Deal is represented by the Just Transition Fund (JTF), which is designed to help Member States achieving their 2050 targets. However, given that the JTF was also established to encourage certain countries to commit to the ambitious climate goals of the EU and, in particular, to achieve climate neutrality by 2050, it is politically understandable why the EU’s clear and quantified commitment to these countries would need to be demonstrated. The conditions for the allocation of JTF funds are proportionate to the greatest need for action, mainly because of the negative economic effects arising from the termination of high-impact operations. The Fund should, in particular, offer priority to coal- and carbon-intensive areas, where the urgent phase-out of coal by 2030 remains a priority and a challenge.30 This is because, in a significant number of mostly Central and Eastern European countries, achieving deep decarbonisation in line with the Paris Agreement’s objective of limiting global warming to 2 °C requires change in every sector of the EU economy and so it represents a far more difficult issue. As a matter of fact, the fund will prioritise regions with huge conventional energy sources impact. But its scope should be wide enough to start addressing the transition needs of the rest of the economy as well. In addition, the JTF also provides for several other range of interventions, including the retraining of the employees in these sectors and their redeployment with a view to the transition to a zero-climate impact; the promotion, the reclamation and reuse of sites towards a circular economy, energy efficiency and renewable sources. Countries will have to submit ‘territorial just-transition plans’ to show that the funds are needed and where and how they will be spent. Countries will also have to demonstrate how they plan to fulfil their national climate objectives, as the

29

Pepe (2021). S. Tagliapietra, The European climate law needs a strong just transition fund, (2020) BruegelBlogs, accessed 26 February 2021. 30

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proposal also mentions the need to be “consistent with their National Energy and Climate Plans and the EU objective of climate neutrality by 2050”.31 Furthermore, the JTF has also been designed and set up to mitigate the costs of social transition. The fund’s stated objective is to “alleviate the impact of the transition by financing the diversification and modernisation of the local economy and by mitigating the negative repercussions on employment”.32 In practice, the Just Transition Fund will mainly include grants to finance three forms of projects in order to help regions facing severe socio-economic problems resulting from the transition towards climate neutrality: (1) social support, (2) economic revitalisation, and (3) land restoration. However, it has been argued that the JTF will not realistically be able to tackle effectively all these three components, especially if it is supposed to be available to all member states.33 It is recommended that the European Parliament considers concentrating only on two of the three components of the level of funding available: only social support and, to a lesser degree, land restoration. This is the only way to make it visible, effectively and strategically as well. This does not mean that it is not important for economic revitalization. Economic revitalization, on the other hand, should be an integral component of any basic transformation strategy. But given that the substantial investment required to transform the EU economy into a carbonneutral economy, between EUR 250 billion and EUR 300 billion per year, the JTF will still play a marginal (if not negligible) role in filling that void, compared to its small size.34 Other instruments should therefore be used to revitalize the economy: by prioritizing carbon-intensive regions/territories through EU structural funds, by mobilizing private funds through the InvestEU initiative and the EU promotional bank network, and by reforming EU fiscal rules to allow EU countries to invest even more in green investments.35

5 Digitalisation of the Energy Supply: An Example Technological progress represents another axis of the energy transition paradigm. The energy sector is today contaminated by the transformations brought about by technological acceleration and their application in the field of energy production and distribution. With the ever-increasing generation of data by energy management and

31 Proposal for a Regulation of the European Parliament and of the Council establishing the Just Transition Fund (ec.europe.eu, January2020) file:///C:/Downloads/ Proposal_for_a_regulation_establishing_the_Just_Transition_Fund_and_annexes_EN.pdf.pdf, accessed 26 February 2021. 32 Ibid. 33 Cameron et al. (2020). 34 Claeys et al. (2019). 35 Claeys and Sapir (2018).

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measurement systems, the increase in the data transmission capacity of telecommunications networks and the accessibility of a huge amount of data generated outside the energy system but also relevant to the sector, now energy operators are expected to equip themselves with calculation and analysis capacities in order to enhance their operations and offer new services.36 On the energy supply and consumption side, the phenomenon of digitalisation is enabling new business models through the development of solutions capable of bringing energy supply and demand into direct contact, thus disintermediating traditional sales channels. This is the case with blockchain technology, a computer technology consisting of a decentralised peer-to-peer network that allows the unambiguous identification of transactions concluded by users. The best known of these peer-to-peer projects is undoubtedly the Microgrid in Brooklyn.37 The Microgrid in question is connected to a plurality of electrical consumers managed through a single point of connection to the electrical distribution network. A dedicated grid has therefore been installed between neighbours (both those with and without photovoltaic panels) and self-producers have been enabled to sell surplus energy to others.38 Blockchain provides transaction protection and guarantees that the network on which the Microgrid operates cannot be tampered with. This new technology aims to transform the future of energy trading, where a system made up of many small prosumers that can share surplus energy can replace the conventional model of private person purchasing from a large operator. It should be noted that, in spite of the potential provided by a highly innovative solution capable of disrupting the energy market, there are still critical problems related, in particular, to the lack of a sufficiently established regulatory and normative structure.

6 The Energy Justice Challenge for a Just Society The first duty of a society is Justice. There is an imperative for a transition to a low carbon energy system with the dual challenges of eliminating emissions from fossil fuels and ensuring access to clean and affordable energy. In order to achieve the energy transition towards an equal and equitable access to resources and technology, this transformation must take into account the questions of energy justice. The concept of energy justice has emerged in recent years in the social sciences, as a tool with analytical-interpretive, evaluative-normative value, and applicable to issues of social relevance such as policies, diffusion of technologies/production systems, consumption and access to the energy market, activism and participation in energy decisions.39

36

Loock (2020). Mengelkamp et al. (2018), pp. 870–880. 38 Ibid. 39 Jenkins et al. (2016), pp. 174–182. 37

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Energy justice was pointed out to be essentially a spatial theoretical term, challenging the spatial/territorial and social/relational components of energy problems, emphasizing the study of territorial transition processes.40 On the other hand, it has been proposed to consider energy decisions as ethical and justice issues, and to rethink how dangers and externalities as well as benefits and advantages of the energy system are distributed within society, and whether decision-making reflects criteria of equity, inclusion and representativeness.41 Whatever the scope and objective of a framework for energy justice is, it provides a useful tool for the researcher to analyse (and reflect on) where injustices emerge, who is affected or ignored, and what processes exist to redress them so that these injustices are made evident and reduced. As a matter of fact, the energy justice principles have been theorized with the aim of identifying all the aspects of the society where injustices occur, and which actions must be taken to address them. The Energy Justice principles are:42 – – – – –

Distributive Justice Procedural Justice Recognition Justice Restorative Justice Cosmopolitan Justice

Distributive justice in this sense refers to how the costs and benefits of change are distributed not only between individuals and social groups (between groups and communities) but also geographically (between territories) and temporally (e.g. intergenerational justice). Reflecting on the entire energy system implies and forces one to examine how, in the energy cycle, the costs and benefits of transition are spread territorially and socially—from production and transmission to the disposal of associated waste. Procedural justice focuses on factors such as access to information, transparency, legitimacy, inclusiveness and representativeness of the different interests at stake in the decision-making process and the fairness of the decisions themselves. Procedural justice, on the other hand, refers to the demand for fair procedures involving all interested parties in a non-discriminatory manner.43 This requires not only that all potentially affected persons be able to take part in the debate preceding the decisionmaking process and that their voices be taken seriously, but also appropriate mechanisms of involvement, access to expertise and impartiality, and informationsharing by industries and governments. Recognition justice refers, instead, to the (non-)recognition or misrecognition of social groups and geographical areas, as “the process of insult and degradation that devalues some people and some identities of place in comparison with others”.44

40

McCauley et al. (2013), p. 3. Sovacool et al. (2016), p. 5. 42 Jenkins et al. (2016). 43 Walker (2009), pp. 614–636. 44 Ibid. 41

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Non-recognition can manifest itself in various types of cultural and political superiority, for example by ignoring certain decision-making affecting social groups and sectors of society or in processes of misrecognition of individuals and groups in which distortions of their views and expectations are correlated with different forms of non-recognition and devaluation. Non-recognition can also influence the way in which procedures are followed (whether and how they are involved, treated and represented in decision-making) and how the impacts and costs of the energy system are distributed (how decisions reflect recognition of the concerns and opinions of different audiences by assessing and redistributing costs and benefits).45 Restorative justice is concerned about how it can be rectified if there is an injustice in the energy sector. This can be done in the form of the allocation of project revenues but also by returning the energy sites issues to their former use, especially in the extractive industries. Consequently, within the context of the project and the guidelines laid down in the law, the waste management and decommissioning strategy should be adequately finalized and cost-effective. In addition, restorative justice may aid in identifying where prevention needs to occur.46 Finally, the relation to cosmopolitan justice, based on the central belief that we are all people of the world, is obvious. There is a global impact on our actions and this needs to be realized and accounted for as the energy industry develops and the energy demand increases. Around the world the recognition of the cosmopolitan effect of our decision is starting to spread and to take place. As a consequence of cross-border or overseas ramifications, there have been a number of recent strong examples of rising interest in legal action with cosmopolitan effect. A first clear example is in the coal industry, where a judge argued in a 2019 Australian decision that a coal mine should not be allowed to open because of the carbon dioxide effects that would be produced elsewhere in the world.47 This cosmopolitan approach to the energy issues seems to be in line with the most recent theory of a cosmopolitan turn in public law frameworks and in the constitutional theory by affirming that the global issues and their impact must be taken into account in the legal practice and process for achieving a just society.48 In the application of the general principles of justice, a considered equity is required to ensure not only a fair distribution of natural resources but also the access to them by future generations. Energy is inevitably involved in all essential aspects of human activity (water, health, lighting, heating, transport, agriculture, industrial production) and it is therefore closely linked to development. Services such as education and training are also linked to energy use. Energy, especially electricity, like water, is a powerful factor in spatial planning and economic and social cohesion. It is in this context that the concept of justice emerges and becomes fundamental in

45

Heffron and McCauley (2014), pp. 435–437. Heffron (2020), pp. 855–863. 47 Ibid. 48 Kumm (2009), p. 69. 46

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order to make energy systems socially accepted and functional in pursuing the objectives of the transition. Energy justice as an evolution, or rather a specification of environmental and climate justice, accompanies a whole series of challenges which are necessary to pursue the transition to a low carbon economy.

7 Conclusion and Future Perspectives As pointed out by the 2018 Nobel Prize in economics, William Nordhaus—what is urgently needed, in the face of the global warming emergency, is not so much a response in terms of technical-scientific elaboration, but rather the adoption of legal solutions that are as close as possible to the empirical—evidence on the trend in greenhouse gas emissions into the atmosphere.49 And this shift nowadays is needed in the energy sector as never before. New legal solutions and binding targets are inevitable for a sector which is undergoing (and expected to undergo) a period of profound change, driven on the one hand by environmental policies and on the other by a technological acceleration. The convergence of all these aforementioned factors is driving the transformation of the sector at global level, changing the paradigms of how energy systems and markets operate, as well as the business models of the operators who work in them. At the same time, governments and regulatory authorities are required to redesign market regulations and rules to enable the substantial investments needed to develop and deploy more sustainable technologies with a reduced environmental impact. The objective is clear: to move the energy sector towards the containment, first, and elimination, in the long term, of anthropogenic greenhouse gas emissions in order to limit the increase in the earth’s temperature to below 2 °C within the current century. This is the threshold indicated by climate science as desirable if significant socioeconomic impacts with negative repercussions on the well-being of the world’s populations are to be avoided. And to strengthen and to make this transition achievable and socially possible, a look at the injustices in the energy sector is crucial. A transition, even if it is mainly economic, cannot disregard important social, justice and ethical issues, the resolution of which would not only lead to a greater sharing and acceptance of the global objectives but would itself benefit the transition. A system that is not fair and just will not be able to complete the transition, because it is only by training and educating society in justice, fairness and solidarity that all choices, especially in the energy sector, will be adopted rationally, highlighting environmental and climate emergencies. Energy justice must not be an outcome of the transition, but a prerequisite for making it just, and for ensuring that the transition itself can shape a more just society.

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Nordhaus (2016).

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References Boer B (2019) International environmental law. In: Chesterman S, Owada H, Saul B (eds) The Oxford handbook of international law in Asia and the Pacific. Oxford Cameron A, Claeys G, Midões C, Tagliapietra S (2020) How good is the European Commission’s Just Transition Fund proposal? Bruegel-Policy Contribution, 4 Claeys G, Sapir A (2018) The European Globalisation Adjustment Fund: easing the pain from trade? Bruegel-Policy Contribution, 5 Claeys G, Tagliapietra S, Zachmann G (2019) How to make the European Green Deal work. Bruegel-Policy Contribution, 13 Colella L (2019) Energia nucleare ed emergenze ambientali. Rivista ambiente e diritto, 3 Cordini G, Fois P, Marchisio S, Ambientale D (2017) Profili internazionali europei e comparati. Giappichelli Frosini TE (2019) Diritto pubblico comparato. Le democrazie stabilizzate, Il Mulino Haas T (2019) Comparing energy transitions in Germany and Spain using a political economy perspective. Environ Innov Soc Trans 31:200–210 Heffron RJ (2020) The role of justice in developing critical minerals. Extract Ind Soc 7:855–863 Heffron RJ (2021a) Energy law: an introduction, 2nd edn. Springer Heffron RJ (2021b) In: Pepe LM (ed) L’Energia attraverso il diritto. Editoriale Scientifica Heffron RJ, McCauley D (2014) Achieving sustainable supply chains through energy justice. Appl Energy 123:435–437 Jenkins K, Heffron RJ et al (2016) Energy justice: a conceptual review. Energy Res Soc Sci 11:174– 182 Kumm M (2009) The cosmopolitan turn in constitutionalism: on the relationship between constitutionalism in and beyond the state. In: Dunoff JL, Trachtman JP (eds) In ruling the world? Constitutionalism, international law, and global, p 69 Legrand P (1996) How to compare now. Leg Stud, 16 Loock M (2020) Unlocking the value of digitalization for the European energy transition: a typology of innovative business models. Energy Res Soc Sci, 69 Manga SJT (2018) Post-Paris Climate Agreement UNFCCC COP-21: perspectives on international environmental governance. Afr J Int Comp Law 26(3):309–338 McCauley DA et al (2013) Advancing energy justice: the triumvirate of tenets. Int Energy Law Rev 32:3 Mengelkamp E, Gärttner J, Rock K, Kessler S, Orsini L, Weinhardt C (2018) Designing microgrid energy markets: a case study: the Brooklyn Microgrid. Appl Energy 210:870–880 Montini M (2017) Riflessioni critiche sull’Accordo di Parigi sui cambiamenti climatici. Rivista di Diritto Internazionale 3:179 Nordhaus WD (2016) Projections and uncertainties about climate change in an era of minimal climate policies. National Bureau of Economic Research Working Paper No. 22933, Cambridge Pepe V (2019) Energia Nucleare, ambiente e democrazia: Italia e Francia a confronto. Federalismi (Rivista diritto pubblico italiano comparato ed europeo) 2:9 Pepe LM (2020) Reflections on comparative oil and gas law: new convergences of public and private rights. Quaderni Amministrativi 4:51 Pepe LM (2021) Il diritto dell’energia fondato su principi. La transizione ecologica come giustizia energetica. Rivista ambiente e diritto, 3 Pérez M, Scholten D, Stegen KS (2019) The multi-speed energy transition in Europe: opportunities and challenges for EU energy security. Energy Strat Rev 26 Petteruti C (2020) Il Diritto dell’Ambiente e dell’Energia. Profili di comparazione. Edizioni Scientifiche Italiane, p 256 Reusswig F, Braun F, Heger I, Ludewig T, Eichenauer E, Lass W (2016) Against the wind: local opposition to the German Energiewende. Utilities Policy 41:214–227

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Sorman AH, García-Muros X, Pizarro-Irizar C, González-Eguino M (2020) Lost (and found) in transition: expert stakeholder insights on low-carbon energy transitions in Spain. Energy Res Soc Sci, 64 Sovacool BK, Heffron RJ et al (2016) Energy decisions reframed as justice and ethical concerns. Nat Energy 1:5 Van Boxstael A, Meijer LLJ, Huijben JCCM, Romme AGL (2020) Intermediating the energy transition across spatial boundaries: cases of Sweden and Spain. Environ Innov Soc Trans 31: 466–484 Vasconcelos J (2017) Il ruolo dell’efficienza energetica nell’ambito della transizione energetica europea. In: Biandrino P, De Focatiis M (eds) Efficienza energetica ed efficienza del sistema dell’energia. Un nuovo modello? Cedam Walker G (2009) Beyond distribution and proximity: exploring the multiple spatialities of environmental justice. Antipode 41(4):614–636

Raphael James Heffron Professor in Energy Justice, the Social Contract and Sustainability at the Universite de Pau et des Pays de l’Adour, TREE, Pau, France. He is also Jean Monnet Professor in the Just Transition to a Low-Carbon Economy awarded by the European Commission (2019–2022). In 2020, he was also appointed as Senior Counsel at Janson law firm in Brussels (Belgium). Professor Heffron is a qualified Barrister-at-Law, and a graduate of both Oxford (MSc) and Cambridge (MPhil & PhD). His work all has a principal focus on achieving a sustainable and just transition to a low-carbon economy, and combines a mix of law, policy and economics. He has published over 180 publications of different types and is the most cited scholar in his field worldwide (2525+ Scopus) with translated work in multiple languages including Chinese. Professor Heffron has given just over 180 keynote or guest lectures in 52 countries worldwide. Luigi Maria Pepe, PhD at Università degli Studi della Campania Luigi Vanvitelli. Lecturing in Comparative Constitutional Law and Environmental Law and Security. Junior Associate Studio Legale Malinconico—Gentile Studio Legale Malinconico—GentileMar 2021.

Wind of Change: A Scandinavian Perspective on Energy Transition and the ‘Greenification’ of the Oil and Gas Sector Ignacio Herrera Anchustegui and Aleksander Glapiak

Abstract The Scandinavian region—Denmark, Norway and Sweden—is a worldleading example of a rapid energy transition due to high rates of electrification. There are high ambitions to be fossil free’ by 2050 and to push towards a renewable energy-based society. However, despite these plans and their ongoing success in reducing emissions, Scandinavia is not a fossil-free area; oil and gas remain the largest sources of energy in the region. Denmark and Norway are fossil fuel producers and exporters, with hydrocarbons being by far the largest source of income for Norway. In this paper, we discuss the energy transition in Scandinavia and how hydrocarbons and renewable sectors are interrelated in practice and energy governance and regulation. We show how these countries, and the Nordics in general, set a leading example in energy decarbonization with high electrification rates and blaze the trail in energy transition within the oil and gas industry, with Norway being the pioneer. Our contribution shows how Norway, due to a combination of its climate ambitions, including its aim to reduce greenhouse gas emissions, hydrocarbon regulation and economic dependence on petroleum, is leading the greenification efforts in the oil and gas industry, not by phasing it out but by making it more sustainable, at least as far as the extraction of oil and gas is concerned. Paradoxically, Scandinavia and Norway are at the forefront of the world’s energy transition thanks to a large share of renewable energy consumption. However, oil and gas extraction continues with the aim of not stopping it but making it greener.

I. Herrera Anchustegui (✉) University of Bergen, Faculty of Law, Bergen, Norway e-mail: [email protected] A. Glapiak University of Eastern Finland, UEF Law School, Joensuu, Finland e-mail: aglapiak@uef.fi © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_6

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1 Introduction The Scandinavian region—Denmark, Norway and Sweden—is a world-leading example of a rapid energy transition as a result of high rates of electrification. These three countries, along with Finland and Iceland, aim to be mostly ‘fossil free’ by 2050; Denmark, Sweden and Norway have some of the world’s most ambitious energy and climate policies.1 In October 2020 Denmark pledged to reach a 70% reduction in emissions by 2030 and reach climate neutrality by 2050.2 With less ambitious plans and a large oil and gas industry, Norway aims to reduce greenhouse gas emissions by at least 50%, and hopefully nearer to 55%, by 2030 compared to 1990 levels, having a minimum binding target of 40% by 2030 according to the Norwegian Climate Change Act.3 Sweden adopted the Climate Act in 2017, pledging to have zero net greenhouse gas emissions by 2045 at the latest, and have negative greenhouse emissions thereafter.4 In all these Scandinavian energy transition plans, electrification alongside increasing renewable energy sources (RES) production is the key to the green transformation of the energy system.5 Despite these plans and their ongoing success in reducing emissions, Scandinavia is not a fossil-free area; oil and gas remain the largest sources of energy in the region.6 Furthermore, Denmark and Norway are fossil fuel producers and exporters, with hydrocarbons being by far the largest source of income for Norway. However, Scandinavia is also leading the energy transition within the hydrocarbon industry. Denmark, being a precursor in offshore wind, plans to electrify oil and gas fields in its sea with wind turbines. Norway and Equinor, the Norwegian state oil and gas company, have gone even further with ambitious plans to ‘greenify’ the oil and gas industry through electrification and the use of technologies to capture carbon dioxide (CO2) and store it. We aim to present this innovative aspect of the energy transition in Scandinavia. We show how these countries, and the Nordics in general, set a leading example in energy decarbonization with high electrification rates and blaze the trail in energy transition within the oil and gas industry, with Norway being the pioneer. Our contribution shows how Norway, due to a combination of its climate ambitions,

1

European Commission, Submission by Germany and the European Commission, United NationsClimate Change & Paris Agreement (2020), p. 9; Nordic Energy Research, Progress towards Nordic Carbon Neutrality: Tracking Nordic Clean Energy Progress 2020 (April 2020), p. 8; Nordic Energy Research, 10 Insights into the Nordic Energy System (2018), p. 3; Sovacool (2017), pp. 569–582. 2 Danish Government, A Green and Sustainable World: The Danish Government’s long-term strategy for global climate action. 3 Norwegian Government, Submission of the Nationally Determine Contributions, United NationsClimate Change & Paris Agreement (2020). 4 Climate Change Act, Klimatlag (2017:720). 5 Nordic Energy Research (2020), (n 1) p. 10. 6 Nordic Energy Research (2018) (n 1), p. 2.

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including its aim to reduce greenhouse gas emissions, hydrocarbon regulation and economic dependence on petroleum, is leading the greenification efforts in the oil and gas industry, not by phasing it out but by making it more sustainable, at least as far as the extraction of oil and gas is concerned. Paradoxically, Scandinavia and Norway are at the forefront of the world’s energy transition thanks to a large share of renewable energy consumption. However, oil and gas extraction continues in the region and the aim is not stopping it but making it greener.

2 Growth of Green Energy in Scandinavia Through Electrification 2.1

The Scandinavian Energy Landscape

Scandinavia is ‘energy-hungry’. A cold climate, long and dark winters, economic development and modern and high-tech societies all contribute to this demand for energy. Scandinavia and the Nordics have some of the world’s highest per-capita consumption rates of electricity.7 Industries consume almost four times more than the OECD/Europe average, and households more than three times in the same comparison.8 Scandinavia also tops the world’s charts of bioenergy and waste consumption, with an average per capita consumption of about 25 GJ, while the world’s average is 6 GJ.9 The scale of decarbonization and electrification in Scandinavia is praiseworthy. A very high proportion of the energy consumed in Denmark, Norway and Sweden is renewable.10 Out of Norway’s 21 million tonnes of oil equivalent (Mtoe) consumption in 2015, 44% of it was produced by hydropower and 0.8% by wind.11 In Sweden, with an annual consumption of energy of 32 Mtoe in 2015, biomass and waste were 33% of the total energy output, with hydropower at 15% and nuclear at 12%.12 With a lesser energy consumption, Denmark also had high rates of low carbon energy sources, with biomass and waste and wind representing 24% and 8% respectively of the total 13 Mtoe of energy supply.13 The trend has been for renewable energy to gain traction, increasing 9% in the total energy supply in the period from 2008 to 2018.14 Decarbonizing the economy and reducing greenhouse

7

Nordic Energy Research and International Energy Agency, Nordic Energy Technology Perspectives 2016 (2016), p. 45. 8 Nordic Energy Research (2020) (n 1), p. 28. 9 Nordic Energy Research (2020) (n 1), p. 28. 10 Nordic Energy Research (2018) (n 1), p. 2. 11 Nordic Energy Research (2018) (n 1), p. 2. 12 Nordic Energy Research (2018) (n 1), p. 2. 13 Nordic Energy Research (2018) (n 1), p. 2. 14 Nordic Energy Research (2020) (n 1), p. 8

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emissions has not translated into a decrease in GDP.15 The energy transition has been an opportunity for the region to develop new technologies, with Denmark’s success story in (offshore) wind, and Norway’s low emissions in the oil and gas industry as examples. Yet, these three countries remain dependent on hydrocarbons and, to some degree, coal, like the rest of the world. In Denmark, oil, gas and coal represent 35%, 15% and 9% of the total energy consumption, respectively; Norway has a similar pattern with 39%, 6% and 3%, while in Sweden these numbers are smaller, 29%, 3% and 3%.16 Transportation remains dependent on hydrocarbons and is, as a whole, the highest source of CO2 emissions in the Nordics and Scandinavia, producing 40% of the total.17 Importantly, the petroleum sector, including refineries, is the second-largest source of greenhouse gases in the region, with 28% of all the emissions.18 The transition regarding energy consumption must coincide (and be facilitated) with a change related to the energy supply sources. The replacement of other energy sources by electricity will be moot if power generators resort to the use of hydrocarbons to meet the demand. Therefore, electrification efforts need to be matched by an increase in renewable energy production. However, green energy is characterized by intermittency, which leads to topics of (in)flexibility and storage.

2.2

Electricity Supply

For more than a century Denmark, Norway and Sweden have used their abundant renewable resources (flowing water and wind particularly) to power their economies. This in part explains the Scandinavian climate change commitments and policies,19 well anchored in renewable power and electrification. This reliance on renewable energy has led to some landmark situations. For example, Norway has a hydropower electricity generation share that for decades has been higher than 93% of the total national production,20 and the Danish offshore wind power adventure, with the Vindeby wind farm being the first European offshore wind park built in 1991.21 This leading example is not something of the past. In 2019, Norwegian generators produced 98% of the country’s electricity from hydro (93.6%) and wind (4.4%) power. Denmark followed with 78.2% of its power coming from renewables (mostly

15

Nordic Energy Research (2018) (n 1), p. 3. Nordic Energy Research (2018) (n 1), p. 2. 17 Nordic Energy Research and International Energy Agency (n 7). 18 Nordic Energy Research and International Energy Agency (n 7). 19 Eikeland and Sæverud (2007), pp. 31–32. 20 Eurostat, Simplified energy balances: https://ec.europa.eu/eurostat/databrowser/view/nrg_bal_s/ default/table?lang=en. 21 See e.g., Meyer (1995), pp. 24–25. 16

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wind and a fraction of biofuels) and 11.2% from solid fossil fuels. This is even more impressive considering that Denmark’s reliance on fossil fuels for electricity production was almost four times higher in 2013 (41.1%). Swedish electricity sources accounted up to 58.7% of RES (with hydropower, wind and biofuels being the main sources), while 39.3% was nuclear.22 Recent developments and the increase in renewable energy generation in Scandinavia have been driven by the targets set under Article 3 of the 2009 Renewable Energy Directive,23 to be repealed by the Directive 2018/2001 on 30 June 2021. The three Scandinavian countries met their 2020 targets: Denmark 30%, Norway 67.5% and Sweden 49% of renewable energy in their total energy consumption, well ahead of schedule.24 However, due to stable and low electricity prices throughout that period, more extensive investment in renewable energy, especially wind, lagged.25 Ambitious goals and an identified interest in green energy development collided with market realities. This led Scandinavian governments to design various support schemes to accelerate the energy transition. Regionally, the most prominent one was a certification scheme introduced by Sweden in 2003,26 which Norway later joined.27 The scheme was based on a certificate market. The demand for certificates was created by the obligation imposed on electricity suppliers and large customers to cover a set quota of their electricity supply (or consumption) with certificates they had to purchase. These certificates were granted to owners of generation plants using RES.28 As a result, RES producers could receive revenue by selling electricity and in addition by receiving the certificate’s value. While the scheme proved effective in increasing renewable energy production, it affected both countries’ electricity markets. Sweden and Norway decided in September 2020 that the scheme should be discontinued, as green energy can now attract investment without significant state support.29 Nevertheless, the countries

22

Shares were based on Eurostat: https://ec.europa.eu/eurostat/databrowser/view/nrg_bal_c/ default/table?lang=en. 23 Directive 2009/28 on the promotion of the use of energy from renewable sources. 24 Eurostat, Share of energy from renewable sources, https://ec.europa.eu/eurostat/databrowser/ view/nrg_ind_ren/default/table?lang=en. 25 See e.g., IEA, Energy Policies of IEA Countries, Sweden (2019), https://www.oecd-ilibrary.org/ energy/energy-policies-of-iea-countries-sweden-2019_d4ff3340-en, p. 13. 26 Lag (2003:113) om elcertifikat. 27 Agreement Between the Government of the Kingdom of Norway and the Government of the Kingdom of Sweden on a Common Market for Electricity Certificates of 29 June 2011, https:// www.regjeringen.no/globalassets/upload/oed/pdf_filer_2/ev/063-2011-avtale_elsertifikater_ endelig.pdf. 28 Article 4 of the 2011 Agreement (n 27). 29 See the Agreement on 18 September 2020: https://www.regjeringen.no/contentassets/26872 56caf784557a071052486a6597a/avtale-mellom-kongeriket-norges-regjering-og-kongeriketsveriges-regjering-om-endring-av-avt.pdf.

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extended the termination period in a bid to meet a goal previously set for 2030 (46.4TWh)30 under the scheme.31 Other incentives employed in Scandinavia included levying of taxes on CO2 (both Sweden and Norway in 1991, Denmark in 1994), the granting of public support in the form of variable or fixed feed-in premiums32 and the “green scheme” (grøn ordning) promoting the acceptance of wind turbines in Denmark.33

2.3

Patterns of Consumption

The growing share of renewables in electricity generation is an essential step, but not the end-goal, in the transition towards net carbon neutrality. As the studies commissioned by the EU institutions reiterate, the way forward is the electrification of economic sectors.34 In this transition, Scandinavian countries have managed to curb the use of fossil fuel in electricity production. Thus, one may think that these countries are particularly suitable for the broader introduction of electricity in economic processes. However, a closer analysis of the statistical data suggests that this is more complex. While Scandinavia in total uses less energy than the combined EU in average, it also has a smaller population. At the same time, the electrification of both industry and households are higher than in the rest of Europe. (See Fig. 1). In Scandinavia, the most electrified sectors are the commercial and public services, agriculture and forestry, and fishing (all falling into the ‘Other sectors’ category). Residential use ranks second behind them, with only Denmark behind the European average on account of its use of primary solid biofuels and natural gas (20.1% vs 24.4% of electricity use). Transport, in all three countries, remains a major issue, with Norway taking the lead with a mere 2.7% of it electrified. Despite the Scandinavian countries surpassing the European electrification (and generation from RES) averages, one could ask whether the region can reduce emissions further. Three reasons make us somewhat skeptical about this possibility unless some important changes, like electrification of transportation or the oil and

30

See the amended version of Article 2(1) of the 2011 Agreement in the 2017 Amendment: https:// www.regjeringen.no/contentassets/3c4f08f94b394bc8a02d02af326a611e/avtale-mellomkongeriket-norges-regjering-og-kongeriket-sveriges-regjering-om-endring-av-avtale-om-et-fellesmarked-for-elsertifikater%2D%2D5.mai-2017.pdf. 31 See the amended version of Article 4 of the 2011 Agreement in 2020 Amendment (n 29). 32 Chapter 6 of Promotion of Renewable Energy of 7 February 2020. 33 §18-20 of Promotion of Renewable Energy Act of 2009. See also: Herrera Anchustegui (2021). 34 Van Nuffel L, Sector coupling: how can it be enhanced in the EU to foster grid stability and decarbonise?, https://www.europarl.europa.eu/RegData/etudes/STUD/2018/626091/IPOL_STU (2018)626091_EN.pdf; Riechmann Ch et al., Potentials of sector coupling for decarbonisation Assessing regulatory barriers in linking the gas and electricity sectors in the EU, https://op.europa. eu/en/publication-detail/-/publication/60fadfee-216c-11ea-95ab-01aa75ed71a1/language-en.

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Fig. 1 The structure of the final energy consumption by sector in 2019. Source: Eurostat – European Commission, 2020

gas sector, take place. Compared to other regions, electrification in Scandinavia is already high and increasing it further will require substantial investment; in addition, electrification of some parts of the economy might pose more challenges. Second, the data indicates sideways trends for all the sectors with limited electricity use growth. During the 2010s, only the transport sector in Norway saw a notable increment of 0.075 Mtoe, which amounted to an increase of 153.7% from 2010 to 2019. Third, the National Energy and Climate Plans submitted by Sweden and Denmark present a moderate response to the electrification challenge.35 We may expect some changes in the residential sector (such as the deployment of heat pumps which is expected in Denmark since it has halved the tax on the heat produced using electricity)36 and transportation (with a robust institutional framework in Sweden37

35 Plans are submitted under Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action (OJ [2018] L 328/1). 36 Danish Ministry of Climate, Energy and Utilities, Denmark’s Integrated National Energy and Climate Plan, (December 2019), p. 174 37 Swedish Ministry of Infrastructure, Sweden’s Integrated National Energy and Climate Plan, (January 2020), pp. 50–51.

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and some generic Danish commitments38). From the Norwegian perspective, electrification may be expected in the transport sector39 (mostly in private and urban public transport) but not in heavy-duty transportation.

3 Norwegian Transition and Electrification Regarding Oil and Gas 3.1

Scandinavia as a Hydrocarbon Producer and Exporter

Despite the scenario described in Sect. 2, Scandinavia is also a producer of hydrocarbons. Norway and, perhaps somewhat surprisingly, Denmark are petroleum producers (See Fig. 2). Denmark’s total energy production for 2017 was 14.9 Mtoe, with oil representing almost half of that (47.6%), gas more than a quarter (27.1%) and all the other sources combined the remaining (25.3%), including wind and solar as renewable energy (7.4% and 0.7%, respectively).40 Petroleum has been produced in Denmark since 1972, and it has exported hydrocarbons since 1997. However, in 2018 due to the decline in oil production, it became a net oil importer. In 2021, there are 55 platforms in 19 oil and gas fields in Danish waters.41 Oil production reached its peak in the mid-2000s,42 with a sharp decline since then of about 60%,43 reaching ca. 83,000 and 21,000 barrels of oil and gas per day, respectively.44 These numbers make Denmark the largest petroleum producer in the EU after Brexit.45 Most of the Danish oil and gas were exported to Sweden, while the majority of imports came from Russia.46

European Commission, Assessment of the final national energy and climate plan of Denmark, SWD(2020) 903 final, p. 8. 39 Norwegian Ministry of Climate and Environment, Norway’s National Plan, (December 2019), p. 9. 40 International Energy Agency, Denmark 2017 Review (2017). 41 Danish Energy Agency, About Oil and Gas, available at: https://ens.dk/en/our-responsibilities/ oil-gas/about-oil-and-gas. 42 Danish Energy Agency, Resources and Forecasts (2016), p. 6. 43 International Energy Agency (2017) (n 42), p. 43. 44 Klima-, Energi- og Forsyningsministeriet, Press Conference: Bred aftale om Nordsøens fremtid (3 December 2020). 45 The Guardian, Denmark to end new oil and gas exploration in North Sea, (4 December 2020), https://www.theguardian.com/business/2020/dec/04/denmark-to-end-new-oil-and-gas-explorationin-north-sea. 46 International Energy Agency (2017) (n 42), p. 43. 38

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Fig. 2 Norwegian and Danish oil and natural gas exports in 2010–2019. Source: Eurostat – European Commission, 2020

The reign of oil in Demark as a main source of energy is in decline as a result of the pursued policy and depletion of resources. In December 2020, the Danish government pledged to cancel its latest oil and gas exploration license round47 and to end any extracting activity beyond 2050 as part of its plans to become a climateneutral country in the coming decades.48 However, the hydrocarbon frontrunner in Scandinavia and Europe is Norway. Norway is the largest producer and exporter of oil and gas in the region, followed by the United Kingdom. In January 2021, the Norwegian Petroleum Directorate esti-

47

BBC, Denmark set to end all new oil and gas exploration (4 December 2020), https://www.bbc. com/news/business-55184580. 48 Klima-, Energi- og Forsyningsministeriet (n 47); S & P Global Platts, Denmark to end all North Sea oil, gas production by 2050, bans new exploration (4 December 2020), https://www.spglobal. com/platts/en/market-insights/latest-news/natural-gas/120420-denmark-to-end-all-north-sea-oilgas-production-by-2050-bans-new-exploration.

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mated an average daily production of 2,137,000 barrels of oil, natural gas liquids (NGL) and condensate.49 The Norwegian oil and gas production peak came in 2004, with more than 250 million Sm3, with a small decline to 230 million Sm3 in 2020.50 Norway produces about 2% of the world’s oil demand, with the USA sitting at 18%, followed by Russia and Saudi Arabia with 12% each.51 As a producer, it is the 15th largest in the world. Yet, the importance of hydrocarbons to Norway has no parallel in any other economic sector in the country. In the words of the Norwegian Government, the “oil and gas industry is Norway’s largest ocean industry, generating value creation of NOK 560 billion in 2017”,52 representing about €56 billion and generating a total net cash flow estimated at NOK 263 billion in 2019.53 Hydrocarbon products are by far the largest source of revenue and export in the country. Since 2001 crude oil, natural gas and condensate have represented more than 40% of Norway’s total export of goods. In 2019, this figure was 46.9%, with a peak of 61.3% in 2008. Fish, the second-largest export product, came a long way behind, representing a mere 13.2% of Norwegian exports. Norway’s energy policy and RES, with hydropower historically being the dominant source of electricity production, explain why most of the petroleum is exported, generating this enormous revenue. Exports are made mostly within Europe. For example, Norway’s gas exports represented 22% of the EU’s gas demand in 2020, second only to Russia (if gas transported through Ukraine and Belarus are combined).54 Norway exports 1.1 million barrels of crude oil per day to other European countries.55

3.2

Law as a Tool of Success and Change

The Norwegian model has been dubbed “exemplary”,56 and the paragon of objectbased petroleum regulation.57 Al-Kasim has gone as far to say that “Norway’s highly

Norwegian Petroleum Directorate, Production figures January 2021, https://www.npd.no/en/ facts/news/Production-figures/2021/Production-figures-January-2021/. 50 Norwegian Petroleum Directorate, Historical Production, https://www.norskpetroleum.no/en/ facts/historical-production/. 51 Norwegian Petroleum Directorate, Exports of Oil and Gas, https://www.norskpetroleum.no/en/ production-and-exports/exports-of-oil-and-gas/. 52 Norwegian Government, Blue Opportunities: The Norwegian Government’s updated Ocean Strategy (2019), p. 10. 53 Norwegian Government (2019) (n 54), p. 13. 54 European Commission, Natural Gas Supply Statistics (September 2020), p. 4. 55 Norwegian Petroleum Directorate (n 53). 56 Al-Kasim (2013), p. 263. 57 Hunter (2014), p. 51; Pereira and Bjørnebye (2019). 49

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developed governance system is perhaps the prime factor behind its success in petroleum resource management”.58 Norway’s legal regime has been planned with a long-term vision,59 being a source of stability and predictability. Its key driver has been ensuring resource exploitation to the benefit of Norwegian society as a whole,60 as reflected explicitly in §1-2 of the Petroleum Act.61 The Petroleum Act, adopted in 1996, sets the general framework for oil and gas activities in Norway. The Act is not particularly extensive or detailed—following Norwegian legal tradition—and it is complemented by different administrative regulations dealing with technical matters. Other laws also govern petroleum activity, such as the Pollution Control Act,62 the Working Environment Act,63 the Marine Resources Act64 and the Petroleum Taxation Act.65 Some regulatory choices have led to the Norwegian hydrocarbon success.66 These are also paving the way for the transition within the industry as oil and gas production in Norway may further become electrified and sustainable. This is because of Norway’s obligations concerning climate change and the associated need to reduce greenhouse emissions related to the sector.

3.2.1

Strong State Intervention

The central role of the state in determining the way, areas, timing and conditions in which petroleum activity is conducted is central to the Norwegian hydrocarbon model. This has been achieved through regulation which is closely followed by administrative supervision. State presence is also paving the way for the oil and gas transition in Norway as we discuss in Sects. 4 and 5. Two factors are worth highlighting. First, Norway has a government-led licensing system. Ordinary or numbered production license rounds are held every two years, with no signs of this ending any time soon, the most recent was announced on 19 November 2020.67 Licenses are granted by the state through a qualitative 58

Al-Kasim (2013), p. 263. Norwegian Government, Meld. St. 28 (2010–2011) ‘An Industry for the Future: Norway’s Petroleum Activities’ (24 June 2011). 60 Norwegian Government (2019) (n 54), p. 9; Nordtveit (2015), p. 136; Hunter (2010), pp. 30–33. 61 §1-2 of the Act 29 November 1996 No. 72 relating to petroleum activities (Petroleum Act). 62 Act 13 March 1981 No. 6 relating to protection against pollution and relating to waste, see section 4. 63 Act 17 June 2005 No. 62 relating to working environment, working hours and employment protection, etc. 64 Act 6 June 2008 No. 37 on management of wild living marine resources. 65 Act of 13 June 1975 No. 35 relating to the Taxation of Subsea Petroleum Deposits, etc. Last amended by Act of 21 June 2013 No. 66. 66 See recently discussing this at length: Gormley and Kristensen (2019). 67 Ministry of Petroleum and Energy, Announcement of the 25th licensing round, Press Release 71/20 (19 November 2020). 59

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assessment—as opposed to auctioning68—for both exploration (survey) and production licenses.69 This allows the government to control how operations are conducted and to choose strategic partners rather than maximize short-term profitability. When production licenses are awarded, the Norwegian Government combines several licensees to operate in a single oil and gas field, promoting the sharing of techniques and technology.70 Second, the Norwegian state has had a strong presence as a regulator and player since the early 70s, with Statoil’s creation in 1972. Statoil, now Equinor, which was partially privatized in 2001, produces about 1.3 million barrels of oil and gas per day and directly operates 42 oil fields in the Norwegian Continental Shelf (NCS) as reported for 2019.71 Equinor, despite being mostly publicly owned, competes with other operators on a relatively equal footing. It is also the company that leads the greenification of oil and gas platforms in Norway.

3.2.2

Revenue and Market-Oriented Policies

Strong state intervention in Norway has been combined with the pursuit of a profitoriented approach to oil and gas activity within the well-known welfare-state system and high fiscal system, which also applies to hydrocarbons.72 Through its regulatory framework, Norway has achieved a good balance between competitive pressure, allowing and encouraging foreign participation, protecting national interests and increasing revenues. After all, oil and gas is a business: “[t]he primary objective of the petroleum policy is to facilitate profitable production of oil and gas in a long-term perspective”.73 This is done through encouraging profitable exports, increasing the value of Norwegian hydrocarbons and fiscal policy. This also explains the need for the decarbonization of oil and gas activities upstream, as we discuss below. As remarked by Nordtveit, “[t]he state is interested in the highest possible tax revenue from the petroleum activity as well as in its impact on the general economic, regional and social development of Norway”.74 Norway has a petroleum tax regime comprising the standard company tax, equivalent to 22% of the company’s total income, and an additional 56% tax applicable only to the income from offshore production and pipeline transportation of hydrocarbons from the NCS.75 This fiscal

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Nordtveit (2015), p. 151 Chapters 2 and 3 of the Petroleum Act. 70 §3-3 of the Petroleum Act. 71 Equinor, 2019 Annual Report and Form 20-F (2019), p. 31. 72 Gormley and Kristensen (2019), p. 43. 73 Norwegian Government, Meld. St. 28 (2010–2011) ‘An Industry for the Future: Norway’s Petroleum Activities’ (24 June 2011), p. 6. 74 Ernst Nordtveit (2015), p. 154. 75 See also: Gormley and Kristensen (2019), pp. 83–87. 69

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framework has been called excessive by some and insufficient by others.76 However, behind it, there is a clear plan to increase petroleum revenue for the country as much as possible within a competitive market. The state participates in the oil industry passively to increase its revenue. Since the 2001 restructuring and partial privatization of Equinor, the Norwegian state has participated directly in petroleum activities by reserving a specified share of licenses granted by the state and as a partner of the joint venture agreement operating that license.77 This participation is done through Petoro AS, a fully state-owned company that in 2021 participates as a licensee in 36 producing oil and gas fields. All the revenue received by Petoro is directly assigned to the State Treasury.

3.2.3

Recovery Maximization and Exploration of New Areas

Not all petroleum resources located in a field are extracted for a combination of geological, technological and financial reasons. Recovery rates in the oil and gas industry worldwide oscillate between 20 and 40%,78 with sources from 2018 indicating that typically only around 30% of the oil in the reservoir has been recovered before the deposit is abandoned.79 Norway, on the other hand, has adopted a policy of recovery maximization. This allows the Norwegian state to ensure that more resources are obtained, which “will substantially increase revenues to the Norwegian state”.80 The principle of recovery maximization is enshrined in §4-1 of the Petroleum Act, requiring operators to ensure maximum resource extraction. The provision also requires licensees to “carry out continuous evaluation of production strategy and technical solutions” to ensure recovery maximization and the prolongation of the life of the operations. This also explains the impetus that the electrification of oil and gas production has had in Norway. As a result of operational requirements, the recovery rates for fields in the NCS are over 40% and usually closer to 50%. Equinor has an average oil recovery rate in the NCS of close to 50%.81 Equinor’s ambition is to increase the recovery rates in its operated fields up to 60% for oil and 85% for gas.82 Additionally, the geographical scope of Norwegian petroleum activity has kept expanding83 as part of an assertive resource exploitation policy.84 Until the early

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Al-Kasim (2013), p. 263. §11-1 of the Petroleum Act. 78 Muggeridge et al. (2013). 79 McGlade et al. (2018). 80 Norwegian Government (2019) (n 54), p. 13. 81 Equinor, Improving Recovery Rates, https://www.equinor.com/en/how-and-why/increasingvalue-creation.html. 82 Equinor (n 73), p. 19. 83 For a historical discussion of oil and gas activity in Norway see: Jarlsby (2019). 84 Ingrid Sølvberg, Norwegian Petroleum Directorate, Director General, https://www.npd.no/en/. 77

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1980s, all the activity centered on the North Sea and below the 62nd parallel, areas now considered to be mature provinces with highly developed infrastructures.85 With time, licenses were granted in the North Sea and now in the Barents Sea; examples are the Snøhvit gas field and the Goliat and Skrugard oil fields.86 Licensing procedures also ensure that new geological areas and possible deposits are investigated. Exploration happens in large areas as well as more mature and explored parts of the NCS, the latter being done through licenses in predefined areas (known as the TFO scheme). These have been conducted annually since 2003. Recently TFO licenses have allowed the discovery of new sources in areas that were thought to be ‘empty’.87

3.2.4

High Environmental Standards

Norway’s oil and gas activities are subject to high environmental standards. These standards are seen as ‘best practices’.88 Legislation has played a central role in this as a result of the inclusion of a ‘prudent’ standard for petroleum activities, which includes taking due account of the environment and how these activities affect it.89 These high environmental standards serve as a backdrop and framework to understanding the greenification of the oil industry as we discuss in Sects. 4 and 5. Norway is a party of the OSPAR Convention,90 according to which it must “take all possible steps to prevent and eliminate pollution and shall take the necessary measures to protect the maritime area against the adverse effects of human activities”, including petroleum activity.91 Particularly important is Annex III of the OSPAR Convention, which aims to prevent or eliminate pollution from offshore installations, demanding the application of best environmental practices and/or best available techniques.92 National regulation on environmental protection is based on the precautionary and polluter pays principles, ecosystem-based management and the requirement to use the best available technology, as set by the Act of Biodiversity. These rules, even if not fully applicable outside the Norwegian territorial waters, are the basic environmental law principles of the country. Furthermore, the adoption of maritime spatial plans in the North, Norwegian and Barents seas, while not hard law, constrain

85

Tina Hunter (2014), p. 49. Ernst Nordtveit (2015), p. 135. 87 Ernst Nordtveit (2015), p. 151. 88 Ernst Nordtveit (2015), p. 157. 89 Chapter 10 of the Petroleum Act. 90 The Convention for the Protection of the Marine Environment of the North-East Atlantic, 22 September 1992. Entered into force on 25 March 1998 (OSPAR Convention). 91 Article 2 (1)(a) of the OSPAR Convention. 92 Article 1 (2) Annex III of the OSPAR Convention. 86

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and guide petroleum activity within environmental protection principles and sustainable development.93 Additionally, the Petroleum Act demands high environmental standards. Hydrocarbon activities must be preceded by an impact assessment conducted by the state, which takes into consideration the effects on the environment but also other users of the sea.94 Moreover, companies operating in the NCS are required to include environmental aspects as part of their operational plan, under §4-2 of the Petroleum Act, the entrusted ministry also being entitled to request a detailed “account of the impact on the environment, possible risks of pollution and the impact on other affected activities”.95 Lastly, §7-1 of the Petroleum Act creates a no-fault and unlimited liability scheme for pollution damage, extending not only to economic losses but also to consequential damage and expenses to restore the conditions in the area.

4 The Greenhouse Gases Problem and §112 of the Norwegian Constitution Norway’s hydrocarbon success brings both economic revenue and environmental challenges. Central in this perspective are the greenhouse gas emissions associated with the extraction of hydrocarbons in the NCS. Statistics Norway reports that the oil and gas extraction constitutes by far the largest source of greenhouse gas emissions, with 50.3 million CO2 tonnes in 2019, representing 35.8% of the national total.96 In second place comes manufacturing industries and mining with 14.0 million tonnes of CO2, almost four times less. Norway has an ambitious national plan to drastically reduce its greenhouse gas emissions by 2050 as required by the Climate Change Act, which also includes the oil and gas industry.97 Additionally, Norway is bound by international obligations, such as the Paris Agreement, the Kyoto Protocol, the EU Emission Trading Scheme (ETS) System,98 to which Norway has been a party since 2008,99 and the Effort Sharing Regulation.100 Climate change ambitions were ratified in February 2020

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Bjørnebye and Banet (2019), p. 99. §3-1 of the Petroleum Act. 95 §4-2 of the Petroleum Act. 96 Statistisk Sentralbyrå, Emissions to Air (November 2020), https://www.ssb.no/en/klimagassn. 97 Norwegian Government (2020) (n 3). 98 Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community (OJ [2003] L 275/32). 99 European Commission, The European Union, Iceland and Norway agree to deepen their cooperation in climate action (25 October 2019). 100 Regulation (EU) 2018/842 on binding annual greenhouse gas emission reductions (OJ [2018] L 156/26). 94

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when Norway announced an enhanced climate target under the Paris Agreement, aiming at reducing its emissions by at least 50% and towards 55% by 2030 compared to 1990 levels.101 Due to its significance and relation to the EU Emission Trading Scheme System, the oil and gas sector is an area ripe for a substantial greenhouse gas emissions decrease. The technology for this is already available, and part of it has also been developed locally, with Equinor-led efforts being an example, as we discuss in Sect. 5. Furthermore, as carbon prices increase, petroleum extraction becomes costlier. In February 2021, the carbon price in the EU ETS reached a record high of €38 per tonne as annual allowances have been reduced in the fourth phase of the system, reaching more than €90 in 2022.102 Moreover, Norway has had a national carbon tax which is also applicable to the oil industry since 1991.103 Further, there are myriad laws related to carbon emissions and their pricing, among them the CO2 Tax Act on Petroleum Activities, the Sales Tax Act, the Greenhouse Gas Emission Trading Act and the Pollution Control Act.104 Each CO2 tonne produced by the oil and gas industry is currently subject to a tax of NOK 500 (around €50).105 In January 2021, political discussions were initiated to discuss a possible increase in this petroleumspecific tax.106 Additionally, in Norway, nitrogen oxide (NOx) emissions have also been subject to a tax regime since 2007, which currently is 23.48 NOK per kg.107 While this is the case in Norway, not all countries have similar greenhouse emission taxes for the hydrocarbon industry. These charges put Norwegian oil and gas activity at a ‘disadvantage’ as they have higher operational costs. Carbon pricing strategies are designed to render carbon-intensive activities unprofitable, impacting the profitability of the sector unless changes are introduced. Hence, reducing greenhouse emissions is not only a matter of climate change but also the future profitability of the petroleum industry in Norway and the companies active in the NCS, therefore creating incentives for a green shift in their operations. However, economic pressure is not the only incentive to start a green transition within the oil and gas sector. The Norwegian state has a general responsibility to ensure good environmental conditions and to properly manage the country’s and

101

Norwegian Government (2020) (n 3). Financial Times, EU Carbon Prices Soars to Record High (2021), https://www.ft.com/content/91 5f168a-0d7d-4cb6-abe1-6dbf8f40188f; Carbon Herald, EU ETS Carbon Price Reaches New Record High At Nearly €100 (2022), https://carbonherald.com/eu-ets-carbon-price-reaches-newrecord-high-at-nearly-e100/. 103 Statistisk Sentralbyrå, Pricing of CO2 emissions in Norway (2009/16), p. 4. 104 See also: Bjørnebye and Banet (2019), p. 124. 105 Energy Facts Norway, Taxes and Emissions Trading, https://energifaktanorge.no/en/etbaerekraftig-og-sikkert-energisystem/avgifter-og-kvoteplikt/. 106 Reuters, Norway’s plans to raise carbon tax draw oil industry ire (8 January 2021), https://www. reuters.com/article/uk-climate-change-norway/norways-plans-to-raise-carbon-tax-draw-oil-indus try-ire-idUKKBN29D1BB. 107 Lov om særavgifter of 19 March 1933. 102

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natural resources pursuant to §112 of the Norwegian constitution. This provision also grants the state the determination of how protection of the environment must be achieved. The controversy around §112 of the Constitution and oil and gas licenses awarded in the Barents Sea by the Norwegian state has climbed up to the Supreme Court.108 In December 2020, the Supreme Court held that while §112 grants a right to the citizens of a clean environment, it is the “authorities’ task to determine which environmental measures to implement” to address climate change challenges, for example.109 It also held that actions of Parliament, in this case, the awarding of licenses for oil and gas activity, may be invalidated, but the threshold to do so is very high. Thus, the Supreme Court found that the state decision to grant licenses in the Barents Sea for the twenty-third oil and gas rounds was not unlawful. Importantly for our discussion, the Supreme Court endorsed the greenification idea within the oil and gas industry in Norway as it expressly recognized that measures to address climate impact could be done through “carbon tax, investments in renewable energy, grants to technology on carbon capture and storage, grants to green technology and green adjustment in general”.110

5 Greenifying the Oil and Gas Industry? 5.1

Oil’s Reign: Challenges and Opportunities

Stakeholders in the Norwegian hydrocarbon sector have been seeking and implementing measures to increase the sustainability of oil and gas production for more than two decades. Based on climate obligations, carbon pricing and social and political pressure, Norway and the companies operating in its territory, face the option of either stopping their oil production or seeking alternatives to make this production more sustainable, thus reducing the carbon footprint.111 Despite the need for an energy transition, the “Hydrocarbon Man is alive and well. Global oil demand increased by 1.3 per cent in 2018, led by the US and China, and driven by the need for oil in petrochemicals and for jet fuel”.112 The global total energy consumption and supply has kept increasing, hydrocarbon still being the

108

Supreme Court of Norway, Judgment 22 December 2020, HR-2020-2472-P. Supreme Court of Norway, English Summary, https://www.domstol.no/en/Enkelt-domstol/ supremecourt/rulings/2020/supreme-court-civil-cases/hr-2020-2472-p/. 110 Supreme Court of Norway (n 111) (emphasis added). 111 See also highlight the relation between reduction of CO2 emissions and prolongation of a large hydrocarbon industry in Norway: Bjørnebye and Banet (2019), p. 118. 112 Hunter and Herrera Anchustegui (2020), p. 6. 109

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main source of global energy.113 Even considering the rapid rise of RES (mostly in electricity generation), oil and natural gas represented, together, 54.4% of the global energy supply sources in 2018, from a combined share of 62,2% in 1973.114 In terms of total global consumption, oil and natural gas represented 57% in 2018.115 The world still depends on oil and gas, and this is unlikely to change, at least in the medium term, despite the much-needed efforts to mitigate the effects of climate change. Norway is no stranger to this dilemma of the balance between climate change, energy needs and profitability. As pointed out by the Norwegian Government: The Norwegian Petroleum Directorate estimates that in 50 years of petroleum activities in Norway, about half of the total petroleum resources have been produced. Global energy consumption is expected to increase considerably in the future due to population growth and greater prosperity, especially in Asia. There have been strict controls on emissions to air and sea on the Norwegian continental shelf for many years, and emissions from Norwegian petroleum activities are considerably lower than the average for other countries because operators have had incentives to reduce emissions. Thus, the Norwegian continental shelf is in a good position to meet the growing demand for energy with proportionally lower emissions.116 Clear signals to continue (but more sustainably) hydrocarbon production are linked to the policies of recovery maximization and the exploration of new areas, as discussed in Sect. 3.2. Norway will “continue to facilitate the profitable production of oil and gas by maintaining a predictable framework. This will include continuing the regular licensing rounds on the Norwegian continental shelf, in order to give the industry access to new exploration areas.”117 Climate change goals and economic interests in continuing oil and gas production in the NCS create incentives to transform the industry from within by ensuring that oil and gas extraction is greener and more sustainable. Both Norwegian companies and the Norwegian Government have been considering and developing ways to achieve this. Doing so will contribute to achieving climate goals, drastically reducing CO2 emissions in Scandinavia, increasing petroleum revenues for the Norwegian state and creating new exportable renewable energy technologies. Two main avenues have been set in motion in this regard: deployment of offshore wind to power oil and gas rigs, and systems for carbon capture, transportation and storage (CCTS). In Denmark, electrification projects for the hydrocarbon industry have been discussed and projects are now underway.118

113

International Energy Agency, Data and Statistics, https://www.iea.org/data-and-statistics? country=WORLD&fuel=Energy%20supply&indicator=TPESbySource. 114 International Energy Agency, Key World Energy Statistics 2020 (Statistics Report, August 2020), p. 6. 115 International Energy Agency 2020 (n 116), p. 34. 116 Norwegian Government (2019) (n 54), p. 13 (emphasis added). 117 Norwegian Government (2019) (n 54), p. 13. 118 The Committee for the Development of an Oil and Gas Strategy, The Future of the Danish Oil and Gas Sector (July 2017).

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Electricity and Wind for Oil and Gas

Oil and gas platforms are powered by gas turbines located on them. The extracted gas is used to generate the energy needed to continue the operation, emitting considerable amounts of greenhouse gases, mostly CO2 and NOx.119 Technical solutions have been developed to reduce the emissions created by oil and gas activity, with different techniques being implemented in Scandinavia and the North Sea, among other places in the world.120 Equinor spearheads some of them as part of its ‘low carbon’ operations goal. Three concrete objectives have been set by the Norwegian oil and gas company: reduce the carbon intensity of its operations by at least 50% by 2050, grow its renewable energy production tenfold by 2026 and strengthen its leading position in the industry on carbon-efficient production, reaching carbon neutrality by 2030.121 Electrification and CCTS are key to this. Replacing gas with renewable power in the petroleum fields will dramatically decrease the carbon footprint of petroleum activities, and is necessary to achieve Equinor’s ambitions. As Bjartnes put it, “[i]t is impossible to half emissions from the Norwegian petroleum sector in ten years without extensive electrification”.122 Electrification from onshore RES started in 1996 with Troll East (A). This has continued with other Equinor operated fields such as Ormen Lange, Troll A, Gjøa and Valhall.123 In 2019 the Johan Sverdrup field became powered from the Norwegian land grid, making it one of the most carbon-efficient fields worldwide.124 To put this in perspective, the electrification of the Johan Sverdrup field implies that its operation is 25 times less CO2 intensive, reducing emissions by up to 90% which is equivalent to the emissions of 310,000 passenger cars per year.125 By 2018, electrification of oil and gas production in Norway had reached about 30% according to Rystad Energy.126 Also impressive are the efforts by Equinor to construct offshore wind farms to power oil and gas fields in the NCS. Electrification through offshore wind ensures that RES will be always used—the same cannot be said for electricity from land— and allows oil and gas rigs to be powered in cases in which due to the distance from the shore it would be very costly or impossible. In 2019, the Hywind Tampen project

119

Marvik et al. (2013), p. 558. Cheng et al. (2017), pp. 1–7. 121 Equinor (n 73), pp. 92–93. 122 Anders Bjartnes, Energi og Klima, Elektrifisering av oljesektoren: Her er et forsøk på å gi et faktagrunnlag for debatten (16 March 2021, own translation). 123 Bjørnebye and Banet (2019), p. 124. 124 Equinor (n 73), p. 93. 125 Equinor, Electrification of Oil and Gas Platforms, https://www.equinor.com/en/magazine/ electrification-of-oil-and-gas-platforms.html. 126 Rystad Energy, 40% of Norway’s offshore production electrified by 2025 (6 December 2019), https://www.rystadenergy.com/newsevents/news/press-releases/40-percent-of-norways-offshoreproduction-electrified-by-2025/. 120

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was launched to construct the world’s first medium-sized floating offshore wind farm, and the first offshore wind farm to power an oil and gas field. Hywind Tampen is to be operational in the third quarter of 2022, and with 11 turbines, it will produce 88MW to partially electrify the oil and gas fields of Snorre and Gullfaks. Hywind Tampen will be located approximately 140km into the Economic Exclusive Zone of the Norwegian North Sea.127 This wind farm will not entirely replace the gas used to power the two fields. However, it will provide about 35% of the power needed for the two fields,128 reducing the emission of CO2 by approximately 200,000 tons per year, the equivalent to the emissions of 100,000 private cars.129 In both fields, Equinor was the designated operator and largest licensee, also entrusted with the wind farm construction. Albeit a project for renewable energy production, the wind farm, which is not connected to the national grid, was authorized under the oil and gas regime as a field modification, and not as a ‘standard’ offshore wind farm under the Offshore Energy Act.130 The Norwegian state has financially supported this electrification of oil and gas fields through offshore wind turbines. On 22 August 2019, ENOVA SF, a Norwegian wholly state-owned entity entrusted with supporting financing for the development of energy and climate technology to reduce greenhouse gas emissions, announced its decision to finance up to 43% of Hywind Tampen’s cost. This amounted to a direct public capital injection of NOK 2 229.6 million, about €200 million. It was declared to be compatible state aid by the EFTA Surveillance Authority on 11 March 2020, at the time the largest amount of aid approved for a single project, only now surpassed by a project related to carbon capture discussed below.131 Oil and gas electrification gives rise to not only a host of economic and social questions but also regulatory uncertainties ripe for future research. These range from the question of whether or not EU/EEA law should be applied over the Economic Exclusive Zone of Norway, the topic concerning the ownership and operation of the cable network, the legal base on which offshore wind licenses are granted (the Petroleum Act or the Offshore Energy Act), and the role of maritime spatial planning in dealing with space pressure and other users.132

127

Equinor, Hywind Tampen, https://www.equinor.com/en/what-we-do/hywind-tampen.html. EFTA Surveillance Authority, Decision No 017/20/COL, 11 March 2020, Non-confidential version (the Decision), Decision, para. 26. 129 Equinor, Enova supporting pioneer project (22 August 2019), https://www.equinor.com/en/ news/enova-supporting-pioneer-project.html. 130 Oljedirektoratet, 2018/606-30 - Hywind Tampen - Brev til Equinor - Tilbakemelding - Søknad om endret plan for utbygging og drift for Gullfaks; 2018/606-31 - Hywind Tampen - Brev til Equinor - Tilbakemelding - Søknad om endret plan for utbygging og drift for Snorre. 131 Herrera Anchustegui (2020). 132 Arif and Herrera Anchustegui (2022). 128

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Despite these regulatory risks and ongoing political debate, electrification of the oil and gas industry has been on its way in Norway since 1996.133 So far but likely to change, less discussed is its potential, not only locally but globally. More than 825 oil and gas offshore fields are located in the North Sea, the Gulf of Mexico, the Persian Gulf, Far East Asia, and Southeast Asia alone.134 These fields may be electrified to make them more sustainable, drastically reducing the pollution caused by the extraction of petroleum. From such a perspective, electrification may lead to the continuing promotion of energy transition, without this necessarily implying an end to petroleum extraction. This will be opposed by some stakeholders as it means that oil and gas will continue to be used in the future. However, it ought to be kept in perspective that hydrocarbons are still the world’s primary energy source, and they will continue to be needed in the decades to come. Also, that reaching carbon neutrality does not imply a ban on the use of hydrocarbons.

5.3

Carbon Capture, Transportation and Storage

With the Norwegian Government’s view to maintain petroleum operations on the NCS, another way of curbing the adverse effects of hydrocarbon exploitation is to capture CO2.135 Carbon capture transportation and storage comes with ancillary benefits beyond change mitigation.136 These may include higher profits for hydrocarbons’ producers as the cost of extraction will be reduced by not being eligible for a carbon tax.137 Moreover, CCTS has the potential to provide an economic benefit that is associated with carbon utilization. Recent estimates point towards the value of captured CO2 due to its multiple uses in chemicals, building materials, fuels and production of additives based on carbon structures (e.g., graphene) or enhanced oil recovery (EOR).138 Carbon capture and electrification have gone hand in hand in Norway, with the first CCTS operations dating back to 1996 when the Sleipner gas field partnership (with Equinor as an operator) started to inject CO2 captured from a gas stream into a

133 TU Energi, NVE-sjefen: “Å elektrifisere sokkelen kommer med en pris for samfunnet” (17 February 2021); Dagens Næringsliv, En oljeplattform på strøm er fortsatt en oljeplattform (16 March 2021); E24, Frp vil si nei til mer elektrifisering av oljefelt: – Dette vil koste skjorta (10 March 2021). 134 Statista, Number of offshore rigs worldwide as of January 2018 by region, https://www.statista. com/statistics/279100/number-of-offshore-rigs-worldwide-by-region/. 135 See: Budinis et al. (2018); International Energy Agency, Energy Technology Perspectives 2020 Special Report on Carbon Capture Utilisation and Storage (2020). 136 See e.g., Ayres and Walter (1991), pp. 237–270; Burtraw et al. (2003), pp. 650–673. 137 For more on this: Torvanger (2020). 138 Bui et al. (2018).

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geological storage. By capturing carbon, the companies were left with purified methane and no obligation to pay the carbon tax introduced in 1991.139 Both Sleipner and the subsequent Snøhvit project received the Norwegian authorities’ approval before the specific rules on CCTS were introduced. The current regulatory framework governing CCTS operations in Norway builds on the Directive on the geological storage of CO2, incorporated into the EEA Agreement in 2012.140 The implementation took into account the previous Norwegian experience by incorporating some rules as amendments to the existing acts, the Petroleum Regulation,141 and the Pollution Regulation.142 Other rules were implemented in the new CO2 Storage and Transportation Regulation.143 This has created two areas of CCTS regulation in Norway, one related to petroleum activities (under the Petroleum and Pollution Regulations), and another applicable to all remaining CCTS projects (where the CO2 Storage and Transportation and the Pollution Regulations are applicable). This split is traced back to §30c of Petroleum Regulation. Rules introduced in this act govern CCTS in petroleum activities, which means that CO2 operations would be a part of oil and gas production. Hence, a petroleum producer that wishes to obtain consent for injection and storage of CO2 under the Petroleum Regulation must fulfill two cumulative requirements: to be a production license holder according to §3-3 of the Petroleum Act,144 and to commence activities in line with the development and operation plan (pursuant to §4-2 of the Petroleum Act). Splitting the CCTS regulation into two areas is advantageous for the oil and gas companies. Under this regime, they do not need to apply for new survey, exploration or exploitation licenses as non-petroleum companies would have to;145 instead, they can pursue carbon-related activities by meeting the administrative requirements and obtaining the permit and consent,146 thus gaining an advantage compared to non-oil and gas entities interested in CCTS. Are the somewhat unified procedure and the possible ineligibility for emission tax in Norway sufficient to incentivize oil and gas producers to deploy CCTS? In the short term, unless the technology costs significantly decrease or carbon markets continue to develop, the existing incentives might not result in a push to further the transition. Some countries may decide to take the step forward and grant subsidies. 139

Chadwick and Eiken (2013), p. 228; Lov om avgift på utslipp av CO2 i petroleumsvirksomhet på kontinentalsokkelen. 140 Directive 2009/31/EC on the geological storage of carbon dioxide (OJ [2009] L 140/114). 141 Regulation to Act relating to petroleum activities of 27 June 1997 (Petroleum Regulation). 142 Forskrift om begrensning av forurensning 01.06.2004, nr 931 (Pollution Regulation). 143 Regulation relating to exploitation of subsea reservoirs on the continental shelf for storage of CO2 and relating to transportation of CO2 on the continental shelf of 05 December 2014, nr 1517 (CO2 Storage and Transportation Regulation). 144 Petroleum Act. 145 Otherwise, application for those licences is mandatory, see §2-1, §3-1, §4-1 of the CO2 Storage and Transportation Regulation. 146 See §30e of the Petroleum Regulation, and §35-4 of the Pollution Regulation.

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For instance, the Norwegian Government has given €2.1 billion in approved state aid to the Longship project, the largest aid ever surpassing that of Hywind Tampen. The project aims to capture the carbon produced by a cement factory and a waste-toenergy plant and store it under the seabed.147 Perhaps in the future state aid will be granted to oil and gas projects. Another stimulus that may be given is related to the use of CO2 in EOR.148 In this context, CCTS operations may render oil and gas extraction more sustainable by minimizing atmospheric pollution, improving field recovery efficiency and lowering energy consumption. Finally, it is worth noting that the development of CCTS activities on the NCS in the oil and gas sector seem not to be prioritized (or mentioned) in Norway’s recent CCTS strategy. Although the government policy on carbon capture and storage outlined in the White Paper ‘Longship’ turns to other parts of the economy than oil and gas, companies of that sector are not left behind.149 Equinor, Shell and Total established the Northern Lights joint venture 150 which will be responsible for the transportation and storage of CO2 captured at industrial sites. Even though the Longship CCTS project is pretty small in comparison to others in Europe, the joint venture’s operations are expected to result in experience and knowledge that can be applied to decarbonize petroleum activities in the future.151

6 Conclusions Scandinavian countries have a long history dealing with the consequences of climate change and energy transition. Even before the energy transition was up for debate, renewable energy was the main source of electricity in the region. Currently, Denmark, Norway and Sweden are among the frontrunners regarding energy decarbonization in Europe. Historically, natural resource availability and political ambitions have resulted in a substantial share of RES Scandinavia energy mix. Leading to extensive electrification of the industrial and household consumers of energy. Electrification continues on its way in Scandinavia as part of the ambitious climate goals expressed in international and national obligations aiming to reach carbon neutrality—or near it—by 2050, or to even be carbon negative as envisaged by Sweden. Furthermore, these climate targets are backed up by carbon tax policies at the regional but also national level. However, a close review of the policies and 147

EFTA Surveillance Authority, Decision No093/20/COL (OJ [2020] C 374/4). The Norwegian Petroleum Directorate anticipates that EOR will serve mature fields, Resource Report – Fields and Discoveries (2017). 149 Longship – Carbon capture and storage — Meld. St. 33 (2019–2020) Report to the Storting (white paper). 150 Northern Lights, Accelerating Decarbonisation: https://northernlightsccs.com. 151 See United Nations Economic Commission for Europe, Technology Brief, Carbon Capture, Use and Storage (2021), https://unece.org/sites/default/files/2021-03/CCUS%20brochure_EN_final. pdf, p. 9. 148

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electrification plans reveals that electricity consumption may not grow as rapidly as desired or expected, particularly in the transport and industrial sectors. Despite the relative success of the energy transition in these countries, Scandinavia is not free from hydrocarbon dependence. Like the rest of the world, oil and gas are still the first energy source in the region. Additionally, Denmark and Norway are oil and gas producers. Our contribution has focused on Norway, where the production and export of hydrocarbons continues and keeps being expanded. The country’s economy depends on oil and gas for its success, and for decades the policy has been to maximize the industry’s revenue to finance the state welfare system. Consequently, the Norwegian vested interests in the oil and gas sector are well reflected in various governmental strategies and policies.152 For example, the 2019 “Blue Opportunities” policy note explicitly refers to a strategy, also supported by the Norwegian petroleum legal framework, of continuation and even maximization of oil and gas extraction in the NCS.153 However, this large, modern and very profitable industry gives rise to climate change challenges for the region, and Norway in particular. The greenhouse gas emissions associated with the extraction of oil and gas are the main source of CO2 in the country, without even factoring in its consumption. State revenue and decarbonization objectives are at opposite extremes meeting at the core of energy and climate politics. Climate change obligations and economic interests challenge both the Norwegian and Danish states and petroleum companies to find ways to achieve a transition or ‘greenification’ of the oil and gas industry, if activity in the sector is to be maintained. This shift is currently under debate in Norway. Our chapter shows the efforts made in Norway the Norwegian state and companies operating in its territory to develop new technologies and technical solutions that promote a more sustainable oil and gas industry with a reduced carbon footprint. This is primarily done in two ways: through the electrification of oil and gas rigs, either from renewable electricity from land or through offshore wind farms, and CCTS projects. While these efforts are not new and can be traced back to the mid-90s, there is an increasing interest and need to reduce carbon emissions in the sector. Rumor has it that this is the beginning, with larger projects and ambitions to come. The experiences in Norway, and to some extent in Denmark, show how the transformation of the petroleum sector may combine the continuation of hydrocarbon extraction with the development of RES technologies and methods of capturing and storing CO2. In this way, the greenification of oil and gas may lead to new technological developments to deal with the climatic challenges of the hydrocarbons industry and beyond. However, electrification and CCTS solutions to make petroleum activity more sustainable in Scandinavia are the subjects of heated debate. In Denmark, the discussion has led principally to a promise by the Danish state’s not to conduct

152

E. Moe, Renewable Energy Transformation or Fossil Fuel Backlash (2015). Norwegian Government, Blue Opportunities: The Norwegian Government’s updated Ocean Strategy (2019).

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any more licensing rounds for oil and gas activity and to stop any hydrocarbon activity after 2050. In Norway, the debate is ongoing at the time of the writing in early 2021. Greenification opponents raise several issues. For some, this is a way of extending the use of hydrocarbons instead of sending a clear global signal demanding it to be stopped. For others, it either prolongs Norway’s petroleum dependence or consumes public funds that could be better used elsewhere. While Scandinavian countries seem to have seen off the Hydrocarbon Man with the widespread use of renewable energy, he still casts a long shadow in the region, especially over Norway. We have shown that, despite this, Scandinavian efforts are underway towards making the oil and gas sector more sustainable and greener, making the region an example of oil and gas greenification. This transformation of the oil and gas industry still has a long way to go, if it to start or continue around the globe. Legal, environmental, and political hurdles may hinder this change; however, the urgent need for it may also overcome them.

References Arif AA, Herrera Anchustegui I (2022) Regulatory and policy frameworks for offshore wind projects: spatial and temporal considerations in light of fisheries sustainability amid climate change. OGEL. https://www.ogel.org/journal-author-articles.asp?key=3703 Al-Kasim F (2013) The main attributes of the Norwegian approach. In Appiah-Adu K (ed) Governance of the petroleum sector in an emerging developing economy, p 263 Ayres RU, Walter J (1991) The greenhouse effect: damages, costs and abatement. Environ Resour Econ 1:237–270 Bjørnebye H, Banet C (2019) Licensing Regime: Norway. In: Pereira E, Bjørnebye H (eds) Regulating Offshore Petroleum Resources: the British and Norwegian models. Elgar, p 99 Budinis S et al (2018) An assessment of CCS costs, barriers and potential. Energy Strat Rev 22 Bui M et al (2018) Carbon capture and storage (CCS): the way forward. Energy Environ Sci 11 Burtraw D et al (2003) Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector. J Environ Econ Manage 45(3): 650–673 Chadwick RA, Eiken O (2013) Offshore CO2 storage: ‘Sleipner natural gas field beneath the North Sea’. In: Gluyas J, Mathias S (eds) Geological storage of carbon dioxide (CO2), p 228 Cheng X, Korpås M, Farahmand H (2017) The impact of electrification on power system in Northern Europe. In: 2017 14th International Conference on the European Energy Market (EEM), pp 1–7 Eikeland PO, Sæverud IA (2007) Market diffusion of new renewable energy in Europe: explaining front-runner and laggard positions. Energy Environ 18(1):31–32 Gormley TP, Kristensen M (2019) Hydrocarbon policy and legislation: Norway. In: Pereira E, Bjørnebye H (eds) Regulating offshore petroleum resources: the British and Norwegian models. Elgar Herrera Anchustegui I (2020) Is Hywind Tampen’s state aid approval a kickstart for the Norwegian offshore wind industry? European State Aid Law Q 19(2) Herrera Anchustegui I (2021) Distributive justice, community benefits and renewable energy: the case of offshore wind projects. In: Fleming R, Huhta K, Reins L (eds) Sustainable energy democracy and the law. Brill Publishers Hunter T (2010) Legal regulatory framework for the sustainable extraction of Australian offshore petroleum resources, pp 30–33

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Hunter T (2014) The role of regulatory frameworks and state regulation in optimising the extraction of petroleum resources: a study of Australia and Norway. Extract Ind Soc 1(1):48–58 Hunter T, Herrera Anchustegui I (2020) Introduction to the Routledge handbook of energy law. In: Hunter T Soliman, Herrera Anchustegui I, Crossley P, Álvarez G (eds) Routledge Handbook of energy law, p 6 Jarlsby E (2019) Background: Norway. In: Pereira E, Bjørnebye H (eds) Regulating offshore petroleum resources: the British and Norwegian models. Elgar Marvik JI, Øyslebø EV, Korpås M (2013) Electrification of offshore petroleum installations with offshore wind integration. Renew Energy 50:558 McGlade Ch, Sondak G, Han M (2018) Whatever happened to enhanced oil recovery? International Energy Agency Meyer NL (1995) Danish wind power development. Energy Sustain Dev 2(1):24–25 Muggeridge A, Cockin A, Webb K, Frampton H, Collins I, Moulds T, Salino P (2013) Recovery rates, enhanced oil recovery and technological limits. Philosophical transactions. Series A Math Phys Eng Sci 372(2006) Nordtveit E (2015) Regulation of the Norwegian upstream petroleum sector. In Hunter T (ed) Regulation of the Upstream Petroleum Sector, p 136 Pereira E, Bjørnebye H (eds) (2019) Regulating offshore petroleum resources: The British and Norwegian models Sovacool BK (2017) Contestation, contingency, and justice in the Nordic low-carbon energy transition. Energy Policy 102:569–582 Torvanger A (2020) Ancillary benefits of carbon capture and storage. In: Buchholz W et al (eds) Ancillary benefits of climate policy

Ignacio Herrera Anchustegui is an Associate Professor at the Faculty of Law of the University of Bergen where he leads the Research group for Natural Resource Law, Environmental Law and Development Law. Member of the Bergen Offshore Wind Centre (BOW) and the Bergen Center for Competition Law and Economics (BECCLE). His research focuses on the regulation of energy markets, at the intersection between energy, competition and public procurement law, areas in which he has published extensively, with more than 40 peer-reviewed articles and book contributions. Currently, he conducts research linked to offshore energy regulation, particularly offshore wind. His PhD ‘Buyer Power in EU Competition Law’ (Concurrences 2017) received the Concurrences 2017 Award for best PhD of the year in Competition Law and Economics. He also received the Meltzer Award for Young Researchers in 2017. Aleksander Glapiak is a doctoral researcher at the University of Eastern Finland Law School. His research focuses on the system operation and grid connection network codes and the European energy policy. Former member of the Climate Change Task Force at the University of Wroclaw, worked on strategic actions to reduce the university’s carbon footprint.

The European Green Deal and Regionalisation: Italian and Polish Case Studies Katarzyna Gromek-Broc

Abstract The European Regions have been rightly considered as the key players in the realisation of the Green Deal. The Commission’s Green Deal sets up an ambitious agenda aiming at cleaner energy, cleaner air, higher protection of biodiversity throughout the circular economy for 2021–2027. Its holistic approach based on local economy is coupled with employment strategy, reskilling, digitalisation and sustainable investment. Accordingly, the Committee of Regions in 2021, made Green Deal Going Local its priority objective. Intelligent Cities Challenge and Just Transition Platform are initiatives designed to support the delivery of the Green Deal at the local level. There is also a strong emphasis on the local, rural areas prioritising initiatives such as smart villages, ecovillages, investing in local food systems, water quality, protection of biodiversity, renewable energy. This contribution addresses the difficulties and efforts to meet the green economy targets at the local level. It considers some examples from Poland and Italy looking at the local strategies and the key issues such as access to funding, digitalisation or innovative solutions allowing access to data combined with the new employment objectives such a reskilling. The contribution aims to underline the difficulties in this area but also to provide some examples of good practice. Finally, it offers some reflections on the feasibility of the targets.

1 Introduction The EU Commission’s Green Deal sets up a very ambitious Agenda to achieve climate neutrality by 2050. Among a long list of objectives, the energy transition appears to be the top priority. The EU mid-term commitment is to reduce greenhouse K. Gromek-Broc (✉) Department of Political and Social Sciences, University of Pavia, Pavia, Italy Autorità di Regolazione per Energia Reti e Ambiente (ARERA)/Regulatory Authority for Energy, Networks and Environment, Milan, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_7

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gas emissions by at least 55% through the ‘Fit for 55’ legislative package.1 Launched in 2019, the European Green Deal is a set of measures, a road map or guidelines allowing the EU to become the first continent to achieve carbon neutrality by 2050.2 The Commission’s Green Deal adopts truly holistic approach designed to tackle a variety of issues in line with the Treaty provisions on sustainable development and high level environmental protection. It covers climate action including climate law,3 clean energy, sustainable industry, buildings and renovations, sustainable mobility, eliminating pollution, ‘Farm to Fork strategy’, preserving biodiversity, research and development, and preventing unfair competition from carbon leakage.4 Clearly, the programme is a ‘colossal enterprise’, incredibly complex and composed of many pieces that in the end should fit to one another like a jigsaw puzzle. In addition, the energy crisis resulting from the war between Russia and Ukraine brought to the fore a question of energy independence, adding extra hurdles to the implementation of the EGD. A scarcity of resources leading to excessively high prices will impact on the countries engagement with the EGD objectives if the situation does not improve. Nonetheless, the EGD is equipped with Just Transition Mechanism totalling of €150 billion over the period 2021–2027, to support countries and regions who struggle with the social and economic effects of the transition according to the idea of “a fair transition to a climate-neutral economy, leaving no one behind”.5 ‘A just transition’ commitment considers social dimension of the transition and ensures equal share of benefits while supporting those who will lose economically: countries, regions, industries, and workers. Undoubtedly, the transition will affect labour markets, jobs, will bring technological innovation and the shift to services.6 The transition should bring better working conditions—the creation of decent work, provide quality jobs and reduce inequalities in line with the UN Sustainable Development Goals. These objectives fall in the heart the European Pillar of Social Rights, launched in 2017 to redefine Social Policy in the EU, bringing particular emphasis on social aspect of the EGD. 1 European Commission, ‘“Fit for 55” Legislative Package’, 2021, https://www.easa.europa.eu/ newsroom-and-events/news/european-commission-publishes-fit-55-legislative-package. 2 European Commission, ‘The European Green Deal, COM/2019/640’ (2019), https://eur-lex. europa.eu/legal-content/EN/TXT/?qid=1576150542719&uri=COM%3A2019%3A640%3AFIN. 3 Proposal for a Regulation of the European Parliament and of the Council establishing the framework for achieving climate neutrality and amending Regulation (EU) 2018/1999 (European Climate Law), COM/2020/80 final at https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1 588581905912&uri=CELEX:52020PC0080; see also Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’), OJ L 243, 9.7.2021. 4 European Commission, The European Green Deal, COM/2019/640. 5 European Commission, ‘The Just Transition Mechanism: Making Sure No One Is Left Behind’, 2019, https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/finance-andgreen-deal/just-transition-mechanism_en. 6 European Bank of Reconstruction and Development, ‘What Is a Just Transition?’, 2022, https:// www.ebrd.com/what-we-do/just-transition.

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Yet, the ambitious goals of the EGD need a strategy for their implementation. The EU Institutions favoured a bottom-up approach seeing in peripheries potential for the efficient realisation of the EGD objectives. The EU Parliament in its 2020 Resolution stressed the importance of local and regional authorities (RLAs) in the implementation of the European Green Deal.7 In fact, the involvement of local and regional authorities seems crucial for the European Climate Pact8—inherent to Climate Action, encouraging people and local communities to gather knowledge, share experience and develop solutions to climate change. Hence, the initiatives targeting the regions, cities and villages such as Covenant of Mayors, Majors Alliance for the European Green Deal or the Committee of Regions’ Initiative—Green Deal Going Local,9 mobilised important efforts to embark on the path towards more eco-sustainable Europe.10 The EGD is a political commitment with economic vocation having however important legal implications. The implementation of Climate Law will certainly bring to the fore many legal questions that the Court will adjudicate. This contribution first discusses potential for the EGD to become a vehicle to relaunch the European Integration process towards modern, eco—friendly, energy sufficient and digital EU. It focuses on how the regions, cities and rural areas could contribute to the realisation of the EGD and what should be done to support them further. It briefly considers the EU funding as a starting point and the Treaty legal framework. Further, it attempts to answer the question why the bottom up approach could produce tangible results, accelerate the transition and reduce the energy poverty. It argues that digitalisation and re-skilling are the prerequisites for future progress. While considering smart cities and rural areas it looks at the ways they produce clean energy, reduce energy consumption or engage with digitalisation. Italian and Polish examples provide evidence of good practices but also display the numerous obstacles hardly reconcilable with the EGD ambitious targets. Finally, it looks at some strategies on how to empower the regions and strengthen their potential to engage with the transition.

1.1

Political Commitment and Financial Support

However, taking the Green Deal at the local level is easier said than done. There is a considerable disparity between the European regions regarding their development,

7 Ibid., European Bank of Reconstruction and Development; European Parliament, ‘Resolution of 15 January 2020 on the European Green Deal (2019/2956(RSP))’ (2020). 8 ‘European Climate Pact’, 2021, https://europa.eu/climate-pact/index_en. 9 Committee of Regions, ‘Green Deal Going Local. Delivering Climate-Neutrality, Leaving No One Behind’, 2020, https://cor.europa.eu/it/engage/Pages/green-deal.aspx. 10 European Parliament, ‘The European Green Deal and Cohesion Policy’, 2021, https://www. europarl.europa.eu/RegData/etudes/BRIE/2021/698058/EPRS_BRI(2021)698058_EN.pdf.

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energy resources and their exploitation, industrialisation and the reliance on the traditional energy production, where decarbonisation process is more difficult. In addition, there is an uneven degree of familiarity with technology and innovative solutions. There is also an issue of human capital, local communities, local actors and their willingness to engage with the EGD objectives, in particular when the green alternatives disadvantage them. The EGD multiple objectives necessitate substantial funding, administrative resources, appropriate legal framework, organisation and coordination. The EU financial support of the EGD is impressive. The EU through the EU Green Deal Investment Plan mobilises €1 trillion to make the EGD happen. Out of which €100 billion from the EU budget and InvestEU programme is devoted to the regions. A new Just Transition Fund (2021–2027), is designed to support the regions particularly affected by the transition, those relying on fossil fuels and high-emissions industries.11 However, the problems might arise in relation to appropriate distribution, management, coordination and synergy between the regions.12 For example, EU funding might favour one region, widening the gap in their development and prevent them from sharing good practices if they compete for the same funding.

1.2

The EGD in the Legal Context: Exploring the Relationship Between the EGD and the Treaty Provisions

Furthermore, the EGD needs also an appropriate legal framework. The Commission proposes remarkable legislative steps to review, update and adapt legislation in order to meet the interim deadline of 2030 outlined in the “Fit for 55 package”,13 to ultimately achieve climate neutrality in 2050. Further step is to ensure cohesion between different pieces of secondary legislation in light of the EGD holistic dimension. The European Climate Law—framework legislation promises efficient implementation of the EGD targets.14 The proposed legal framework puts the EU at the top of the World’s League Table in the fight against climate change, the first that makes net-zero greenhouse gas (GHG) emissions by 2050 a binding obligation.15 The translation of the primarily EGD objectives into law is an important step, raising however questions regarding enforcement mechanisms, sanctions, rights, and

11

Widuto (2021). Miccinilli (2020), pp. 15–17. 13 EU Commission, Fit for 55, The EU’s plan for a green transition, at https://www.consilium. europa.eu/en/policies/green-deal/fit-for-55-the-eu-plan-for-a-green-transition/. 14 Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’), OJ L 243, 9.7.2021. 15 Ibid. 12

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judicial review. Yet, regions play a crucial role in ensuring compliance with EU legislation. The Committee of Regions acknowledged that “more than 70% of climate change mitigation and up to 90% of climate change adaptation measures are undertaken by local and regional authorities [. . .] implementing 70% of all EU legislation.16 This is exactly why the regions can make the EGD Agenda happen. One of the important current preoccupations is to find a solution to current energy crisis and to reduce the EU’s energy dependence on Russia. The latest Commission’s proposal for a Directive on renewable sources takes on board the current energy situation resulting in high energy prices and the eminent shortage in energy supply.17 The proposal is seeking to accelerate energy efficiency through “the deployment of solar installations on buildings”.18 It increases the Union’s renewable energy target to 45%.19 If adopted, it would provide a binding obligation for Member States “to identify the land and sea areas necessary for the installation of plants for the production of energy from renewable sources” (15b), and to adopt a plan designating ‘renewables go-to areas’ (15c), the text also facilitates “permit-granting process in renewables go-to areas”.20 It is worth noting, that the Committee of Regions in its Draft Opinion on the Commission’s amendments to the energy efficiency Directive emphasised the important need for protecting vulnerable households, business, mobility users affected by energy poverty aligning in this respect with a just transition strategy and its inspirational dictum: “Leaving no one behind.”21 The Committee of Regions also emphasised that in order to lower administrative burden for local and regional authorities, Member States should equip them with digital platforms to collect consumption data.22 Recital 34 stresses the need to put in place the integrated approaches to energy saving in sustainable mobility in the cities.23 The EGD environmental vocation sits within the ambit of Article 191 TFEU on environmental policy, its objectives and cooperation with the third countries.

European Committee of the Regions, ‘Opinion of the European Committee of the Regions — The Impact of Climate Change on Regions: An Assessment of the European Green Deal COR 2020/ 03120’ (2020), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020IR3120. 17 Proposal for a Directive of The European Parliament and The Council amending Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources, Directive 2010/ 31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency, Brussels, 18.5.2022, COM(2022) 222 final, 2022/0160(COD) at https://eur-lex.europa.eu/legalcontent/EN/TXT/HTML/?uri=CELEX:52022PC0222&from=EN. 18 Ibid. 19 Ibid. 20 Ibid.. Article 15b. 21 European Committee of the Regions, ‘Draft Opinion – Amending the Energy Efficiency Directive to Meet the New 2030 Climate Targets, COR-2021-04548-00-01-PAC-TRA (EN)3/42’, 2021., Recital 16. 22 Ibid., Recital 28. 23 Ibid. 16

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Observance of the environmental principles enshrined in Article 191.2 is particularly important in the implementation of secondary legislation. Environmental principles constitute a common element, high value, high resonance, that have a cohesive function, improving synergy of the regions. Similarly, Article 191 TFEU should be interpreted in light of Article 3 TEU and Article 37 of the Charter of Fundamental Rights, making environment an objective of the EU. Energy is introduced in Article 194 TFEU. Article 194(2) TFEU constitutes the legal basis for legislation covering new and renewable forms of energy and the promotion of energy efficiency goals according to the Union’s Energy Policy inserted in Article 194(1)(c) TFEU. The Treaty framework gradually developed throughout different revisions of the Treaty. Environmental protection evolved from sectoral, technical policy24 to take a leading role in the EU integration process determining other EU policies. Hence, the content of environmental protection under the EU law has never been strictly defined. It has always been an amalgamation of matters, expanding over time and often belonging to other policies in the Treaty. The lack of a strict definition could be highly beneficial. In this way, the concept of a high level of environmental protection can always accommodate new issues and needs. Today, High level of environmental protection became an EU objective enshrined in Article 3.2 TEU. According to AG Sharpston “following the entry into force of the Treaty of Lisbon (. . .) the principle of “a high level of environmental protection and improvement of the quality of the environment set out in Article 3(3) TEU and Article 37 of the Charter has become a guiding objective of EU law”.25 Article 37 of the Charter reads “A high level of environmental protection and the improvement of the quality of the environment must be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development”. The latter connects all essential elements of the EGD such as quality of environment, holistic vision and the principle of sustainable development. The principle of sustainable development is also inserted in the Preamble to the current TEU Treaty: [the EU is] “determined to promote economic and social progress for their peoples, taking into account the principle of sustainable development and within the context of the accomplishment of the internal market and of reinforced cohesion and environmental protection, and to implement policies ensuring that advances in economic integration are accompanied by parallel progress in other fields.”26 In fact, the concept of sustainable development expanded and permeated into all EU policies, acquiring a truly holistic dimension. Introduced first by the Maastricht Treaty in 1992 was subsequently amended by the Amsterdam Treaty to cover economic, social and environmental

24

Sikora (2021), pp. 681–97. AG Sharpston, ‘Opinion of AG Sharpston in Case C-557/15 Commission v Malta, EU:C:2017: 613’, 2017., point 44 see Sikora A [24]. 26 European Union, ‘Consolidated Version of the Treaty on European Union’ (2012), https://eurlex.europa.eu/resource.html?uri=cellar:2bf140bf-a3f8-4ab2-b506-fd71826e6da6.0023.02/ DOC_1&format=PDF. 25

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aspects.27 Sustainable development, not clearly defined in the Treaty, attracted many interpretations. It is helpful to refer to the 2030 UN Agenda, defining sustainability as a holistic concept covering “environmental policies but also production and consumption, reduction of inequalities, descent work, elimination of poverty and hunger quality of education for all.”28 Furthermore, a reference to sustainability triggers other EU policies raising budgetary, economic and social aspects. Article 11 TFEU embedding the principle of environmental integration, strengthens the Treaty legal basis, reaffirming its holistic dimension,29 according to which ‘environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development.’30 It is particularly relevant to a just transition in the regions and their overall transformation towards sustainability. Alas, the EGD does not make any reference to this Article.31 In addition, we should give more consideration to Article 174 TFEU, promoting harmonious development leading to economic, social, and territorial cohesion, aiming at reducing disparities between the regions. Finally, a greater reliance on the principle of solidarity might be a solution to an uneven development in the regions. Undeniably, the EGD has many connections with the Treaty but the strongest link lies with two guiding principles: high level of environmental protection and sustainable development that potentially could be a driving force for the EU integration. In contrast, Sikora argues that the EGD fails to “explore the constitutional dimension of environmental protection in the EU legal order [. . .] it remains a program, a roadmap of highly technical announcements of new legislative and political initiatives”.32 Stronger reliance on the Treaty would elevate its status.33

1.3

Regions, Communities, Cities and Villages: Top—Players in the Realisation of the EGD

Ambitious goals and an impressive financial support still need efficient implementation strategies to make the EGD a success. The EU Commission and Committee of Regions launched a number of initiatives to focus on local and regional implementation of the EGD.34 The EU regions in 27 countries are “very diverse and 27

Jans Vedder (2012). Griggs et al. (2014), art 49; in Blasi et al. (2022), p. 103793. 29 Jendrośka et al. (2021). 30 Van Hees (2014), p. 60, https://doi.org/10.18352/ulr.269. 31 Sikora A, [24]. 32 Ibid. 33 Ibid. 34 European Committee of the Regions, ‘Green Deal Going Local: The European Climate Pact’, 2022, https://cor.europa.eu/en/engage/Pages/European-Climate-Pact.aspx. 28

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fragmented,”35 they face different environmental realities, are of different sizes and have their own problems, territory specific, often some already tested solutions, local governance and resources. The number of initiatives put forward in the recent years recognises the importance of territory-specific strategies. Scholars also acknowledge that the EU needs to focus on a territorial dimension of the EGD for its successful implementation.36 Schroder believes that a just transition should start in the regions through the empowerment of the local communities to create shared vision.37 Thus, sustainable development needs to be facilitated locally.38 Local good practices and strategies should lead to a creation of wider networks motivating other regions to engage with the transition. This idealistic vision presents however many difficulties in its realisation. For example, the regions competing for funding might not always want to share, some develop faster than other, or have uneven resources, human capital and environmental conditions, making the models not really adaptable to them. The 2021 Committee of Regions’ initiative: Green Deal Going Local39 puts in the centre three aspects of the ecological transition plan.40 They reflect potential problems in local implementation of the EGD. First concerns coherence and consistency between the policies outlined in the EGD. Second, relates to the European Committee of the Regions’ governance underlining the predominant place of cities and regions in realisation of the EGD. Third, focusses on guiding and monitoring the local and regional authorities in implementation of the EGD objectives in order to exchange information and good practice that could be replicated in other European regions.41 Green Deal Going Local is “a political engagement” aiming to accelerate the green transition at the local and regional level. It is a strategy to foster transformation in multiple sectors such as climate change, a clean energy transition, transport, protection of biodiversity, agriculture and many others.42 The responses should adapt to the local needs and be tailored to a specific problem. Rightly framed by Reddy: “Climate change is a global problem that needs local solutions”.43 In fact, Schröder advocates the dynamics of peripheries as promising accelerator for a just

35

Ibid. Schröder (2020). 37 Ibid. 38 Ibid. 39 Committee of Regions, ‘Green Deal Going Local. Delivering Climate-Neutrality, Leaving No One Behind’. 40 Messina (2021), pp. 613–22. 41 Ibid. 42 European Committee of the Regions, ‘Green Deal Going Local: The European Climate Pact’. https://cor.europa.eu/en/engage/Pages/European-Climate-Pact.aspx. 43 Reddy (2015). 36

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transition.44 The strategy is to empower the regions to build resilience to limit the EU’s dependency on fossil fuels as well as to strengthen the role of local and regional leaders. “Decentralised energy production, energy efficiency and saving plans on a local and regional level will ensure the achievement of the REPowerEU plan”.45 The latter,46 adopted as a response to energy shortage caused by the Russian invasion on Ukraine encourages regional and local authorities to improve energy efficiency and savings and to accelerate the production of renewable energy.47 Local and regional leaders, having administrative powers, are the key-players to foster the transition, by steering the eco-friendly projects, engaging the entire community and entrepreneurship in its eco development and innovation directed towards to the clean energy production. Furthermore, local and regional leaders are the best suited to identify the problems and the areas that need additional support and funding. EU Parliament stressed that ‘green transition’ should be turned into an economic and social opportunity for all regions of Europe’, while “paying particular attention to the most disadvantaged regions especially the carbon-intensive ones”.48 EU Parliament in its Resolution raised two important points necessary for the realisation of the EGD at the local level: first “translating EU-level targets into concrete local targets” and secondly “a multi-level dialogue among national, regional and local authorities on the planning and implementation of climate measures”.49

1.4

The Urban Areas and the EGD Targets

Cities and urban areas have been the centre of attention for some time now. Concentrated on “only 4% of the EU’s land area, are home to 75% of EU citizens [. . .] consume over 65% of the world’s energy and account for more than 70% of global CO2 emissions”.50 But, also “cities are the most dynamic design spaces for

Schröder, ‘Peripheries—Dynamics for the Green Deal’ [36]. European Committee of the Regions, ‘REPowerEU: Local and Regional Energy Saving Plans Are Crucial to Ensure an Affordable Green Transition and Stop the EU’s Dependency on Russian Fossil Fuels’, 2022, https://cor.europa.eu/en/news/Pages/ENVE-31-MAY.aspx. 46 REPowerEU: A plan to rapidly reduce dependence on Russian fossil fuels and fast forward the green transition. https://ec.europa.eu/commission/presscorner/detail/en/IP_22_3131. 47 European Committee of the Regions, ‘REPowerEU: Local and Regional Energy Saving Plans Are Crucial to Ensure an Affordable Green Transition and Stop the EU’s Dependency on Russian Fossil Fuels’. https://cor.europa.eu/el/news/Pages/ENVE-31-MAY.aspx. 48 European Parliament, ‘The European Green Deal and Cohesion Policy’. https://www.europarl. europa.eu/RegData/etudes/BRIE/2021/698058/EPRS_BRI(2021)698058_EN.pdf. 49 European Parliament; European Parliament, Resolution of 15 January 2020 on the European Green Deal (2019/2956(RSP)). 50 European Commission, ‘EU Mission: Climate-Neutral and Smart Cities’, n.d., https://ec.europa. eu/info/research-and-innovation/funding/funding-opportunities/funding-programmes-and-opencalls/horizon-europe/eu-missions-horizon-europe/climate-neutral-and-smart-cities_en. 44 45

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setting energy and technological transition policies”.51 Thus, many EU initiatives have concentrated on the cities. The Covenant of Mayors launched in 2008, gathered local governments to work together in order to meet the EU climate and energy targets. This was “the first of its kind bottom-up approach to energy and climate action”.52 In 2016 the Covenant of Mayors and the Compact of Mayors launched a global action to make the cities and the regions eco-sustainable, allowing for a greater collaboration between cities across the world.53 Most recently, EU Missions within the Horizon Europe research and innovation programme 2021–2027 offer some real opportunities for the cities that are willing to contribute to meet the EGD targets. The Cities mission stresses the importance of the involvement of all actors such as local authorities, citizens, businesses, investors as well as regional and national authorities in the city project. It aims at accelerating their green and digital transformation focusing on “cleaner air, safer transport and less congestion”.54 The Cities Mission is also to deliver 100 climate-neutral and smart cities by 2030.55 Yet, the cities, through urbanisation, planning, technologies and digitalisation will demonstrate the first positive effects of sustainable growth. The EGD success depends on technological innovations. Another Commission’s initiative—the Intelligent Cities Challenge aims at preserving local ecosystems, sustaining local economies, ensuring citizens’ wellbeing and participation. It fosters goals such as the digitalisation of public administration, resilience of local supply chain, digital transition in tourism and reskilling of the workforce.56 The idea of smart cities is not new and not proper to the EU. It developed alongside ICT technology since the 90s. The concept of ‘a smart city’ has been dominated by “an efficiency-based [. . .] urban development which mainly sees technology and Public Private Partnerships as the mean to optimise the management of urban processes”.57 The study reveals that without the cities and urban areas 65% of UN 2030 Agenda and its sustainable goals would not be achieved.58 “Smart cities” were relaunched by Palmisano to combat climate change and economic instability in 2008.59 Global Urbanisation, on one hand, brings some

51

Messina G [40]. EU Covenant of Mayors for Climate&Energy, ‘About’, 2022, https://www.eumayors.eu/about. 53 European Commission, ‘EU Covenant of Mayors and Compact of Mayors Launch Largest Global Coalition of Cities Committed to Fighting Climate Change’, 2016, https://ec.europa.eu/ commission/presscorner/detail/cs/IP_16_2247. 54 European Commission, ‘EU Mission: Climate-Neutral and Smart Cities’ [50]. 55 Ibid. 56 European Commission, ‘About Intelligent Cities Challenge’, 2022, https://www. intelligentcitieschallenge.eu/. 57 Blasi et al. (2022), p. 103793. 58 Cities Alliance, ‘Sustainable Development Goals and Habitat III: Opportunities for a Successful New Urban Agenda 2015’, 2015, https://www.citiesalliance.org/sites/default/files/Opportunities for the New Urban Agenda.pdf. 59 Palmisano SJ, (2008) ‘A Smarter Planet: The Next Leadership Agenda’, https://www.ibm.com/ ibm/cioleadershipexchange/us/en/pdfs/SJP_Smarter_Planet.pdf. 52

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unquestionable benefits such as better access to higher quality healthcare, general improvement of working and living conditions, education, but on the other, it also generates air pollution, greenhouse gas emissions, and waste.60 A smart city could be defined by common elements such as “enhanced transparency, civic engagement, efficient traffic and public transit maintenance, optimum usage of resources, greater security of the ecosystem, smart app monitoring, and enhanced medical, power, and educational facilities.”61 Auby refers to “the product of a triple transformation in the concrete functioning of cities; the transformation of infrastructures, the growing importance of data and digital technology and changes in governance”.62 The EU Commission’s definition of a smart city refers to “a place where traditional networks and services are enhanced by digital technologies, better use of resources reducing emissions, efficient urban transport, upgraded water supply, better management of waste, energy efficient lighting and heating buildings, [coupled with] responsive city administration and safer public spaces”.63 Hence, the prompt realisation of the EGD goals relies on digitalisation. Digitalisation is also in the heart of energy transition.64 It is a primarily tool to improve “energy and resource efficiency, facilitating circular economy, reduced emissions, pollution, biodiversity loss and environmental degradation, and improved resilience to climate change impacts”.65 Auby makes a point that digital technologies are potentiating the cities’ infrastructures, making them more efficient.66 He gives some examples such as “sensors placed on public lighting make it possible to modulate it according to passages, parking is increasingly regulated by information systems which indicate where free places can be found, garbage containers can be equipped with devices that monitor the contents, signal that it is time to empty them.”67 Digitalisation is also a response to the long lasting cities’ problems: traffic congestion, air pollution, insecurity.68 Consequently, the progress in achieving sustainable objectives through digital technologies is the most visible in the cities. Undoubtedly, digitalisation will help to collect and to compare data for example on energy consumption or energy saving, will allow fast exchange of information, will facilitate networking between the cities, detecting for example, shortage of energy. 60

Makani et al. (2022). Ibid., Makani et al. [60]. 62 Auby (2018). 63 European Commission, ‘Smart Cities’, 2022, https://ec.europa.eu/info/eu-regional-and-urbandevelopment/topics/cities-and-urban-development/city-initiatives/smart-cities_en. 64 European Council, ‘Digitalisation for the Benefit of the Environment: Council Approves Conclusions’, 2020, https://www.consilium.europa.eu/en/press/press-releases/2020/12/17/ digitalisation-for-the-benefit-of-the-environment-council-approves-conclusions/. 65 ‘A Green and Digital Transformation of the EU’, (2021), República Portuguesa, https://www. portugal.gov.pt/download-ficheiros/ficheiro.aspx?v=%3D%3DBQAAAB%2 BLCAAAAAAABAAzNDQxMwMAT7AwdwUAAAA%3D. 66 Auby JB, ‘Algorithmes et Smart Cities: Données Juridiques’ [62]. 67 Ibid. 68 Ibid. 61

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Digitalisation of the smart cities ineluctably triggers digitalisation of work introducing computerisation, robotisation, artificial intelligence, advanced automation, Uberisation, gig work, “that either digitally-enabled machines with artificial intelligence (AI)or[. . .]enhance the possibilities of processing, storage and communication of information [or] use digital networks to coordinate economic transactions.69 Digitalisation of work raises may legal issues and above all, there is a real danger of enhancing inequality by excluding many from the labour market.70 Therefore, many legal considerations related to employment protection are yet be clarified in light of European Social Pillar’s objectives.

1.5

Italian Smart Cities Going ‘Green’

Italy presents a mixed panorama in the ecological transformation of the cities. The major Italian Cities invested in the production of electricity from the renewable sources relying mostly on photovoltaic solar sources in municipal-owned plants.71 The progress is visible but the reliance on RES is still low. However, Italy reached 20.4% in renewable energy production in 2020, which means 3 points above the target prescribed by the Directive 2009/28/CE.72 Genoa is the only city producing energy from all three renewable source (solar photovoltaic, hydroelectric, wind).73 Nonetheless, some cities are underperforming; there are seven medium size cities that do not produce any renewable energy such as Como, Viterbo, Isernia, Trani, Lecce, Crotone and Trapani.74 Only eight cities produce hydroelectric power, among them Genoa, Bergamo, Mantua and Vicenza but also Rome and Naples. Only two Genova-Savona and Pisa rely on wind.75 Some cities on the north offer good

69

Fernández-Macías (2018), in Warhurst and Hunt (2019), JRC117404. JRC Technical Report, Technology, Labour, Education https://www.eurofound.europa.eu/ publications/report/2018/automation-digitisation-and-platforms-implications-for-work-andemployment. 70 Warhurst C and Hunt W, ‘The Digitalisation of Future Work and Employment’, JRC Working Papers Series on Labour, Education and Technology, 2019, https://joint-research-centre.ec.europa. eu/publications/digitalisation-future-work-and-employment-possible-impact-and-policyresponses_en. 71 Bolognese (2021). 72 Redazione INGENIO (2021) ‘Consumi Energetici in Italia: Quanti Sono Di Fonte Rinnovabile? Ecco i Dati GSE’, 26 December 2021, https://www.ingenio-web.it/33051-consumi-energetici-initalia-quanti-sono-di-fonte-rinnovabile-ecco-i-dati-gse#:~:text=Nel2020%2CinItalia%2Cle,2 puntil%27analoga percentuale. 73 Openpolis (2021). 74 Ibid. 75 Ibid.

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examples of technological innovation, infrastructure and smart mobility, focusing on the reduction of energy consumption. Milan is leading in technological strategies, totalling 36 projects targeting smart mobility, smart living and environment.76 Trento was a Smart City of 2020, according to criteria such as the city’s infrastructure divided into transport, energy and the environment (water, green and waste),77 followed by Turin and Bologna, Mantua and Milan.78 Smart cities’ strategies seem to benefit medium-sized cities, easier to coordinate; more operational and better organised.”79 Using slightly different criteria, Florence was the smartest city in Italy in 2021, followed by Milan, Bologna, Rome, Modena, Bergamo and Turin.80 The efforts to use the eco-strategies in the most antic infrastructures are quite remarkable. Despite the difficulty to reconcile the eco-solutions with the ancient architecture, these cities provide an example for the rest of Europe. In addition, the majority of regions on the north of Italy have regional regulations limiting pollution, prohibiting access to the cities or limiting circulation for the most polluting vehicles and controlling light pollution.81 Messina’s league table puts Bologna and Novara at the top using as a criterion the number of eco-sustainable initiatives and projects they are involved.82 According to his table, Bologna leads cumulating the multiple initiatives that cover a wide range of activities. As for example Cultural heritage as a driver for participatory and sustainable urban forestation agreement in Bologna;83 Battirame—ecologicalcycle-horticultural corridor; Emergency plans for urban mobility;84 Second Life: municipal reuse areas, Regional Pact for jobs and the climate.85 In addition, Novara offers a good example of political-administrative simplification aimed at unifying, in a single framework document86 the city environmental planning.87

76

Statista Research Department (2021). Bonucci (2020). 78 Liguori (2021). 79 ‘Smart City in Italy, What They Are and How They Work’, JOEducation Invention Hub, 2021, https://www.joeducation.eu/smart-city-in-italy-what-they-are-and-how-they-work/. 80 Laricchia (2022). 81 Zitelli et al. (2001), pp. 111–116. 82 Messina G, [40]. 83 Università di Bologna, ‘Research’, 2022, https://site.unibo.it/almagoals/en/dimensions/research; see in Messina G, ‘[40]. 84 European Committee of the Regions, ‘#EUGreenDeal’, 2022, https://cor.europa.eu/EN/engage/ Pages/greendeal-stories.aspx; see Messina G, [40]. 85 See Table in Messina G, [40]. 86 The City Council Resolution n.46 of 16/02/2021 of the City of Novara in [40]. 87 Comune di Novara, ‘Estratto Dal Verbale Delle Deliberazioni Della Giunta Comun’, 2021, http:// albopretorio.comune.novara.it/web/trasparenza/papca-ap?p_p_id=jcitygovalbopubblicazioni_ WAR_jcitygovalbiportlet&p_p_lifecycle=2&p_p_state=normal&p_p_mode=view&p_p_ resource_id=downloadAllegato&p_p_cacheability=cacheLevelPage&p_p_col_id=column-1&p_ p_col_count=1&_jcitygovalbopubblicazioni_WAR_jcitygovalbiportlet_downloadSigned= 77

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Italian cities also widely benefit from the EU funding and projects. The Commission’s initiative: the Cities Mission supporting 100 smart and climate-neutral cities by 2030, selected nine Italian cities.88 They will follow a number of identified objectives, urban planning and design for climate-neutral cities, sustainable urban mobility, and positive and clean energy that will be financed by the Horizon Europe fund.89 However, the cities such as Naples, Palermo, Bari are at the bottom of the league table.90 The initiatives, projects and funding deepen the gap between the most dynamic cities on the north and the cities on the south. There are many factors explaining the lack of progress in the southern Italian cities. There is no infrastructure and a general lack of willingness of the community to engage with the eco-friendly solutions. Public awareness towards eco-friendly solutions is low. Digitalisation is slow to develop due to the general lack of skills. In addition, people are not confident to use common services.91 The car-sharing service, for example, did not attract much interest.92 Italy is just an illustration, that the underdeveloped regions across Europe need further support. Without substantial efforts, the national and regional strategies, community an civil engagement, the city projects will enhance inequalities by creating wealthier regions in the nation.93 The smart cities ‘”technology and innovative planning will create inequalities as to whom it would be accessible to”.94 Finally, there are some structural obstacles: over bureaucratic public administration, lack of transparency, delays that do not facilitate building networks, reluctance to exchange information or good practices.

false&_jcitygovalbopubblicazioni_WAR_jcitygovalbiportlet_id=160040&_ jcitygovalbopubblicazioni_WAR_jcitygovalbiportlet_action=mostraDettaglio&_ jcitygovalbopubblicazioni_WAR_jcitygovalbiportlet_fromAction=recuperaDettaglio; Messina, ‘The Role of the Committee of the Regions (CoR) to Implement the Green Deal at the Local Level: An Overview of Italy’. 88 European Commission, ‘Commission Launches EU Missions to Tackle Major Challenges’, 2021, https://ec.europa.eu/commission/presscorner/detail/en/ip_21_4747. 89 PROAXXES, ‘Italian Cities Going Green Nine Italian Cities Have Been Invited to Participate in the EU Mission for 100 Climate-Neutral and Smart Cities by 2030, the so-Called Cities Mission’, 2021, https://proaxxes.com/cities-mission-climate-neutral-and-smart-cities-by-2030/. 90 ‘Smart City in Italy, What They Are and How They Work’; also Liguori G [78]. 91 Liguori (2021) [78]. 92 Ibid. 93 Ibid. 94 Ibid.

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Polish Cities Facing Transition

Poland is one of the most problematic country regarding the energy production. However, the energy sector is gradually moving in the right direction. In 2020, renewables represented only 10.75% of the total energy production, out of which 65% was from wind power.95 The reliance on photovoltaics increased drastically in 2020.96 Polish city, Ostrów Wielkopolski, focused on the production of green energy with the ambition to become independent from the National Power System, to reduce the price of electricity, provide cheaper public transport and improve air quality with the lowest carbon emissions in Poland.97 The city created its own green electricity network, producing electricity from biomass by the Municipal Heat Supply Company in Ostrów.98 This is the first municipal green energy network in Poland designed for residents and businesses.99 Besides renewables, Polish cities focus on the reduction of energy consumption through smart infrastructures, smart mobility and monitoring. For example, the city of Poznan, created the city’s own air quality index to monitor Air pollution supplying information about the air quality in the city.100 Furthermore, Poznan launched the city’s Stay Warm initiative providing information on the benefits of environmentally conscious renovations. Finally, the city offers a solar map indicating the property that could benefit from installing photovoltaic solar panels.101 Moreover, Poznan is also a Smart Digital City representing the city’s 3D model. Poznan promotes e-administration, e-services, e-health, e-care facilitating social inclusion:102 As a matter of priority, Polish smart cities put at the first place transportation followed by energy efficiency and ICT.103 In terms of assessment, one must acknowledge that there is certainly a lot of enthusiasm to engage on the path of eco-sustainability but there are also the numerous obstacles. Hajduk examines the smartness of the cities according to the following criteria: “adequate intellectual resources, well-functioning local institutions, high-quality 95 Walkowska K (2020) ‘Energia Ze Źródeł Odnawialnych w 2019 r. Energy from Renewable Sources in 2019’ (Warsaw, 2020), 23, https://stat.gov.pl/files/gfx/portalinformacyjny/pl/ defaultaktualnosci/5485/3/14/1/energia_ze_zrodel_odnawialnych_w_2019_r..pdf. 96 International Trade Administration, ‘Poland - Country Commercial Guide’, 2022, https://www. trade.gov/country-commercial-guides/poland-energy-sector#:~:text=Renewable energy,-In 2008 all&text=Poland%27s RES capacity totaled 9%2C475,in 2020%2C reaching 708 MW. 97 Klimek B (2022) ‘The First Urban Network Ff Green Electricity In Poland’, https:// innovationinpolitics.eu/showroom/project/the-first-urban-network-of-green-electricity-in-poland/. 98 Ibid. 99 Ibid. 100 Appleton J (2021) ‘Smart City Poznan: An Innovation Hub in the Greater Poland Region’, https://hub.beesmart.city/city-portraits/smart-city-poznan. 101 Ibid. 102 European Commission’ s 100 Intelligent Cities Challenge’. https://www. intelligentcitieschallenge.eu/. 103 Masik et al. (2021), p. 102970.

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infrastructure and good city planning”.104 Polish cities struggle with some parts of this definition, for example, with digitalisation as applied to sustainable energy, transport management, e-government. Measures are not always efficient and there is a lack of a coordinated and long term strategy.105 Budziewicz-Guźlecka and DrabKurowska sum up that the Polish Cities strategies are still “generally administrative in nature, particularly with regard to e-government and e-services”.106 “Conservative governance traditions and a lack of transparency frustrate progress in achieving greater citizen’s involvement”.107 Technological expertise is lacking. The past experience demonstrated that regional cooperation was not always possible although the situation is slightly improving.108

1.7

The EGD and the Challenges for the Rural Areas

The discussion on the role of regions and localities in realisation of the EGD has been mostly concentrated on the cities seen as vectors able to produce promptly the expected results. The rural areas attracted much less attention although 29% of the whole population living in the EU, lives in the rural areas.109 A concept of a smart village is generally associated with the CAP 2014–2020, inspired by the smart city development and cemented by the European Commission’s “EU Action for Smart Villages”.110 Kalinowski, Komorowski, and Rosa observed that “smart village” as a concept might have various functions, for example, in mitigating the negative effects of rural depopulation,111 as a driver for sustainable rural development,112 or as an instrument for mobilising local communities.113 As a strategy, it might improve the quality of life of local residents and attract younger generations.”114

104

Hajduk (2016). Masik et al. (2021). 105 Sikora-Fernandez (2018), pp. 52–59. 106 Budziewicz-Guźlecka and Drab-Kurowska (2017), pp. 17–32. 107 Ibid. 108 Masik et al. (2021) [103]. 109 Stojanova et al. (2021), p. 1663; Eurostat, ‘Urban and Rural Living in the EU’, 2020, https://ec. europa.eu/eurostat/web/products-eurostat-news/-/edn-20200207-1#:~:text=In2018%2C39.3%2 5ofthe,29.1%25 lived in rural areas. 110 EU Action for Smart Villages Initiative (2019) Department of Rural and Community Development, ‘Smart Villages and Rural Towns in Ireland. Revitalising Rural Communities through Social and Digital Innovation’, 2019, https://www.nationalruralnetwork.ie/wp-content/uploads/2019/04/ Smart-Villages-and-Rural-Towns-in-Ireland-NRN-Case-Study-April-2019.pdf. 111 Paniagua (2020); Patnaik et al. (2020); Kalinowski et al. (2022). 112 Guzal-Dec (2018), pp. 32–49. 113 Anastasiou et al. (2021); Kalinowski et al. (2022). 114 Kalinowski et al. (2022).

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Yet, the progress in rural areas, in comparison to the cities has been considerably slower.115 Even though, rural areas are also to be blamed for environmental degradation. In fact, the farm sector is responsible for a high level of greenhouse gases, deterioration of biodiversity and water quality, caused by pesticides.116 Nonetheless, many scholars are optimistic and see “a just transition” happening now since many “ecovillages and collaborative environmental partnerships address water quality, biodiversity, renewable energy, local food systems, and initiatives for sustainable mobility while promoting inclusive development”.117 The EU strategies for the development of rural areas favoured the bottom-up approach through LEADER/ CLLD strategy focusing on local needs and local solutions.118 More importantly, LEADER/CLLD aims at connecting and involving local people.119 The idea was to empower local people and organisations to contribute to the future development of their rural areas through Local Action Group (LAG) partnerships between the public, private and civil sectors.120 Practically, involving them in exploiting local resources, finding local solutions while mobilising local communities.121 Integrated and multisectoral actions focus on innovation, cooperation and networking.122 Networking is facilitated by digital technologies. Digitalisation seem to be a starting point, a pre-condition for accelerated rural development.123 Therefore, there is a lot of emphasis on the promotion of digital transformation in villages and rural areas. Digitalisation covers “a wide range of strategies to improve digital infrastructure, increase digital usage, enhance digital skills and inclusion, and promote digital innovation in rural areas”.124 Digital development should contribute to the quality of life, access to public services, better environment.125 It creates opportunities, has potential to increase the quality of services, leads to a higher income while

Stojanova S et al., ‘Smart Villages Policies: Past, Present and Future’(2021) [109]. Ibid. 117 Slee (2021). 118 Turek Rahoveanu (2012), pp 355–362. 119 European Network for Rural Development, ‘LEADER/CLLD Explained’, 2021, https://enrd.ec. europa.eu/leader-clld/leader-toolkit/leaderclld-explained_en. 120 Ibid. 121 Kalinowski, Komorowski, and Rosa (2022), The Smart Village Concept. Examples from Poland. [114]. 122 Kalinowski, Komorowski, and Rosa [114]. 123 Smart Villages Pilot Project, ‘Briefing Note’, 2019, https://digitevent-images.s3.amazonaws. com/5c0e6198801d2065233ff996-registrationfiletexteditor-1551115459927-smart-villages-brief ing-note.pdf. 124 European Network for Rural Development, ‘Smart Villages and Rural Digital Transformation’, 2019, https://enrd.ec.europa.eu/sites/default/files/enrd_publications/smart_villages_briefs-smart_ villages_and_rural_digital_transformation-v07.pdf; European Commission, ‘EU Member States Join Forces on Digitalisation for European Agriculture and Rural Areas’, 2019, https://digitalstrategy.ec.europa.eu/en/news/eu-member-states-join-forces-digitalisation-european-agricultureand-rural-areas. 125 Smart Villages Pilot Project, ‘Briefing Note’.[123]. 115 116

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strengthening social bonds.126 Kalinowski et al. identified three strands of smart action for the rural areas in which digitalisation is a primary tool. The first one concerns access to public services covering issues such as energy, safety, remote education, public transport, e-care, e-health. The second refers to public governance, e-administration, waste management, spatial planning, environmental quality monitoring, online meetings with residents. The third focuses on entrepreneurship, precision farming, online commerce, rural tourism, co sharing of equipment, rural incubators.127 Digitalisation offers other possible benefits for the smart villages such as facilitation of social and economic digital inclusion of local stakeholders, digital and social innovation, communication and coordination with external policy-makers, service deliverers to enable the village to access external research allowing technological development.128 Hopefully, technological progress will narrow the rural– urban gap. Patnaik et al., came with some useful examples on how Big Data and Internet-of-Things could help in agriculture with water management or renewable electricity management.129

1.8

Italian Rural Areas in Context of the EGD Objectives

Italian rural and inner areas are significantly less agriculture-oriented sharing however with the rest of the EU the problem of depopulation and aging. Particular attention should be drawn to inner areas of historical value, mostly affected by depopulation. There are apparently 6000 abandoned historic villages, and other rural areas at risk of abandonment.130 The National programme SNAI (National Strategy for Inner Areas) financed 72 localities with a considerable budget of €281 million, but this strategy was not particularly successful due to inertia of administrative authorities, administrative inefficiencies, resistance towards innovation and a lack of coordination among the participants of the programme.131 The development of rural areas specialising in agriculture is a priority of the new CAP Strategic Plan (2021–2027) in terms of jobs, growth, social inclusion.132 In

126

Holmes and Van Gevelt (2015). Kalinowski, Komorowski, and Rosa, The Smart Village Concept. Examples from Poland [114]. 128 European Network for Rural Development, ‘Smart Villages and Rural Digital Transformation’. 129 Patnaik et al. (2020), Switzerland, [111]. 130 Magliozzi A, ‘The Regeneration of Abandoned Italy Through Smart Villages’, 2020, https:// worldarchitecture.org/article-links/egphe/the-regeneration-of-abandoned-italy-through-smart-vil lages.html. 131 Ibid, Magliozzi [130]. 132 Smart Rural 21, ‘What’s Happening in My Country’, 2022, https://www.smartrural21.eu/ countries/italy/. 127

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addition, the National Recovery Plan (PNRR) focuses on digitalisation and enhancement of digital infrastructure in rural areas.133 Looking at some specific examples, Italian smart villages did not develop as well as Italian smart cities, nonetheless some examples of good practice exist. Ostana village in Piedmont region134 gained its status of a smart village through a number of eco initiatives. The village invested in better broadband connection and offered affordable housing to future residents and entrepreneurs. In line with the EGD objectives to reduce CO2 emissions, Ostana opted for e-mobility.135 The latter consists of a wide use of electric vehicles, creation of a local car pooling system, a new infrastructure for recharging electric bikes and the creation of new interchange areas for intermodal mobility.136 The village facilitated eco transport to touristic areas organised and monitored through digital solutions of booking and planning.137 Another example is a Tuscan town Santa Fiora near Grosseto.138 Equipped with a high-speed broadband,139 Santa Fiora attracts smart workers offering subsidised accommodation (50% reduction in rent up to 6 months).140 Based on information and communication technologies (ICT), it promotes the quality of living while preserving the Italian historical and cultural Heritage.141 Good digital infrastructure is vital for relaunching the economy and increasing attractiveness of the rural areas. An inspiring example is the Italian National Strategy Ultra-Wideband Project,142 implementing the objectives of European Digital Agenda in the Strategic Digital Programme of the Liguria Region 2016–2018.143 The National Ultra-Broadband Plan (part of the Cohesion Policy under the Digital Agenda priority) should help small municipalities.144

133

Ibid, Smart Rural 21 [132]. Ibid, Smart Rural 21 [132]. 135 Volontà M, Smart Rural 21, ‘Supporting E-Mobility in Ostana’, 2022, https://www. smartrural21.eu/wp-content/uploads/3rd-Regional-WS-Smart-Rural-21-Marco-Volonta-220127. pdf. 136 Ibid, Smart Rural21 [135]. 137 Ibid, Smart Rural 21 [135]. 138 Ibid, Magliozzi, ‘The Regeneration Of Abandoned Italy Through Smart Villages’ [130]. 139 Bastos C, ‘Carla Bastos’ Greener Pastures, Pt. 3: Santa Fiora Is a “Smart Village,” but Will It Be My Village?’, Dispatched Europe, 2021, https://dispatcheseurope.com/carla-bastos-greenerpastures-pt-3-santa-fiora-is-a-smart-village-but-will-it-be-my-village/. 140 ‘Smart Working Village, Progetto Santa Fiora’, La Reppublica, 8 July 2021, https://www. repubblica.it/dossier/economia/italia-un-paese-al-lavoro/2021/07/08/news/smart_working_vil lage_progetto_santa_fiora-309443213/. 141 Magliozzi A, ‘The Regeneration Of Abandoned Italy Through Smart Villages’ [130]. 142 Presidenza del Consiglio dei Ministri, ‘The Italian Strategy for next Generation Access Network’, 2020, 139, https://www.agid.gov.it/sites/default/files/repository_files/documentazione/ next_generation_access_network_-_english_version.pdf. 143 Raffini et al. (2019), p. 471. 144 Smart Rural 21, ‘What’s Happening in My Country’ [132]. 134

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Nonetheless, the percentage of population connected to the broadband is considerably lower in the rural areas as compared to the rest of the country, which is 65%, as compared to 46% in the inner areas.145 Despite, considerable efforts and financial support, given that 25% of the PNNR funds are dedicated to the digital transition, Italy as a country is below the European average in the DESI index, only the 25th out of the 28,146 after Poland.147 There is an important digital divide between the North and the South of Italy. All Southern regions are in fact, below the national average: Campania, Apulia, Basilicata, Sardinia, Sicily and Calabria. Whereas, on the North: Lombardy, Emilia Romania, Lazio and Piedmont are in the lead much above the national average.148 The reasons for this delay lie not so much in the coverage or speed of broadband but in the local population’s engagement and the residents’ digital skills and competence.149 The national strategy for Digital Skills aims to equip with at least basic level digital skills 70% of the population aged between 16 and 74 in 2025.150 At the EU level, the new Common Agricultural Policy (CAP) (2023–2027)151 and the proposed “CAP networks” will be supporting the rural areas through the Knowledge and Innovation systems.152 “CAP networks” will be particularly useful to promote exchange of good practices, information and share experiences. The CAP Networks will be in operation from 2023 and will link national and regional networks with the similar ones in other Member States.153 Finally, the new CAP aims to “better connect research and practice” that might foster the synergy between the regions. The new CAP is well equipped to foster development, technical innovation and digitalisation in agriculture and we could only hope that the local residents will be willing to engage with technology and innovation.154 Internet User Skills and Advanced Skills are desperately needed to foster further development.155

145

Mantino (2019). Bruno (2022). 147 Ibid, Bruno [146]. 148 Ibid, Bruno [146]. 149 Ibid, Bruno [146]. 150 ‘Pubblicato Il Primo Rapporto Di Monitoraggio Dell’attuazione Del Piano Operativo Della Strategia Nazionale per Le Competenze Digitali’, Republica Digitale, 28 December 2021, https:// repubblicadigitale.innovazione.gov.it/primo-rapporto-monitoraggio-attuazione-piano-operativostrategia-nazionale/. 151 European Council, ‘Common Agricultural Policy 2023-2027’, 2022, https://www.consilium. europa.eu/en/policies/cap-introduction/cap-future-2020-common-agricultural-policy-2023-2027/#: ~:text=The Council has formally adopted,targeted support to smaller farms. 152 European Commission, ‘Agricultural Knowledge and Innovation Systems (AKIS). Boosting Innovation and Knowledge Flows across Europe’, 2021, https://ec.europa.eu/eip/agriculture/sites/ default/files/eip-agri_agricultural_knowledge_and_innovation_systems_akis_2021_en_web.pdf. 153 Ibid, European Commission [152]. 154 Ibid, European Commission [152]. 155 Benecchi A et al., ‘Digitalisation in Italy: Evidence From a New Regional Index’, SSRN Electronic Journal, 2021, https://doi.org/10.2139/ssrn.4016669. 146

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Polish Rural Areas in the Heart of a Just Transition

Polish rural landscape is characterised by traditional farming and fragmented agriculture with some exceptions on the North West of the country.156 The percentage of population living in the rural areas is much higher than elsewhere in the EU, amounting to 40%.157 Many rural areas seized the EU financial opportunities to develop their rural territories, improve infrastructure, transport and access to services. Digital transformation is problematic, otherwise, it could provide some viable solutions on how to increase the production capacity of energy from renewable sources. It could also offer some solutions to the problem of depopulation facilitating smart working and e-services.158 Rural population lacks digital skills to access e-services and e-goods.159 “In 2020, 81% of people aged 16-74 used internet regularly, but only 40% of 65-74 age group”.160 Energy lies in the heart of Polish rural development. Transition to a low-carbon, circular economy encounters here the numerous problems. Poland is an example of the countries that for decades used the most polluting national resources, hard coal and lignite deposits. Heavy reliance on these resources was supported by Polish National Energy Policy committed “to ensure access to electricity and heat for all citizens and the economy, while maintaining acceptable energy prices, economic competitiveness, and at the same time maintaining a high level of energy security and independence.”161 For a long time, Poland was investing in hard coal and lignite mining, modernising infrastructures in order to make profit.162 In addition, Polish Energy Law is based on the principle of energy security meaning that national economy “will cover the current and future demand of customers for fuels and energy in a technically and economically justified manner, while maintaining the requirements of environmental protection”. At this point, it differs from the EU Law in which energy security is equated with security of supply.163 Clearly, Polish perception towards traditional energy sources, a part of Polish economic identity, is changing slowly, mainly due to the impact of International and EU obligations, UN Agenda 2030, Paris Agreements and recently the EGD. The 156

https://enrd.ec.europa.eu/sites/default/files/enrd_publications/tg11_smart-villages_highlights. pdf map. 157 Kalinowski, Komorowski, and Rosa, The Smart Village Concept. Examples from Poland [114]. 158 European Network for Rural Development, ‘Smart Villages. Event Hightlights’, 2020, https:// enrd.ec.europa.eu/sites/default/files/enrd_publications/tg11_smart-villages_highlights.pdf. 159 Smart Tomaszyn and Ostoja Natury, ‘Smart Village Strategy of Tomaszyn (Poland)’, 2020, https://www.smartrural21.eu/wp-content/uploads/Tomaszyn-Smart-village-strategy.pdf. 160 Kalinowski, Komorowski, and Rosa, The Smart Village Concept. Examples from Poland. [114]. 161 Budziewicz-Guźlecka and Drożdż (2022), p. 603. 162 Ibid, Budziewicz-Guźlecka and Drożdż [161]. 163 Energy Law Art. 1, 12 and Art. 3, ‘Prawo Energetyczne, Dz.U.2021.716 t.j’ (2021), https://sip. lex.pl/akty-prawne/dzu-dziennik-ustaw/prawo-energetyczne-16798478; Muras Z and Swora M, ‘Prawo Energetyczne. Komentarz’, 2010, https://sip.lex.pl/komentarze-i-publikacje/komentarze/ prawo-energetyczne-komentarz-587297122.

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numerous amendments were introduced to Polish Energy Law to comply with the international commitments.164 These amendments stress the importance of principle of solidarity at the EU level, calling for risk sharing and diversification and the optimal use of the joint EU action according to the principle of subsidiarity enshrined in Article 5 TEU.165 Poland is ineluctably moving towards more sustainable options, but the process is arduous and it needs collaboration of all actors at all levels. Importantly, the realisation of the EU green objectives necessitates changing of the attitudes and perceptions of Polish population towards the energy consumption, saving, and sources. High level public services, smart governance, transparency of activities or direct involvement of citizens are favourable factors fostering the energy transition. Budziewicz-Guźlecka & Drożdż see in rural areas unprecedented potential to change the Polish approach towards the energy self-sufficiency and security.166 Smart villages could accelerate the energy transition. They noticed that, heavy reliance on national resources such as coal and lignite deposits limited interests in alternative resources.167 Thus, Poland accumulated some delay in searching and exploring renewable energy sources that would otherwise make it competitive at the international arena. In fact, the alternative ways of producing, using or storing energy could build territorial competitive advantages for the Polish rural areas.168 Polish farms should become energy producers generating energy from renewable energy sources. Still, not very popular alternatives as for example, biomass, biogas, hydropower plants or wind power plants might eventually convince local authorities that this is the right move to secure energy independence by producing energy locally and at the lower cost.169 Rural areas could also play a role in diminishing consumption and reducing the energy demand for example through monitoring pollution, greenhouse lighting, or water use for plants. They could contribute to preservation of biodiversity.170 Local dynamic leaders and local administrative authorities could make a real change towards the realisation of the EGD objectives. Art. 19 of the Energy Law gives a power to a village mayor (Soltys) or (mayor, city president) to take the decisions on his territory regarding heat, electricity and gas supply.171 Consequently,

164

Ibid, Prawo energetyczne, Dz.U.2021.716 t.j [163]. Ibid, Prawo energetyczne, Dz.U.2021.716 t.j [163]. 166 Ibid, Budziewicz-Guźlecka & Drożdż, ‘Development and Implementation of the Smart Village Concept as a Challenge for the Modern Power Industry on the Example of Poland’ [161]. 167 Ibid, Budziewicz-Guźlecka & Drożdż [161]. 168 ‘Między Rozwojem a Polityką Społeczną: Oddziaływanie Europejskich Funduszy Strukturalnych w Regionach Celu 1’, Studia Regionalne i Lokalne 3, no. 17 (2004): 5–32, http:// cejsh.icm.edu.pl/cejsh/element/bwmeta1.element.desklight-6451f23b-1fb3-4564-b528-d4b568e3 d62a/c/2004_3_rodriguez_fratesi.pdf. 169 Valujeva et al. (2022), pp. 175–84. 170 Valujeva K et al. 171 Prawo energetyczne, Dz.U.2021.716 t.j [163]. 165

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behind the initiatives promoting smart villages, there is also a dynamic village mayor or a group of residents able to influence administrative authorities. The EU Commission uses four indicators defining the smart villages according to criteria such as digital technologies and innovations, striving to improve quality of life; rethinking the improvement of public service standards; ensuring better use of local resources.172 An interesting example of Polish smart village is Piaseczna Gorka in southern Poland. Following the initiative of local residents organised around an internet group, the village improved mobility and access to information, invested in production of its own renewable energy using autonomous solar lamps, modernised infrastructure and created a flood-barrier increasing rainwater retention.173 The village is pioneering in Poland in energy production focusing on renewable energy sources.174 The second example of a smart Polish village is Tomaszyn on the North-West of Poland. Tomaszyn is a self-sufficient farm Ostoja Natury (Recluse-Nature).175 Ostoja Natury uses eco-friendly methods to produce high-quality food, sold directly to customers in line with the EU Farm-to-Fork strategy.176 The farm operates as “a closed system” using waste as an energy source.177 Ostoja Natury is a model of sustainability: combines traditional methods of farming with the new ones, such as “precision farming, automatization, (receiving, cleaning and packing lines) [. . .], robotization (eg Farmbot, Turtule robotics), creating in that way a demand for specialists in the IT fields.”178 Additional advantage of robotization is the creation of technologically advanced jobs in rural area, narrowing the technological gap between the village and the city.179 Furthermore, Ostoja Natura is well on the way to explore the ecosystem solutions and to maximise the efficient use of energy. Ostoja Natury, invested in renewable energy sources such as biomass building “a small agricultural biogas plant with a cogeneration engine enabling producing electricity, heat and cold and thereby creating a 360 cycle where waste is fuel”.180 The farm explores other renewable energies, the panel solar plants, water and wind turbines, aiming to increase

172

Komorowski (2022). Jamorska–Kurek A, ‘Smart Village – Piaseczna Górka’, 2019, https://enrd.ec.europa.eu/sites/ default/files/3_tg11_smart-villages_pl-village_jamorska.pdf. 174 Ibid, Komorowski Ł, ‘Smart Initiatives in a Suburban Community: An Example From the Holy Cross Mountains in Poland’ [172]. 175 Ostaszewski P, Ostoja Natury, ‘The Cooperative Model: The Polish Model for Reviving a Declining Rural Area’ (Smart Rural 21, 2021), https://www.smartrural21.eu/wp-content/ uploads/17.-Piotr-Ostaszewski_Tomaszyn-Poland.pdf. 176 Ibid, Ostaszewski P [175]. 177 Ibid, Ostaszewski P [175]. 178 Ibid, Ostaszewski P [175]. 179 Ibid, Ostaszewski P [175]. 180 Ibid, Ostaszewski P [175]. 173

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profitability and farm resilience, to lower cost and to become energy self-sufficient.181 This is a waste-free self-sufficient project habitat for rural farms while preserving the natural environment.182 Despite of a few inspiring examples mentioned above, the majority of rural areas in Poland is well behind the targets. This is in terms of technological progress, smart jobs, energy solutions, transport and more importantly a smart community of people who are willing to engage with ecological progress. The villages on the South East of Poland are often isolated due to the poor infrastructures and the lack of reliable transport. The construction of the motorway linking Rzeszow with Krakow helped nearby villages to develop but at the expense of the remote ones leading to the rural fragmentation.183 The remote villages cannot serve as “dormitories”, consequently, young population moved to the cities while aging population struggle with digitalisation. E-services and E-institutions are not yet in place.184 Polish traditional approach to energy production is still persisting.185 Using the 2020 Indicator, the awareness in Polish society is still low: “44% of Poles believe that coal should be used in power industry, 37% consider that coal should be the basis of energy production and RES could only be an additional to it”.186 Many consider RES as expensive187 and not a viable source of energy.188 Some believe that this is another EU’ invention imposed on Poland to benefit Western companies.189 As a result, many Polish villages struggle with the transition.190 Often, the lack of funding, poor digital skills, lack of awareness isolate the villages even more. A lack of social trust in the energy modern solutions is a persisting problem.

181

Ibid, Ostaszewski P [175]. Ibid, Ostaszewski P [175]. 183 Jakiel et al. (2013), pp. 23–33. 184 Janus et al. (2022). 185 Żuk and Żuk (2021), p. 3418. 186 Indicator. Centum Badań Marketinggowych, ‘Badania Opinii Polakow Na Temat Roznych Zrodel Energii’, 2020, https://stowarzyszeniepv.pl/2020/05/10/badanie-opinii-polakow-na-tematroznych-zrodel-energii/. 187 Ibid, Żuk P & Żuk P, ‘On the Socio-Cultural Determinants of Polish Entrepreneurs’ Attitudes towards the Development of Renewable Energy: Business, Climate Skepticism Ideology and Climate Change’ [185]. 188 Ibid, Żuk P & Żuk P. [185] 189 Budziewicz-Guźlecka & Drożdż, ‘Development and Implementation of the Smart Village Concept as a Challenge for the Modern Power Industry on the Example of Poland’ [161]. 190 Grelowska I, ‘Czy Wsie Przyszlosci Juz Istnieja?’, February 2022, https://styl.interia.pl/ magazyn/news-smart-villages-czy-wsie-przyszlosci-juz-istnieja,nId,5834015. 182

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2 Conclusion The EGD is a challenge but also an unprecedented opportunity to become a driving force behind the EU integration. Its ambitious targets and holistic approach have potential to transform the EU in modern, innovative, digital Union caring for its citizens and environment. Regions, cities, local communities and rural areas need to be active participants of this project not only to meet the EGD targets but also, to engage with the progress it brings. The adoption of the EGD could be a new departure for the EU—a momentum not to be missed. From the beginning of the new millennium, the EU integration has been marked by disappointments and stagnation. First, the rejection of the EU Constitutional Treaty, followed by the Euro Crisis, then the unresolved immigration crisis and more recently Brexit. Hence, the EGD is the opportunity to show the leadership, to deepen the EU integration process and to strengthen the EU. The EGD holistic approach fosters the interconnection with sectoral EU policies that need to interact and develop in synergy with the EGD objectives. Sharing Sikora’s view if the EGD is going to steer the EU integration it needs a stronger bond with the Treaty legal basis while respecting EU shared competence in environmental field and the principle of subsidiarity.191 Yet, the EGD objectives are closely related to a wide range of policies articulated in the Treaty. For example, the EGD has clear implications for budget, funds, energy, agriculture, industrial policy, research and technology development, employment, health, transport, taxation as well as the provisions on data protection and transparency and some other. Its potential to penetrate the EU legal order is yet to be unravelled.192 The CJEU has an important role to play to explore these connections and to strengthen the link between the Treaty provisions and the EGD. In future, the Court will certainly have opportunity to consider the relationship between the Treaty and secondary legislation, currently being updated to align with the EGD objectives. Rightly underlined by Espadas: “The European Union will never achieve climate neutrality without its territories sharing the same ambitious objectives. [What is needed then?] the necessary support and finding synergies to help cities and regions”.193 Boudineau stresses the importance of cross-border links, the internalisation of external costs, strictly applying the “polluter pays” principle.194 The current initiatives directed to the regions emphasise the importance of building networks, exchange of information and good practice at national and international level. However, there is a long list of obstacles impeding or slowing down the efficient cooperation and coordination between the regions. The local authorities often do not want to collaborate or share information or change their planning agenda to accommodate other ideas coming from outside. The proposal for Sikora A, ‘European Green Deal – Legal and Financial Challenges of the Climate Change’ [24]. Sikora A [24]. 193 Espadas J, in ‘Green Deal: Cities and Regions Define 2021 Roadmap’, 2021, https://cor.europa. eu/en/news/Pages/GREEN-DEAL-GOING-LOCAL.aspx. 194 Ibid, [193]. 191 192

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Efficiency Directive evidenced administrative burden as one of the most important barriers delaying investments in renewables and related infrastructure referring to “lengthy and complex administrative procedures”, “non-transparent processes, a lack of legal coherence as well as an incomplete and vague framework and guidelines”.195 In fact, there are deep structural disparities in financial resources, level of economic development, infrastructures, level of engagement of local public authorities, stakeholders, businesses and local residents. Impressive EU funding to help the disadvantaged regions is only a starting point. Thinking in terms of multilevel governance might help to address some of these problems. Current EU Cohesion Policy 2021–2027 is trying to bridge the gaps through simplification of the rules, flexible programming, faster delivery, and important funding to foster green and digital transition in the regions.196 Digitalisation and re-skilling are still behind the targets even though they are desperately needed to accelerate the transition. Inevitably, the realisation of the EGD at the local level must be combined with innovation and technological progress changing our cities and rural area and the traditional working patterns. The conversion of the cities, being the biggest polluters and energy consumers, into the smart cities, could make them powerful actors to deliver the EGD targets. They can make a considerable impact on reduction of CO2 emissions, energy consumption or production of renewables. The Italian Smart Cities provide some excellent examples of good practice in reduction of energy consumption through the traffic control, monitoring pollution introducing eco-transport. They are also energy producers mainly through the installation of photovoltaic solar panels. Even though, not the same can be said about the south of Italy that remains behind. The Cities in the North of Italy are pioneering in eco-sustainable strategies, showing considerable public engagement. The smartness of the Italian northern cities is widening the gap between the North and the South of Italy. The persisting danger of a two-speed Italy would lead to social exclusion and inequality sharply contrasting with a just transition goal “to leave no one behind”. The Southern Italian regions behind the wellprospering North struggle with some aspects of the transition and eco sustainability does not yet convince everyone. This is visible in weak public engagement, often disinterest of local authorities and residents. The progress in digitalisation and reskilling is also slow. In short, the mayors of the cities on the south have an important task: to engage with the transition, to raise public awareness and to collaborate. A number of Polish cities are thriving in eco-friendly solutions and clean energy production, but many continue to rely on fossil fuel and the traditional transport.

195

European Parliament renewable sources and European Council, Directive of The European Parliament and The Council amending Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources, Directive 2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency. 196 European Commission, ‘Cohesion Policy 2021-2027’, 2021, https://ec.europa.eu/regional_ policy/en/2021_2027/.

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There are some good practices in reducing the energy consumption through smart mobility, smart infrastructure and collecting data. Polish cities are slowly but inevitably engaging with the greener energy, though progress is not yet significant. The agricultural peripheries would certainly benefit from the redefined CAP, “CAP Networks” and AKIS.197 However, there are some substantial problems in collaboration, coordination and the synergy between the rural areas. The Italian examples show that often the villages and municipalities compete for the EU funding which in fact does not facilitate collaboration or exchange of information. Moreover, different EU Funds apply discretionary rules which are not always compatible with the rules of local public administration. For example, the approval of EU strategies does not always coincide with the timeframe of equivalent decision making at the local level.198 The case study of Polish villages, mainly consisting of agricultural areas, offers many possibilities for renewables. Nevertheless, there is little awareness about funding, methods, and the use of technologies. Local authorities do not always facilitate the transformation, which is seen as costly, or are keen to accept some guidance. Local residents are often diffident and do not trust the EU solutions. Therefore, creating larger networks and spreading good practices is not as easy as one might expect. How can the roles of the regions, cities and villages be strengthened to foster the transition? Szlachta and Zaucha suggest that empowering the regional governments is an important step since they have the right tools in hands. They could foster the transition by launching the new initiatives or elaborating a right strategy, they can invest in monitoring of the progress, ensure implementation of EU secondary law, or communicate more effectively with the appropriate bodies at the EU level.199 Undoubtedly, we need further efforts to reinforce territorial cohesion, deepen synergy between the EU Policies, improve communication and collaboration between the regions, improve organisation that would facilitate the networking. EU should simplify procedures making funding more accessible for all. We need efforts at all levels. Mayors, local leaders, businesses, stakeholders, local residents are all important in the realisation of the EGD objectives and the promotion of harmonious development of the EU.

Poppe K, ‘The European Agricultural Knowledge and Innovation System (AKIS) Towards an Interactive Innovation Model. SCAR-Swg Agricultural Knowledge and Innovation Systems’, 2021, https://www.aieaa.org/sites/default/files/poppe-the_european_agricultural_knowledge_and_innova tion_system-201_a.pdf. 198 European Network for Rural Development, ‘Strategy for Inner Areas. Italy’, 2021, https://enrd. ec.europa.eu/sites/default/files/tg_smart-villages_case-study_it.pdf. 199 Szlachta J & Zaucha J, ‘For an Enhanced Terrttorial Dimension of the Cohesion Policy in Poland in the 2014-2020 Period’, 2012, https://econpapers.repec.org/paper/irowpaper/1203.htm. 197

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References Anastasiou E et al (2021) Territorial and human geography challenges: how can smart villages support rural development and population inclusion? Soc Sci 10(6):193. https://doi.org/10. 3390/socsci10060193 Auby JB (2018) Algorithmes et smart cities: Données Juridiques. Revue Générale Du Droit, no. 29878, www.revuegeneraledudroit.eu/?p=29878 Blasi S, Ganzaroli A, De Noni I (2022) Smartening sustainable development in cities: strengthening the theoretical linkage between smart cities and SDGs. Sustain Cities Soc 80:103793. https:// doi.org/10.1016/j.scs.2022.103793 Bolognese E (2021) ‘L’energia Rinnovabile Nelle Città Italiane’, Il Confronto Quotidiano, 15 July 2021. https://www.ilconfrontoquotidiano.com/post/l-energia-rinnovabile-nelle-città-italiane Bonucci M (2020) Smart city index 2020: Trento e’ La Citta’ Piu’ Sostenibile d’Italia. FASI, March 2020. https://fasi.eu/it/articoli/24-studi-eopinioni/21737-smart-city-index-2020-trento-e-lacitta-piu-sostenibile-d-italia.html Bruno F (2022) Il Ritardo Dell’Italia (e Del Sud) Sulle Competenze Digitali: Basterà Il PNRR? Il Sole 24 Ore, 17 January 2022, https://www.econopoly.ilsole24ore.com/2022/01/17/il-ritardodellitalia-e-del-sud-sulle-competenze-digitali-bastera-il-pnrr/?refresh_ce=1 Budziewicz-Guźlecka A, Drab-Kurowska A (2017) The analysis of selected issues Pertainingto E-administration in Poland in the context of smart city. Nordic Baltic J Inf Commun Technol 1: 17–32. https://doi.org/10.13052/nbjict1902-097X.2017.002 Budziewicz-Guźlecka A, Drożdż W (2022) Development and implementation of the smart village concept as a challenge for the modern power industry on the example of Poland. Energies 15(2): 603. https://doi.org/10.3390/en15020603 Fernández-Macías E (2018) Automation, digitisation and platforms: implications for work and employment. Eurofound working paper, 20 January 2018 Griggs D et al (2014) An integrated framework for sustainable development goals. Ecol Soc 19(4): art 49, https://doi.org/10.5751/ES-07082-190449 Guzal-Dec D (2018) Intelligent development of the countryside – the concept of smart villages: assumptions, possibilities and implementation limitations. Econ Reg Stud/Studia Ekonomiczne i Regionalne 11(3):32–49. https://doi.org/10.2478/ers-2018-0023 Hajduk S (2016) Selected aspects of measuring performance of smart cities in spatial management. In: 9th International Scientific Conference “Business and Management 2016. VGTU Technika, 2016), https://doi.org/10.3846/bm.2016.57 Holmes J, Van Gevelt T (2015) Energy for development – the concept. In: Heap (RB) Smart villages: new thinking for off-grid communities worldwide. Smart Villages Initiative, https:// rael.berkeley.edu/wp-content/uploads/2015/07/Smart_Villages_New_Thinking_for_Off_grid_ Comunities_Worldwide.pdf Jakiel M, Bernatek A, Ostafin K (2013) Ocena Wdrażania Koncepcji Zielonej Infrastruktury w Województwie Małopolskim Na Przykładzie Autostrady A4. Problemy Ekologii Krajobrazu 36:23–33 Jans JH, Vedder HHB (2012) European environmental law: after Lisbon. Europa Law Publishing, Groningen Janus J, Bożek P, Taszakowski J, Doroż A (2022) Decaying villages in the centre of Europe with no population decline: Long-term analysis using historical aerial images and remote sensing data, V.121. Habitat at https://www.sciencedirect.com/science/article/pii/S0197397522000170 Jendrośka J, Reese M, Squintani L (2021) Towards a new legal framework for sustainability under the European Green Deal. The Opole Studies in Administration and Law. http://portal.amelica. org/ameli/jatsRepo/463/4632575004/index.html Kalinowski S, Komorowski Ł, Rosa A (2022) The Smart Village Concept. Examples from Poland. Instytut Rozwoju Wsi i Rolnictwa PAN; Centrum Doradztwa Rolniczego w Brwinowie Oddział w Warszawie), https://doi.org/10.53098/978-83-961048-1-6

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Komorowski Ł (2022) Smart initiatives in a suburban community: an example from the Holy Cross mountains in Poland. Mountain Res Dev 42(1). https://doi.org/10.1659/MRD-JOURNAL-D21-00037.1 Laricchia F (2022) Leading smart cities in Italy 2021. Statista. https://www.statista.com/statistics/ 858268/leading-smart-cities-in-italy/ Liguori G (2021) Lessons from Italy: Why Smart City Projects Can Bridge the Urban Development Gap. Smart Cities World. https://www.smartcitiesworld.net/opinions/opinions/lessons-fromitaly-why-smart-city-projects-can-bridge-the-urban-development-gap Makani S et al (2022) A survey of blockchain applications in sustainable and smart cities. Cluster Comput 2. https://doi.org/10.1007/s10586-022-03625-z Mantino F (2019) Creating synergies between the CAP strategic plans and other funds in Italy. Rete Rurale Nazionale, Brussels. https://enrd.ec.europa.eu/sites/default/files/tg7_smart-villages_ inner-areas_mantino.pdf Masik G, Sagan I, Scott JW (2021) Smart city strategies and New Urban development policies in the polish context. Cities 108:102970. https://doi.org/10.1016/j.cities.2020.102970 Messina G (2021) The role of the committee of the regions (CoR) to implement the green deal at the local level: an overview of Italy. AIMS Geosci 7(4):613–622. https://doi.org/10.3934/geosci. 2021037 Miccinilli M (2020) Europe’s green deal needs to effectively handle rising distributional effects. Eur Energy Clim J 9(1):15–17 Openpolis (2021) La Produzione Di Energia Rinnovabile Nelle Città Italiane. Ecologia e Innovazione Paniagua A (2020) Smart villages in depopulated areas. pp 399–409, https://doi.org/10.1007/978-3030-37794-6_20 Patnaik S, Sen S, Mahmoud MS (red) (2020) Smart village technology. Concepts and developments. Springer, Cham Raffini L, Giampellegrini PP, Pirni A (2019) Digital transformation and egovernment. For a research Agenda on the Liguria Region. OBETS. Revista de Ciencias Sociales 14(2):471, https://doi.org/10.14198/OBETS2019.14.2.07 Reddy B (2015) climate change is a global problem. Climate action is a local solution. The Guardian, 5 October 2015. https://www.theguardian.com/commentisfree/2015/oct/05/climatechange-global-problem-climate-action-local-solution Schröder J (2020) Peripheries—dynamics for the green deal. In: Topos, no. special issue 2020, urbanes.land. http://urbanesland.toposmagazine.com/client_articles/peripheries-dynamics-forthe-green-deal Sikora A (2021) European green deal – legal and financial challenges of the climate change. ERA Forum 21(4):681–697. https://doi.org/10.1007/s12027-020-00637-3 Sikora-Fernandez D (2018) Smarter cities in post-socialist country: example of Poland. Cities 78: 52–59. https://doi.org/10.1016/j.cities.2018.03.011 Slee B (2021) Smart Villages and the European Green Deal: Making the Connections. European Network for Rural Development, https://enrd.ec.europa.eu/sites/default/files/enrd_publications/ tg6_smart-villages_sv-green-deal-bill-slee.pdf Statista Research Department (2021) Number of Smart City Projects Carried out in Selected Cities in Italy as of 2018. Environmental Technology & Greentech, https://www.statista.com/ statistics/974944/smart-city-projects-in-italy/ Stojanova S et al (2021) Smart villages ability 13(4):1663. https://doi.org/10.3390/su13041663 Turek Rahoveanu A (2012) Leader approach: an opportunity for rural development. In: Agrarian economy and rural development - realities and perspectives for Romania, pp 355–362, http:// hdl.handle.net/10419/76827 Valujeva K et al (2022) Abandoned Farmland: past failures or future opportunities for Europe’s green deal? A Baltic Case-Study. Environ Sci Policy 128:175–184. https://doi.org/10.1016/j. envsci.2021.11.014

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Van Hees SRW (2014) Sustainable development in the EU: redefining and operationalizing the concept. Utrecht Law Rev 10(2):60, https://doi.org/10.18352/ulr.269 Warhurst C, Hunt W (2019) The Digitalisation of Future Work and Employment. Possible impact and policy responses. European Commission, Seville, JRC117404 Widuto A (2021) The European Green Deal and Cohesion Policy. European Parliamentary Research Service, https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/698058/EPRS_ BRI(2021)698058_EN.pdf Zitelli V, Di Sora M, Ferrini F (2001) Local and national regulations on light pollution in Italy. In: Symposium International Astronomical Union 196:111–116, https://doi.org/10.1017/ S0074180900163910. Żuk P, Żuk P (2021) ‘On the Socio-Cultural Determinants of Polish Entrepreneurs’ attitudes towards the development of renewable energy: business, climate skepticism ideology and climate change. Energies 14(12):3418. https://doi.org/10.3390/en14123418

Katarzyna Gromek-Broc is a Professor in EU Law at the Department of Political and Social Sciences, University of Pavia. Jean Monnet Module Bid Winner in 2020 and, in 2021, as a Team Member (EUA Africa-Connect). She was awarded a prestigious VLOEBERGHS CHAIR in Law, at the VUB (Vrije Universiteit Brussel), Brussels in 2019. She is also a Member of Brussels Diplomatic Academy. Currently, she has been working on a number of projects involving the EU and Latin America on Energy and Food Security. She taught and researched widely in Europe, Asia, Australia and South America namely at the Institute of European Studies of Macau, Golden Gate University, San Francisco, Stetson College of Law, Florida and many others. Her research attracted numerous awards and funding: the AHRB Award, the British Academy Award; won Strategic Fund Competition, more recently secured some funding for two projects: one on Energy Transition, and another on Law and Technologies. She collaborates with a number of International Organisations, recently, with NATO on Stability Policing. After her PhD at the EUI in Florence, she worked at the University of Hull, later at the University of York, UK, being a founding member of the York Law School.

Energy Auction in the European Union with Specific Reference to Member State Practice in Germany and France Koen Byttebier and Kim Van der Borght

Abstract Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources is the legislative framework for energy auctions for renewable energy in the EU. With two very different energy policies, Germany and France have implemented the Directive in national laws reflecting the different priorities of the two Member-States. The transposition of national policy priorities into implementing legislation are compared as well as the variety of energy sources, their impact and the tenders that have been based of these laws.

1 Europe While, on a global scale, tenders for renewable energy (production) are a fast spreading instrument to attract and procure capacity from renewable energy sources, there is still a noticeable lack of description and analysis of experiences, as in many countries, such tenders were only introduced a few years ago and have not been the subject of much attention from (academic) researchers and authors. On the EU level, a reference to these tenders for renewable energy is made in Directive (EU) 2018/2001.1 This Directive establishes, generally speaking, a common framework for the promotion of energy from renewable sources. According to its Article 1, it, e.g., sets a binding Union target for the overall share of energy from renewable sources in the Union's gross final consumption of energy in 2030. It also

European Parliament and European Council, ‘Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the Promotion of the Use of Energy from Renewable Sources (Recast) (Text with EEA Relevance) (2018), http://data.europa.eu/eli/dir/201 8/2001/2018-12-21.

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K. Byttebier · K. Van der Borght (✉) Vrije Universiteit Brussel VUB, Brussels, Belgium e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_8

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lays down rules on financial support for electricity from renewable sources, on selfconsumption of such electricity, on the use of energy from renewable sources in the heating and cooling sector and in the transport sector, on regional cooperation between the EU Member States, and between such Member States and third countries, on guarantees of origin, on administrative procedures and on information and training. It also establishes sustainability and greenhouse gas emissions saving criteria for biofuels, bioliquids and biomass fuels.2 According to Consideration (19) of the Directive (EU) 2018/2001, electricity from renewable sources should be deployed at the lowest possible cost to consumers and taxpayers. When designing support schemes and when allocating support, EU Member States should, therefore, seek to minimise the overall system cost of deployment along the decarbonisation pathway towards the objective of a low-carbon economy by the year 2050. Also according to the same Consideration (19) of the Directive (EU) 2018/2001, market-based mechanisms, such as tendering procedures, have been demonstrated to reduce support cost effectively in competitive markets in many circumstances. However, in specific circumstances, tendering procedures may not necessarily lead to efficient price discovery. Balanced exemptions may, therefore, need to be considered to ensure cost-effectiveness and minimise overall support cost. In particular, Member States have been allowed to grant exemptions from tendering procedures and direct marketing to small-scale installations and demonstration projects in order to take into account their more limited capabilities. Since the European Commission assesses the compatibility of support for renewable energy with the internal market on a case-by-case basis, such exemptions should comply with the relevant thresholds set out in the latest Commission Guidelines on State aid for environmental protection and energy. E.g., in the Guidelines for 2014 to 2020, those thresholds were set at 1 MW (and 6 MW or 6 generation units for wind energy) and 500 kW (and 3 MW or 3 generation units for wind energy) in terms of exemptions from, respectively, tendering procedures and direct marketing. To increase the effectiveness of tendering procedures to minimise overall support costs, tendering procedures should, in principle, be open to all producers of electricity from renewable sources on a non-discriminatory basis. While EU Member States develop their support schemes, they may limit tendering procedures to specific technologies where this is needed to avoid sub-optimal results with regard to network constraints and grid stability, system integration costs, the need to achieve diversification of the energy mix, and the long-term potential of technologies.3 Furthermore, according to Article 3.1. of the Directive (EU) 2018/2001, the EU Member States must collectively ensure that the share of energy from renewable sources in the EU’s gross final consumption of energy in 2030 is at least 32%. The European Commission itself is bound to assess that target with a view to submitting a

2 3

Article 1 European Parliament and European Council. Consideration (19) European Parliament and European Council.

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legislative proposal by 2023 to increase it where there are further substantial costs reductions in the production of renewable energy, where needed to meet the Union’s international commitments for decarbonisation, or where a significant decrease in energy consumption in the Union justifies such an increase. According to Article 4.6 of the Directive (EU) 2018/2001, where support for electricity from renewable sources is granted by means of a tendering procedure, EU Member States must, in order to ensure a high project realisation rate: (a) establish and publish non-discriminatory and transparent criteria to qualify for the tendering procedure and set clear dates and rules for delivery of the project; (b) publish information about previous tendering procedures, including project realisation rates. On November 17, 2020, the CEER published its 2nd Report on Tendering Procedures for RES in Europe. This report describes key tendering design elements and provides an overview of European experiences with the implementation of tenders to determine the level of support for electricity from Renewable Energy Sources (RES). An emphasis is put on available empirical evidence up to July 2020, notably with respect to the level of competitiveness and price development, as well as the realisation rate.4 Some of the main conclusions of the report were:5 • By mid-2020, a large number of European countries had implemented tenders as a competitive instrument to determine the level of financial support for the operation of RES installations. This meant an important change from the 2018 CEER report, where tendering was a relatively new instrument. • Most countries in the report had opted to implement both technology-neutral and technology-specific tenders. • Across all technology-specific schemes implemented, offshore wind, onshore wind, PV (solar) and biomass were the most selected renewable technologies. • All tendering schemes implemented after 2018 remained national in scope. • As a price-awarding mechanism, the pay-as-bid method, where bidders are awarded a support entitlement in accordance to the level of their submitted bid, was the favoured approach. • While the first tender generation had also been used to determine the reference value for the Feed-in-Tariff (FiT), all more recent tenders introduced used Feedin-Premiums (FiP) as the outcome of the tendering process. • Where empirical evidence is available, results regarding the main criteria demonstrating the success of tenders as a market-based instrument—level of competition, price developments and realisation rates—were mixed. • Competitive procedures did not obviate the need for administrative processes. Council of European Energy Regulators, ‘2nd CEER Report on Tendering Procedures for RES in Europe – Renewable Energy Sources Work Stream of Electricity Working Group. C20-RES-7603’, 2020, https://www.ceer.eu/documents/104400/-/-/f167090e-fb39-84b9-f370-047f5ee6e655. 5 Council of European Energy Regulators. 4

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2 Germany 2.1 2.1.1

Regulatory Framework General

Enactment of the Renewable Energy Law 2021 A new “Renewable Energy Law (2021) / EEG 2021”—in German the “Gesetz für den Ausbau erneuerbarer Energien”, also referred to as the “Erneuerbare-EnergienGesetz - EEG 2021”, or, officially, the "Erneuerbare-Energien-Gesetz vom 21. Juli 2014”6 as changed by Article 1 of a law of December 21, 20207—which came into force on January 1, 2021, includes a tender scheme for solar and other renewables that could result in the deployment of 18.8 GW of PV power capacity from 2021 to 2028, with a minimum of 1.9 GW, and a maximum of 2.8 GW being planned to be allocated per year.8 The changes to the law were passed by parliament (“Bundestag”) on December 17, 2020.9 The European Commission approved Germany’s revised Renewable Energy Act (EEG2021) under the EU State Aid rules.10

Purpose of the EEG The aim of the Renewable Energy Sources Act is to increase the share of electricity generated from renewable energies in gross electricity consumption and thus to

‘Erneuerbare-Energien-Gesetz Vom 21. Juli 2014 (BGBl. I S. 1066), as Changed by Artikel 1 Des Gesetzes Vom 21. (BGBl. I S. 3138, Nr. 65 of December 28, 2020)’ (2020). 7 Erneuerbare-Energien-Gesetz vom 21. Juli 2014 (BGBl. I S. 1066), as changed by Artikel 1 des Gesetzes vom 21. (BGBl. I S. 3138, nr. 65 of December 28, 2020). 8 S Enkhardt, ‘Germany to Tender 18.8 GW of PV by 2028’, 2020, https://www.pv-magazine. com/2020/09/01/germany-to-tender-18-8-gw-of-pv-by-2028/. 9 K Appunn, ‘What’s New in Germany’s Renewable Energy Act 2021’, 2021, https://www. cleanenergywire.org/factsheets/whats-new-germanys-renewable-energy-act-2021. Updates with changes to renewable auction volumes in 2022, were already then announced to cap on renewable surcharge on power price, and on changed interim solutions for pioneer wind installations. The EEG 2021, as it has been named by the Ministry for Economic Affairs and Energy (BMWi) that is in charge of the bill, was approved after some last minute changes. 10 Reve, ‘Eu Approves New German Renewables Law but Sets Unhelpful Precedent by Allowing Short-Term Cuts in Auction Volumes’, News of the wind sector in Spain and in the world, 2021, https://www.evwind.es/2021/05/07/eu-approves-new-german-renewables-law-but-sets-unhelpfulprecedent-by-allowing-short-term-cuts-in-auction-volumes/80655. 6

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contribute to the achievement of climate protection goals and the transformation of the energy system.11 This expansion should be steady cost-efficient and compatible with the grid.12 The EEG has already been amended several times to take account of technological developments and to bring renewable energies closer to the market.13 Specifically within the framework of the amendment of the EEG 2017 and the Wind Energy at Sea Act, the switch to tenders was completed. Since then, the remuneration rates for RE plants that exceed a certain size have been determined competitively. Some further major changes were adopted in December 2018 as part of the Energy Collection Act (EnSAG). Within this framework, the normal tender quantities were supplemented by special tender quantities, the innovation tender was newly introduced and wind turbines only had to be lit at night if required.14 On July 3, 2020, the German Bundestag also passed the Act to Reduce and End the Use of Coal for Electricity Generation (Coal Phase-out Act) as well as amendments to other laws. E.g., the EEG anchors the Federal Government's goal from the Climate Protection Programme 2030 of achieving a 65 percent share of renewable energies in electricity consumption by 2030. However, the prerequisite for achieving this target is a further determined, efficient, grid-synchronous and increasingly market-oriented expansion of renewable energies.15

Economic Impact of the EEG Since the introduction of (the first version of) the Renewable Energy Sources Act (EEG) in 2000, electricity generation from renewable energies has risen sharply: from 36 terawatt hours to 243 terawatt hours in 2019. Onshore wind energy, solar radiation energy (photovoltaics), biomass and, in recent years, increasingly offshore wind energy are the drivers of this increase. E.g., electricity generation from offshore wind turbines has increased very strongly in the last ten years and was expected to amount to almost 25 terawatt hours in 2019. This means that the youngest renewable technology in offshore wind farms has already generated more electricity than hydropower in 2019.16 However, not all electricity from renewable energy sources is subsidized under the EEG. E.g., large hydropower plants and conventional power plants that co-fire biomass are not eligible for remuneration. The electricity quantities remunerated via

Bundesministerium für Wirtschaft und Energie, ‘Erneuerbare Energien in Zah - Nationale Und Internationale Entwicklung Im Jahr 2019. Bundesministerium Für Wirtschaft Und Energie (BMWi)’ (2020), 27. 12 Bundesministerium für Wirtschaft und Energie, 27. 13 Bundesministerium für Wirtschaft und Energie, 27. 14 Bundesministerium für Wirtschaft und Energie, 27. 15 Bundesministerium für Wirtschaft und Energie, 27. 16 Bundesministerium für Wirtschaft und Energie, 27. 11

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the EEG are therefore only a part of the total electricity generation from renewable energies (See Fig. 1). This (EEG-remunerated) electricity generation has risen since 2000 from around ten to 212.8 terawatt hours in 2019.17

2.1.2

Content of the Renewable Energy Act 2021

Overall Purpose of the Renewable Energy Act 2021 Germany’s renewables legislation, which was launched 20 years ago, has been held responsible for the significant growth in: (1) onshore wind, (2) solar PV, and (3) biogas, by establishing grid priority for these power sources and by guaranteeing them generous feed-in tariffs. Together with (4) offshore wind and (5) hydro power, early 2021, these renewable sources already covered half of Germany’s electricity consumption.18 Subject to various changes in the past, the (new) EEG 2021’s next overhaul was staying true to the act's latest principles of making renewable power producers more market-ready by sticking to renewable tenders, while at the same time incorporating new developments, such as the “2020 national hydrogen strategy” and electricity pricing for e-car charging. By 2027, the German government wants to propose how, and by when, renewables funding via the EEG could be stopped entirely—provided a fully market-driven renewables expansion would allow for this.19 Germany’s EEG 2021, in general, aims to make solar and wind power two of the most important electricity sources in the country.20 Through the changes to the law enacted upon in December 2020, renewables should grow faster, become cheaper and more accepted by neighbouring citizens, so that climate and clean energy targets may be reached.21

2050 Greenhouse-Gas Neutrality in the Power Sector Becomes Part of the Law Germany’s overall goal to become “greenhouse gas neutral” by the middle of the twenty-first century was officially made the guiding principle of the EEG 2021. “The aim of this law is also to ensure that before 2050 all electricity generated or consumed in the territory of the Federal Republic of Germany [. . .] is generated in a greenhouse gas-neutral manner”, the draft of the EEG 2021 read. It was hereby intended that both the electricity generated in Germany, and the power imported to

17

Bundesministerium für Wirtschaft und Energie, 27. Appunn, ‘What’s New in Germany’s Renewable Energy Act 2021’. 19 Appunn. 20 Appunn. 21 Appunn. 18

Fig. 1 Electricity generation from renewable energies with and without remuneration entitlement according to the Electricity Feed-in Act and the Renewable Energy Sources Act

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the country, would meet this requirement, which implies that the EU as a whole is (implicitly) expected by Germany to stay on track to its corresponding 2050 neutrality target as well.22

Alignment with More Ambitious EU Climate Target Pending On the moment that the German parliament voted the new EEG 2021, the EU member states had decided to increase the bloc’s 2030 climate target. For Germany this meant adjusting its national emission reduction goals. The tighter target implied that a faster expansion of renewable power sources would be necessary. One of the major sticking points in the final negotiations in the German parliament on the EEG 2021 have been these overall renewable expansion targets, which many believed should be even much higher to account for the future electricity demand from e-cars and heat pumps. This issue was ultimately resolved by postponing the adjustment of the target for the renewables share in power consumption (put at 65%) to Q1 2021.23 Shortly after this deadline, the German coalition reached an agreement to raise expansion targets for Solar PV and onshore wind in 2022, compared to the originally agreed legislation. Solar PV auctions are then to rise three-fold, from 1.9 gigawatts (GW) to 6 GW. The tender volume for onshore wind capacity will then be raised from 2.9 GW to 4 GW.24 However, no changes to the 2030 target and the predicted power consumption were made by the coalition parties who decided to refer these issues to the next government, to be elected in September 2021.25

2.2

Renewable Tenders: New Expansion Paths to Reach the 2030 Goal

The EEG 2021 aimed to increase solar PV capacity to 100 GW (52 GW before), onshore wind to 71 GW (55 GW before), biomass to 8.4 GW, and offshore wind to 20 GW by 2030—targets that slightly exceeded those from the “Climate Action Programme 2030” which was decided in late 2019.26 The EEG 2021 thereto sticks to 22

Appunn. Appunn. 24 Appunn. 25 Appunn. 26 Appunn; B Wehrmann, ‘Germany’s Climate Action Programme 2030’, 2019, https://www. cleanenergywire.org/factsheets/germanys-climate-action-programme-2030. Under the “Climate Action Programme 2030” (cf. Bundesregierung (2019)), the German government has obliged itself to contribute to the EU’s emissions reduction targets in line with the 2015 Paris Climate Agreement. At the UN Climate Action Summit in New York in September 2019, Chancellor Angela Merkel committed Germany to a goal of net-zero carbon emissions by 2050 and said that Germany 23

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annual deployment targets to make sure that capacity addition is compatible with the 65-percent-renewables target and allows for the adjustment of the power grid to incorporate the growing output from fluctuating renewables.27 It was, furthermore, enacted that an additional 500–850 MW per year would be tendered in so called “innovation auctions” that are not technology-specific and where a combination of onshore wind, solar PV, biomass and/or power storage devices work together to stabilise the power system. Agri- and floating PV solutions will also be allowed to participate in these auctions.28

2.3 2.3.1

Specific Issues of the EEG 2021 Interim Solution for Pioneer Installations

The EEG 2021 includes an interim solution for small solar PV installations (up to 100 kW) that will stop receiving payments in the 2020s because their 20-year funding period runs out. The German government had been of the opinion that marketing the power from these very small installations would not be economically viable for their owners. But in order to prevent them from being deconstructed, or from feeding in their power “wildly”, they were given an interim remuneration for their electricity until 2027, amounting to the market value minus marketing costs.29 Old onshore wind turbines, of which some 16 gigawatt could be decommissioned by 2025, were announced not to be benefiting from this rule, since even the oldest and smallest of these rarely have a capacity of under 100 kW. They do, however, retain their feed-in priority over conventional power sources and can, therefore, remain connected to the grid and market their electricity themselves. To alleviate the problems caused by low electricity market prices during the Covid-19 pandemic, the EEG 2021, moreover, included an interim solution for payments for onshore wind turbines until the end of 2021.30 In April 2021, the German government also cancelled planned auctions as of 2022 for old onshore wind turbines to secure continued operation after their 20-years feed-in tariffs run out due to concerns over illegal state aid by the European

supported a similar objective for the whole EU. The Climate Action Programme 2030 was seen as a crucial step in this regard. It was the result of months of deliberations by members of Merkel’s coalition government and the country's "climate cabinet,” which consisted of government ministers with portfolios that are especially relevant to climate action. The 173-page document lists concrete policy measures meant to ensure the mid-term CO2 reduction goals are achieved on the way to eventual carbon neutrality. See Wehrmann. 27 Appunn, ‘What’s New in Germany’s Renewable Energy Act 2021’. 28 Appunn. 29 Appunn. 30 Appunn.

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Commission. A temporary support payment to old wind parks during the Covid-19 pandemic had before been permitted by the European Commission, but further payments as of 2022 and further planned auctions were cancelled. The BMWi reasoned that, as of 2022, power prices will be stable at around 5 cents per kilowatt-hour again, so that wind installations can achieve enough revenues by selling their electricity on the market.31

2.3.2

Changes to the Renewables Levy on the Power Price

Nearly every power consumer in Germany helps to fund renewable energies by paying the so-called “renewables” or “EEG surcharge” (or “renewables levy”) on every kilowatt-hour used. However, some very energy intensive companies can be made (partially) exempt from the surcharge if it impairs their competitiveness on international markets. The levy is used to bridge the gap between the wholesale power price and the guaranteed remuneration that renewable installations receive per kilowatt-hour they feed onto the grid.32 Newer installations, in particular those whose feed-in payments have been determined through auctions, receive little more than the average wholesale power price on the market. But a big bulk of older installations are entitled to payments that exceed the market price. Depending on the wholesale power price and the amount of renewable electricity produced, the EEG surcharge changes every year. In 2020, the surcharge amounted to 6.76 cents which is around 20 percent of the price per kilowatt-hour that an average household pays.33 The reformed EEG 2021 made an important change to this system: The EEG levy is as of January 1, 2021, partially funded from the federal budget. The government’s climate package, agreed in autumn 2019, stipulated that the surcharge was to fall by 0.25 cents per kilowatt hour (kWh) in 2021, by 0.5 ct/kWh in 2022. Initially the government used EUR 11 billion towards this power price reduction and as of 2021, the revenue from the new CO2 pricing of transport and heating fuels is also used. The levy has been set at 6.5 ct/kWh for 2021.34 In April 2021, the coalition parties in German parliament also decided a cap on the EEG surcharge for the years 2023 and 2024. Funded from the state budget, the maximum will be set at 5 ct/kWh.35 The EEG also promised solutions for those companies that are exempt from paying the levy. The economic downturn due to the Covid-19 pandemic was threatening some companies to no longer reach the energy use thresholds for the

31

Appunn. Appunn. 33 Appunn. 34 Appunn; Wehrmann, ‘Germany’s Climate Action Programme 2030’. 35 Appunn, ‘What’s New in Germany’s Renewable Energy Act 2021’. 32

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exemption scheme, putting an additional burden on them if they had to pay the full renewables levy.36 Other elements of the new law also aimed at reducing costs for consumers, e.g., by decreasing the maximum values in tenders for onshore wind and photovoltaics, as well as increasing competition between solar PV systems by expanding the possible installation area.37

2.3.3

Raise Public Acceptance of Renewables Expansion

With the new EEG, the government wanted to make good on its promise to foster acceptance of renewable power installations. It, therefore, guaranteed communities that allow wind parks to be built a share of the park’s income amounting to 0.2 Cent/ kWh for 20 years. This amount can be reduced if the wind park operator offers discounted power supply contracts to people living nearby. In addition, wind park operators were said to pay the majority of their taxes to the municipalities where the turbines are located, instead of at their official company address.38 The government also wanted to help the so-called “tenant electricity scheme” get off the ground. While homeowners have long been able to profit from the energy transition by installing solar panels on their roofs and receiving feed-in payments in return, people living in rented flats had not been able to participate. Landlords of such blocks of flats often themselves do not have enough incentives to install solar PV on these houses and letting their tenants use it. The EEG 2021, therefore, raised the level of the tenant electricity surcharge and made it possible for landlords to be exempt from paying commercial tax to increase attractiveness even further.39

2.3.4

More Wind Turbines and Biomass in the South

In an attempt to incentivise wind expansion in (less windy) southern Germany, the new EEG introduced a “quota for the south” (15% of successful tenders have to come from the south between 2021 and 2023 and 20% as of 2024). A similar quota (of 50%) also applies to tenders for biomass installations. The idea is to reduce the imbalance in generating capacity tilted towards the north of the country, which would have negative implications if north-south grid connections are not completed in time before nuclear power stations in the power-hungry southern industry regions are shut down entirely at the end of 2022.40

36

Appunn. Appunn. 38 Appunn. 39 Appunn. 40 Appunn. 37

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In return, the law gets rid of the so called “grid congestion zones”, areas (mostly in the North of Germany) where onshore wind expansion had to be smaller because a high input of more renewable power would have likely caused grid problems. The ministry stated that this instrument did not work “for several reasons”.41

2.3.5

Negative Power Prices

Negative power prices occur when very low electricity demand, e.g., on national holidays, coincides with high power input from solar PV and wind during particularly sunny and/or windy days. Negative market prices drive up the renewables surcharge, so the EEG 2021 forced new renewable installations to react more flexibly to avoid excess production during such times. They, hence, cease to receive their feed-in remuneration when the spot market price is negative for four, instead of six consecutive hours.42 The government also reasoned that plant operators will have to “find their own ways of hedging against negative price phases, e.g., by entering into cooperation agreements with storage operators, by using new plant technology that enables more continuous electricity production or by entering into hedging transactions on the electricity futures market”. The rule may be tightened even further, after the energy ministry will have reviewed the renewable targets in the course of 2021.43

2.3.6

Solar PV

The EEG 2021 obliges solar PV installations on rooftops of over 750 kilowatt-peak (kWp) to participate in tenders. All smaller rooftop PV installations receive a set feed-in remuneration, the same applying to citizen run solar parks. The EEG 2021 also gives the option to rooftop PV systems as of 300 kW to participate in tenders. All systems between 300 and 750 kWh are offered the choice of either participating in a tender or taking advantage of fixed feed-in tariffs and consume part of their electricity themselves. The latter only receives feed-in payments for 50 percent of the electricity they generate.44

2.3.7

Incorporating Hydrogen

In line with its new hydrogen strategy, the government (partially) exempted producers of green hydrogen from having to pay the renewables surcharge on the power

41

Appunn. Appunn. 43 Appunn. 44 Appunn. 42

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they use. Companies producing hydrogen with renewable electricity sources and who make sure that their facilities and product contribute to grid stability and the overall sustainable development of the energy supply, are fully exempt from the levy, others only partially. However, these green hydrogen producers have to use renewable power installations that have not been subsidised via the Renewable Energy Act (EEG), e.g., those getting renewable electricity under a power purchase agreement (PPA).45 As one of the key technologies for a climate-neutral society, and in the view of the high costs during the time of scaling and learning, cost-reducing framework conditions are needed for green hydrogen, the government reasons. The support is also given to prevent production from migrating abroad.46 The German government estimated that up to 290 hydrogen projects will apply for the partial or complete exemption by 2030. By that time, the market ramp-up phase for hydrogen will be completed and a full exemption from the EEG levy will no longer be necessary, the government argues.47

2.4

Some Examples of Previous Tenders

2.4.1

December 22, 2020: Clean Energy Wire

An onshore wind tender in Germany was oversubscribed for the first time in 2020. For a tendered capacity of 366 MW, 96 bids with a combined volume of 657 MW were submitted, of which 58 projects with a combined capacity of 399 MW were successful. Winning bids were mainly located in the northern and western German states of Schleswig-Holstein (31 projects), North Rhine-Westphalia (11) and Lower Saxony (8); they were to receive feed-in support of between 5.59 and 6.07 cents per kilowatt-hour.48 In 2020, a total of 3860 MW of onshore wind was put out to tender, but only 2672 MW were awarded, according to the German Wind Energy Association (BWE). “1188 MW of lost volume weigh heavily on the energy transition. The main reason for the last auction of the year being oversubscribed was the uncertainty around new rules under the 2021 Renewable Energy Act that was to come into effect on January 1, 2021.49 A simultaneously held solar PV tender was also heavily oversubscribed—186 projects with a total volume of 936 MW met an auctioned capacity of 256 MW. The

45

Appunn. Appunn. 47 Appunn. 48 K Appunn, ‘Onshore Wind Bids Exceed Auctioned Capacity for First Time in 2020 in Germany’, 2020, https://www.cleanenergywire.org/news/onshore-wind-bids-exceed-auctioned-capacity-firsttime-2020-germany. 49 Appunn. 46

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45 winning bids will receive between 4.88 and 5.26 ct/kWh.50 Unlike onshore wind auctions, which had been undersubscribed for the last two years (2019 and 2020), interest in solar PV tenders remained high. By contrast, the building of new wind farms in Germany got impeded by lengthy approval processes and local opposition, leading to a sharp drop in added capacity since 2018. Changes to the new renewable energy legislation that took effect in January 2021 are to boost public acceptance of turbines. The current share of renewable power in Germany’s electricity consumption stands at around 46 percent. The government target for 2030 is 65 percent, with many stakeholders arguing that a growing amount of e-cars and electric heatings will require much more than that, especially in the light of more ambitious EU climate targets.51

2.4.2

May 3, 2021

Germany’s onshore wind tender of May 2020 failed to attract enough bidders for the total 1500 MW on offer. Wind developers submitted a total of 91 bids for only 718 MW, of which the agency accepted 89 for 691 MW after excluding two bids. Successful bid prices ranged between 5.15 and six cents per kilowatt-hour. The largest allocations went to the states of Schleswig-Holstein, which had 20 successful bids with a total 173 MW; North Rhine-Westphalia, with 20 awards and 116 MW; and Brandenburg, with 18 awards and 165 MW.52 By contrast, the solar photovoltaics tender was oversubscribed. Open to projects of up to 10 MW in capacity, the PV tender received 288 bids with a combined capacity of 1504 MW. The regulator selected 103 projects totalling 620 MW. The biomass tender for a total of 168 MW, however, was also undersubscribed, with only 60 bids for 44 MW submitted. A tender aimed at innovative renewable energy technologies for a volume of 250 MW saw greater interest, with 43 bids for 509 MW filed. The regulator accepted 18 bids for a total of 258 MW, all of which included solar projects combined with storage systems.53 It was again reported that onshore wind power—the cornerstone of Germany’s decarbonisation plans—suffered from chronically low additional installations in the past years. The industry appeared to have achieved a turnaround in 2020, connecting almost 50 percent more turbines to the grid than in the year before, but lobby groups kept warning that new construction still fails to match climate targets and rising green power demand.54

50

Appunn. Appunn. 52 Meza, ‘Few Bids for Onshore Wind but Big Interest in Solar in Germany’s Renewables Tenders’, 2021, https://www.cleanenergywire.org/news/few-bids-onshore-wind-big-interest-solar-germanysrenewables-tenders. 53 Meza. 54 Meza. 51

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Tender Procedures General

According to the second CEER-report, the highest rate of disqualification based on formal errors is observed in solar tenders. The major challenge for solar tenders is the submission of the correct documents as proof of the material prequalification (e.g. building permit). The disqualification rate ranges from 2% to 22% and averages 11% (over 20 rounds). For biomass tenders, the average disqualification rate is 10% (over 5 rounds). In onshore wind tenders, the average disqualification rate is 5% (over 15 rounds).55

2.5.2

Description of the Tender Procedure in General

Basic Content of a Tender In the tendering procedures, the amount of the values to be applied as the basis for calculating the payment entitlements (“market premium”) for electricity from onshore wind turbines and solar installations from a size of 750 kilowatts is determined on the basis of bids.56 Bids can be submitted for both onshore wind turbines and solar installations.57 The bids must refer to (1) a specific value in cents per kilowatt hour (= “bid value”) for the electricity generated in the installations, and (2) to an installation capacity to be specified in kilowatts (= “bid quantity”).58 The bids with the lowest bid values shall in principle be awarded a contract until the requested volume of the respective bid date is reached. The ranking can be changed by the distribution grid components.59

Who Is Allowed to Tender In principle, anyone can participate in the tenders.60 55 Council of European Energy Regulators, ‘2nd CEER Report on Tendering Procedures for RES in Europe – Renewable Energy Sources Work Stream of Electricity Working Group. C20-RES-7603’, 17. 56 Bundesnetzagentur, ‘Verfahren Der Gemeinsamen Ausschreibungen’ (2021), https://www. bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ Ausschreibungen/Gemeinsame_Wind_Solar/Ausschreibungsverfahren/Gema_Verfahren_node. html. 57 Bundesnetzagentur. 58 Bundesnetzagentur. 59 Bundesnetzagentur. 60 Bundesnetzagentur.

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With regard to bids for onshore wind turbines, this is a project-based procedure, i.e. the awards are assigned to the notified permits; there is a bidder reference in that the bidder remains the debtor of the collateral.61 In the case of bids for solar plants, there is a stronger bidder reference: the bids remain assigned to the bidder until commissioning; there is a project reference in the sense that if the plants are erected at locations other than those originally specified in the bid, a small reduction in remuneration must be accepted.62

Bid Requirements Bids may be submitted for approved onshore wind turbines and for solar installations with a capacity of at least 750 kilowatts to be installed.63 The federal emission control permits for onshore wind turbines must have been issued three weeks before the bidding deadline. In addition, the notification of the approval to the Market Master Data Register of the Federal Network Agency must also have been made three weeks before the bidding date. The approved installations must not have been awarded a contract in a tendering procedure.64 Bids for solar installations may be submitted for installations on open spaces as well as for solar installations that are mounted on, on or in a building or other structural facility.65 Bids for ground-mounted systems can only be awarded if they relate to areas:66 • which was already sealed at the time of the resolution on the establishment or amendment of the relevant development plan; • which, at the time of the resolution on the establishment or amendment of the corresponding land-use plan, was a conversion area from economic, traffic, residential or military use; • which, at the time of the resolution on the establishment or amendment of the corresponding land-use plan, were located along motorways and railways, provided that the open-space facility is to be erected at a distance of up to 110 m, measured from the outer edge of the paved carriage way; • which are located in the area of an adopted development plan in accordance with Article 30 of the Building Code, which was drawn up before September 1, 2003 and was not subsequently amended with the purpose of erecting a solar installation;

61

Bundesnetzagentur. Bundesnetzagentur. 63 Bundesnetzagentur. 64 Bundesnetzagentur. 65 Bundesnetzagentur. 66 Bundesnetzagentur. 62

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• which were designated as a commercial or industrial area within the meaning of Article 8 or Article 9 of the Land Use Ordinance in an approved development plan before January 1, 2010, even if the designation was amended after January 1, 2010 at least also with the purpose of erecting a solar installation; • for which a procedure in accordance with section 38 sentence 1 of the Building Code has been carried out, or • which were or are owned by the Federal Government or the Bundesanstalt für Immobilienaufgaben (BImA) and were administered by the BImA after December 31, 2013 and published on its website for the development of solar installations. The above-mentioned area restrictions do not apply to solar systems that are to be installed on, at or in a building or other structural facility.67 Bids must refer to an installed capacity of at least 750 kilowatts. Bids for groundmounted solar installations may, moreover, not exceed 10 MW, unless they are located in a district listed in an Appendix 2 of the GemAV. In this case, the bid quantity may not exceed 20 MW.68 The electricity produced in the plants may not be used for self-supply during the entire 20-year promotion period. This must also be observed by a possible new owner of the plant in the event of a subsequent transfer. Exceptions are only possible under the strict conditions of Section 27a sentence 2 EEG.69

Frequency and Announcement of Tenders Twice a year, tenders are held in accordance with the GemAV. On 1 April and 1 November, 200 MW of installed capacity are put out to tender.70 The Federal Network Agency announces the most important parameters of the tender round six to eight weeks before the respective date on these pages on the internet.71

Bid Submissions Bids must be received at the Bundesnetzagentur’s Bonn site by the bid deadline. The format requirements of the Federal Network Agency must be adhered to when

67

Bundesnetzagentur. Bundesnetzagentur. 69 Bundesnetzagentur. 70 Bundesnetzagentur. 71 Bundesnetzagentur. 68

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submitting bids. Late receipt of bids or violations of the format requirements will result in the exclusion of the bid.72 Bidders must download all required forms from the internet and fill them out on their computer using a suitable PDF reader programme.73 Forms filled in by hand do not comply with the format requirements and will not be admitted.74 The information must be provided as precisely as required by the GemAV and the EEG.75 The bids are to be sent by post with all the required documents to the address given in the contact box mentioned on the website of the Bundesnetzagentur. Alternatively, they may be delivered by messenger. Electronic submission or submission of bids by fax is not possible.76 The bid form must be enclosed in its own sealed envelope (envelope within envelope). It is mandatory to comply with the double envelope rule to ensure that the bid is not opened until after the bid deadline, as provided for in the EEG. Bids that are not submitted in a separate envelope will be excluded from the further procedure. Enclosing further documents in the bid envelope is harmless, but the bid form must be included.77

Award Procedure After the bidding deadline, the Federal Network Agency examines which of the bids received in time meet the above-mentioned requirements for participation in the tendering procedure.78 The bids that meet the requirements will be awarded a contract if the sum of the installed capacity stated in the bids does not exceed the total tendered volume.79 If the sum of the capacity of the bids exceeds the tender volume, bids will be awarded until the tender volume is reached; the last bid will be awarded the full amount. The Federal Network Agency ranks the bids on the basis of the bid values modified by the distribution grid component. If bids are equal, the bids with the lower stated capacity are awarded first. If the bid value and bid quantity are identical for two bids and the bids are at the award limit, the decision is made by drawing lots.80

72

Bundesnetzagentur. Bundesnetzagentur. 74 Bundesnetzagentur. 75 Bundesnetzagentur. 76 Bundesnetzagentur. 77 Bundesnetzagentur. 78 Bundesnetzagentur. 79 Bundesnetzagentur. 80 Bundesnetzagentur. 73

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The distribution grid component is intended to limit the expansion in districts where there are already many renewable energy installations in relation to the load. If the expansion of renewable energies exceeds the maximum load, the district becomes a distribution grid expansion area.81 For the bids submitted there, a distribution grid component was calculated for onshore wind energy and for solar plants, which then influences the bid value as a penalty. The distribution grid component does not apply if the plants are to be connected to the extra-high voltage grid. On the other hand, the bids do not enjoy a discount on the subsidy if they are awarded a contract - the unchanged bid value stated in the bid remains the value to be applied. The distribution network expansion areas and distribution network components were determined by the Federal Network Agency.82 For bids relating to approved plants in the grid expansion area—the decisive factor for classification is the location, not the grid connection point—the following award procedure applies: Bids are awarded up to the upper limit stated in the announcement. If this limit is reached, no further bids for the grid expansion area will be considered in the respective round, even if they should be lower than bids outside the grid expansion area.83 All bids are awarded at the bid value specified in the respective bid (bid price procedure = “pay as bid”). The results of the award procedures are announced on the internet under the article on the respective bid date.84 The surcharges for onshore wind energy are tied to the approved installations specified in the bid. If the approval changes subsequently, the surcharge remains effectively allocated to the installations specified in the bid and covered by the approval. A plant may be supported up to the size specified in the bid. Electricity from capacity increases that are not covered by the awarded bid quantity cannot be promoted. An award remains limited to the specifications stated in the bid and is not expandable. The distribution grid expansion areas and the distribution grid components have been determined in a stipulation by the Federal Network Agency.85 Granted surcharges for solar installations expire two years after the announcement of the award if no application for the issuance of a payment authorisation has been submitted for them by then. Awards for wind turbines expire 30 months after the announcement of the award if the turbines have not been realised by then. In these cases, the bidder must pay a penalty.86 For bids that are not accepted, the security paid is returned. In addition, the fee paid is reduced by a quarter and the amount paid in excess is also transferred back to

81

Bundesnetzagentur. Bundesnetzagentur. 83 Bundesnetzagentur. 84 Bundesnetzagentur. 85 Bundesnetzagentur. 86 Bundesnetzagentur. 82

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the account from which the payment was received without further action on the part of the bidder.87

After the Award Onshore Wind As soon as bidders have commissioned their plant and the grid operator has confirmed the information in the MaStR, bidders can have the deposited security refunded. In order to ensure that the installation can be unequivocally assigned to the correct surcharge and to transfer the security to the correct bank account, the Federal Network Agency requires the following form signed and in the original: “Application for refund of security”.88 Solar Surcharges for solar installations must be allocated to the installations put into operation so that a payment authorisation can be issued for the electricity generated there.89 In each case, the principles that apply to the tenders for the individual technologies must be observed.90

3 France 3.1

Regulatory Framework

The regulatory framework on energy auctions in France lies contained in the Energy Code (“Code de l’Energie”)—more precisely in section 3 of chapter 1 of TITLE 1 of book III of the legislative part of the energy code, and section 2 of chapter 1 of TITLE 1 of book III of the regulatory part of the Energy code.91 Pursuant to Article L311-10 of the Energy Code, any natural or legal person may participate in such a call for tenders subject to the provisions of Articles L. 2224-32 and L. 2224-33 of the General Code of local authorities.

87

Bundesnetzagentur. Bundesnetzagentur. 89 Bundesnetzagentur. 90 Bundesnetzagentur. 91 ‘Code de l’énergie’ (2021), https://www.legifrance.gouv.fr/codes/texte_lc/LEGITEXT000023 983208. 88

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According to Article L311-10-1, the competitive tendering procedure referred to in Article L. 311-10 shall be conducted in accordance with the principles of transparency and equal treatment of candidates. In order to designate the successful candidate or candidates, the administrative authority shall base itself on the price criterion, the weighting of which shall represent more than half of that of all the criteria, and, where appropriate, on other objective, non-discriminatory criteria linked to the purpose of the competitive tendering procedure, such as: 1° The quality of the bid, including technical merit, environmental performance, energy efficiency and the innovative nature of the project; 2° The profitability of the project; 3° The security of supply; 4° To a limited extent, the share of capital held by the inhabitants residing in the vicinity of the project or by the local authorities or their groupings on or near whose territory the project is to be located by the companies carrying the project, whether they are governed by Book II of the Commercial Code, by Articles L. 1521-1 et seq. of the General Code of Local Authorities or by Law No. 47-1775 of September 10, 1947, on the status of cooperation, as well as the share of capital offered to these inhabitants, local authorities or groupings The conditions of execution may take into account social or environmental considerations and pursue sustainable development objectives reconciling economic development, environmental protection and enhancement, and social progress. These performance conditions may not have a discriminatory effect on potential candidates. They are mentioned in the specifications. By virtue of Article 311-1, the administrative authority designates the successful candidate or candidates and issues the authorizations provided for in Article L. 311-5 under conditions set by regulation. It may decide not to proceed with the competitive bidding procedure. According to Article L311-12, the selected candidates designated by the administrative authority benefit, according to the modalities provided for by the competitive bidding procedure: 1° Either of a contract of purchase for the produced electricity; 2° Or a contract offering a complement of remuneration to the produced electricity. According to Article L311-13-5, first paragraph, facilities for which a request for a contract has been made pursuant to Article L. 311-12 may be subject to an inspection when they are commissioned or to periodic inspections, making it possible to ensure that these facilities have been built or are operating under the conditions required by the regulations, by the conditions of the competitive bidding procedure or by the contract from which they benefit pursuant to the same Article L. 311-12. These inspections are carried out at the producer's expense by approved organizations. According to Article L311-13-5, second paragraph, a decree in Council of State specifies the conditions of application of the present article. It fixes in particular, according to the characteristics of the installations, the periodicity, the methods of

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operation of the system of control and, in particular, the conditions of approval of the organizations controllers and the conditions in which the results are held at the disposal of the administration or, when certain nonconformities are detected, transmitted to the competent administrative authority.

3.2

2016-2021: CRE4

April 2021 meant the end of the French program for PV tenders known as “CRE4” which started in 2016. By April 21, 2021, CRE4 had enabled over 7.2 GW of solar capacity to benefit from a subsidized tariff (feed-in tariff or feed-in premium). A few months before the last CRE4 tenders and the launch of the PPE2 (or CRE5), Finergreen—a “financial advisory boutique for renewables”92—evaluated their impact on the French solar industry.93 According to Catala and Barallon, the CRE4 program was marked by a strong wave of consolidation led by energy companies and utility majors—both French and foreign—which played a crucial role in the dynamics described above.94 CRE4 also provided the opportunity to increase capital deployment into the green economy.95 One of the objectives of CRE4 was, furthermore, the integration of renewable electricity into the free market economy96 (See Table 1).

3.3

Specific Tender Procedures

Based upon the abovementioned regulatory framework, the ministry responsible for energy may use bidding procedures at irregular intervals to reach the targeted production of electricity from renewable sources (art. L311-10, code de l’énergie). In this regard, the multi-annual programming for energy (Programmation Pluriannuelle de l’Énergie) set out technology-specific targets in terms of total installed capacity to be developed by 2018 and 2023. The conditions for tender are described in the invitations to tender (Art. 311-10, Code l’Énergie).97

‘Fingergreen. Financial Advisory Boutique for Renewables’, 2022, https://finergreen.com/. L Catala and T Barallon, ‘Analysis of France’s CRE4 PV Tenders and Their Impact’, 2021, https://www.pv-magazine.com/2021/04/21/analysis-of-frances-cre4-pv-tenders-and-their-impact/. 94 Catala and Barallon. 95 Catala and Barallon. 96 Catala and Barallon. 97 H Vedalic, ‘Tenders (Complément de Rémunération Par Procédure de Mise En Concurrence)’, 2021, http://www.res-legal.eu/search-by-country/france/single/s/res-e/t/promotion/aid/tendersappels-doffres/lastp/131/. 92 93

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Table 1 Main PPAs signed on the French marketa Date 25/03/ 2019 21/05/ 2029 26/06/ 2019 28/11/ 2019 04/12/ 2019 05/02/ 2020 09/06/ 2020 09/06/ 2020 07/07/ 2020 17/02/ 2021 10/03/ 2021 15/02/ 2021 a

Acheteur Metro & Agregio Boulanger

Producteur Eurowatt

SNFC Energie Société Générale Crédit mutuel ADP

Voltalia

Auchan Auchan Orange

Voltalia

Eurowatt & Agregio Voltalia Urbasolar & Gazel Energie Voltalia Boralex & Eurowatt Boralex

RATP & Agregio Orange

EDF

Orange

Engie

Total

Technologie Eolien brownfield Solaire greenfield Solaire greenfield Eolien brownfield Solaire greenfield Solaire greenfield Solaire greenfield Eolien brownfield Eolien brownfield Eolien brownfield Solaire greenfield Solaire greenfield

Volume 2.4 MW 23–30 GWh 5 MWc

Durée (an) 3

143 MWc200 GWh

25

11.5 MW 27 GWh 10 MWc 15 GWh/an 40 MWc

3

60.7 MWc

20

n.a.

3

39 MW 67 GWh/an 60 GWh/an

5

80 MWc 100 GWh/an 51 MWc

20

25

25 12 + 3 + 3 + 3

3

15

Catala and Barallon Wind energy Solar energy

Biogas

Hydropower Biomass

The conditions for tender are described in the invitation to tender (Art. L311-10, Code l’Énergie). The multi-annual programming for energy foresees regular bidding procedures for the following application segments until 2019 (art. 3, Décret n° 2016-1442): • Ground-mounted solar plants: 2 calls per year until 2019; with a total targeted capacity of 1000 MW per year • Rooftop solar plants: 3 calls per year until 2019; with a total targeted capacity of 450 MW per year The conditions for tender are described in the invitation to tender (Art. L311-10, Code l’Énergie). The multi-annual programming for energy foresees annual bidding procedures for the development of methanisation projects for a total capacity of 10 MW per year until 2019 (art. 3, Décret n° 2016-1442). The conditions for tender are described in the invitation to tender (Art. L311-10, Code l’Énergie). The conditions for tender are described in the invitation to tender (Art. L311-10, Code l’Énergie). The multi-annual programming for energy foresees annual bidding procedures for the development of biomass projects for a total capacity of 50 to 100 MW per year until 2019 (art. 3, Décret n° 2016-1442). The conditions for tender are described in the invitation to tender (Art. L311-10, Code l’Énergie).

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Koen Byttebier Full Professor at the Faculty of Law and Criminology of the Free University of Brussels (Vrije Universiteit Brussel, VUB). Professor of Economic, Financial and Monetary Law. Promotor of the VUB Fund for Research about the values of the socio-economic order at Vrije Universiteit Brussel. Kim Van der Borght Professor International Economic Law and Diplomacy at the Faculty of Law and Criminology of the Free University of Brussels (Vrije Universiteit Brussel, VUB).

The Energy Transition and the Use of EU Funds in the Spanish and Italian Legal Systems Damiano Fuschi

Abstract For decades, the EU has played a central role as policymaker in environmental protection. In particular, its role has become important in the climate agenda. Through the combined disposal of the Climate Pact and the European Green Deal, it is possible to identify the main components of the EU’s climate change policy. These changes mainly depend on the energy transition, a path that aims to lead EU members to zero-carbon global energy. The first aim of this work is to analyse the interpretation and functions of legal certainty of the acts cited, and whether they are a constitutional principle of EU law. Secondarily, we analyse the impact of these principles on the domestic legal framework of the Member States, in particular the impact they are producing in Spain and Italy. In conclusion, the work refers to the principle of legal certainty, which can anchor these evolving and sometimes turbulent legal developments, and reconcile the conflicting roles of law required by the energy transition, on the one hand, and investment certainty, on the other.

1 Introduction Analysing the energy transition policy requires a discussion on the legal certainty as a constitutional principle, both at the EU level and at the state one. Moreover, it requires to explore how the energy transition operates in the low-carbon transition and how the conflicting roles of the energy transition policies are handled in the implementation of the new strategies of national law. A new perspective is also given by the National Recovery and Resilience Plans (hereinafter NRRP) of the EU; with a never-seen-before amount of money given to each member state to implement green and digital policies, EU member states can reach a higher degree of modernisation of their energy infrastructures under the coordination of EU very quickly. In the past, one of the main problems in developing energy transition policies was related to the lack investment certainty, with the NRRPs this aspect would probably D. Fuschi (✉) University ‘la Statale’ of Milan, Milan, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_9

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be reduced. Nonetheless, the energy transition calls for the continuous development of legal frameworks to respond to the evolving energy sector. This continuous change is detrimental to the investment needed to finance the transition. The principle of legal certainty can function as a means of anchoring these evolving and sometimes turbulent legal developments and reconcile the conflicting roles of law required by the energy transition. The European Union (EU) energy sector is undergoing structural changes, referred to as the energy transition.1

2 The EU Normative Legal Framework The definitions of the transition vary, but the key drivers are the same: energy production and usage must become sustainable while simultaneously remaining accessible and available to members of society. This complex and consequential global phenomenon requires technological, economic, political and legal efforts. In the EU, the energy transition process has involved the establishment and continual development of an extensive legal framework since the 1990s.2 The origins of the legal framework are to be found in the first and second energy packages,3 which concentrated on liberalizing the energy markets through sectorspecific rules.4 This evolution of the energy sector has continued in the third energy package, adopted in 2009.5 1

Verbong and Loorbach (2012). Huhta (2020), pp. 425–44. 3 Talus (2017), pp. 380–88. 4 The first energy package entered into force in 1997 and the second in 2003. See, for example, Directives96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity, [1997] OJ L 27/20 and 2003/54/ EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC, [2003] OJ L 176/37. 5 See, for example, Directives 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/ 54/EC, [2009] OJ L 211/55 (hereinafter the ‘2009 Electricity Directive’) and Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC, [200(9] OJ L 140/16.). But also in the legal measures that followed it between 2011 and 2017 (Including, but not limited to Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency, [2011] OJ L 326; Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/ 30/EU and repealing Directives 2004/8/EC and 2006/32/EC, [2012] OJ L 315/1; Regulation (EU) No 347/ 2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infra- structure and repealing Decision No 1364/2006/EC and amending Regulations (EC) No 713/2009, (EC) No 714/2009 and (EC) No 715/2009, [2013] OJ L 115/39; 2

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In addition to the low-carbon transition, the electrical industry has experienced a fundamental revision of the roles of the state and the markets in sector governance.6 Since the 1990s, national and monopolized energy markets have increasingly merged into a more connected and competitive European market where market’s forces rather than governments predominantly direct investment. EU energy legislation is built on the idea that an integrated and competitive internal energy market based on solidarity and trust is the most effective platform for implementing the low-carbon transition’s required investments. Law does not evolve at the same speed of technology; therefore, we are often in a paradoxical situation in which new technologies cannot be fully used because legal provisions are based on the typical models of the pre-digital world.7 In fact, the constant changing of the technology—determined by the speed of technological progress and the diffusion of new applications—leads the Legislator8 to frantically (and often uselessly) discipline the asset of the relationships and emerging interests, and the legal rules to be designed that will assume substance through administrative and jurisdictional decisions. This aspect highlights even more the necessity of an innovative reconfiguration of the functioning of the regulation of the energy sector.9

Commission Delegated Regulation (EU) 2016/89 of 18 November 2015 amending Regulation (EU) No 347/2013 of the European Parliament and of the Council as regards the Union list of projects of common interest, [2016] OJ L 19; Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October 2017 concerning measures to safeguard the security of gas supply and repealing Regulation (EU) No 994/ 2010, [2017] OJ L 280.) The most recent legal instruments concerning the internal electricity market only entered into force in July 2019 and form part of the fourth, so-called Winter Package that promises clean energy for all Europeans (Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, Clean Energy For All Europeans, COM (2016) 860 final. Regulation (EU) 2019/ 943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity, [2019] OJ L 158/54 (hereinafter the ‘Recast Electricity Regulation’); Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU, [2019] OJ L 158/125 (hereinafter the ‘Recast Electricity Directive’); Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/ EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council, [2018] OJ L 328/1 (hereinafter the ‘Energy Union Governance Regulation’); Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources, [2018] OJ L 328/82 (hereinafter ‘RED II’). In this article, these legal instruments are collectively referred to as the ‘Winter Package’. 6 Huhta (2020). 7 Fuschi (2021), pp. 86–102. 8 See Art. 194 TFUE. 9 Huhta (2018), pp. 920–33.

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Investments in the electrical business are stimulated by price signals based on supply and demand. 10 The mechanism of the market necessitates that prices increase to a level that indicates scarcity. In general, permitting high power costs is politically unfavourable; as a result, governments have a tendency to control electricity prices, prohibiting market-based price signals.11 In a circumstance where market-based price formation has been hampered, new legal mechanisms are again required to secure investment.12 During summer 2022 in Europe many problems have arisen in the field of energy prices. Energy costs have soared because the conflict in Ukraine has reduced supplies of Russian gas. Prices have also risen because demand for energy has rocketed since Covid restrictions ended. These price increases are now being passed on to customers through an increase to the energy price cap. This sets the highest amount suppliers are allowed to charge domestic households for each unit of energy they use.European Union leaders are exploring a range of options for gas price caps, over which they have been divided for weeks, according to a new draft of conclusions is waited for the end of October 2022. The EU’s 27 countries have been deadlocked for weeks over whether and how to cap gas prices as part of efforts to tame soaring energy prices, as Europe heads into a winter of scarce Russian gas, a cost of living crisis and a possible recession. These regulatory hazards enhance the total risk of investments in low-carbon technologies. Regulatory risk is widely recognised as one of the most significant concerns in the energy business, especially for renewable energy.13 As risk is one of the most prominent variables in investment decisions, a rise in the total level of risk can have a substantial impact on whether or not low-carbon investments are made.14 Moreover, the manifestation of these risks frequently results in legal conflicts between the state and the investor.15 Financial assistance programmes for renewable energy are an illustration of this. On the basis of EU energy law, the majority of Member States have enacted financial assistance programmes to stimulate renewable energy investments. During the last two decades, some Member States have had as many as twenty distinct types of assistance programmes for renewable energy and energy efficiency, which they are continually modifying to strike a balance between rewarding low-carbon investment and avoiding excessive state expenditure.16 A typical dispute in the renewable energy sector occurs when a state retroactively reduces the economic incentives

10

Huhta (2019). Bellantuono (2017), pp. 274–92. 12 See Jurisprudence: T-356/15 Austria v. Commission, EU:T:2018:439; T-793/14 Tempus Energy and Tempus Energy Technology v. Commission, EU:T:2018:790. Talus, ‘Decades of EU Energy Policy: Towards Politically Driven Markets’. 13 Sisodia et al. (2016), pp. 303–313. 14 Ibid, Sisodia, Soares, and Ferreira. 15 Huhta (2020). 16 Bellantuono, ‘The Misguided Quest for Regulatory Stability in the Renewable Energy Sector’. 11

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guaranteed to a renewable energy investor in order to limit state expenditures,17 and the investor challenges the state’s decision on the basis of a violation of the principle of the protection of legitimate expectations.18 Given this normative frame, it is easy to see how the energy policies of recent decades have been based on erroneous premises with respect to the implementation of an energy system not tied exclusively to fossil sources. This is intertwined with a series of EU policies. On the one hand, achievements attributable to environmental and climate policies, driving matter in EU action, have been reached. On the other hand, what has not been achieved can be attributed to those principles of free markets and free competition that underlie the functioning of the EU and that have inexorably slowed the energy transition. Thus, we see that, as it often happens with environmental policies, the necessary balancing of values has led to an inexorable slowdown in the implementation of innovative strategies to enable a turnaround in environmental and climate degradation. The ambitious goals set by Ursula Von der Leyen when she took office at the European Commission should be analysed in this light. Despite being later partially abandoned due to the outbreak of the pandemic, these goals were then set again as part of the policies to be implemented through the NRRPs. However, the goals set for 2050, primarily the neutrality of the European continent with respect to greenhouse gases, seem difficult to achieve, even considering the policies being put in place. The risk is to act in the realm of political proclamation without the support of appropriate regulatory devices for the implementation of what has been established in the political arena.

3 The Case of Spain Within the EU, Spain is a climate hot spot19 as well as the fifth-largest GHG emitter, contributing to 8.98% of the EU-27’s emissions in 2017.20 Spain’s renewable energy potential is significant. It has abundant renewable resources, in excess of its energy demand, making them the key ‘energy asset’ of Spain.21 In terms of renewable technologies, Spain is the sixth largest producer of wind power globally, the fifth in terms of net wind installed capacity and the first in terms of the percentage of power

17

Sharpston (1990), p. 87. Case C-349/17 Eesti Pagar AS v. Ettevõtluse Arendamise Sihtasutus and Majandusja Kommunikatsiooniministeerium, EU:C:2019:172. 19 Guiot and Cramer (2016), pp. 465–68. 20 Eurostat (2020). 21 Montoya et al. (2014), pp. 509–531. 18

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produced from wind.22 As for solar photovoltaic, Spain is the ninth largest producer globally and the sixth in terms of percentage of power produced by solar photovoltaic. Spain is also an energy dependent country, with 74% of its energy being imported. Moreover, Spain is the eighth largest importer of oil worldwide and the 10th largest gas importer.23 Beyond Spain’s contribution to international climate action through the EU’s Nationally Determined Contributions (NDC), Spain’s renewable energy sources (RES) and energy dependence signal its alignment of interests and values in supporting a low carbon transition and the supporting legislative framework that enables it. Spain’s legislative and executive climate acquis for a low carbon transition includes ten climate laws,24 forty-five climate policies,25 including the International Energy Agency, ‘World Energy Outlook 2019’, The World in Figures, 2019, 32–32. Ibid, International Energy Agency. 24 Law 2/2013 on the protection and sustainable use of coastal areas; Law 8/2013 on urban rehabilitation, regeneration and renovation; Law 34/2007 on air quality and atmosphere protection, last amended by Law 11/2014; Law 34/1998, on the hydrocarbons sector; Law 24/2013 on the Electric sector; Law No. 17/2015 on the National Civil Protection System; Royal Decree-Law No. 10/2017 on urgent measures to mitigate the effects caused by drought in certain river basins; Law no 1/2005 regulating the greenhouse gas emission rights trading scheme and creating the Climate Change Policy Coordination Commission (CCPCC); Royal Decree-Law 23/2020 which approves measures in the field of energy and in other areas for economic recovery; Law 7/2021 on climate change and energy transition. 25 Royal Decree 690/2021 regulating the Ecological Restoration and Resilience Fund; Spain’s recovery and resilience plan (2021); State Bicycle Strategy (2021); Energy Storage Strategy (2021); Royal Decree 960/2020 regulating the economic regime of renewable energy for electricity production facilities; Green hydrogen roadmap (2020); Spain’s integrated National Energy and Climate Plan for 2021–2030 (2020); Secure, Sustainable and Connected Mobility Strategy 2030 (2020); National Climate Change Adaptation Plan 2021–2030 (2020); Spanish Strategy for Science, Technology and Innovation 2021–2027 (2020); Plan to promote the value chain of the automotive industry (2020); Spanish Strategy for Circular Economy (España Circular 2030) (2020); Long-term strategy for energy rehabilitation in the building sector (2020); Long Term Decarbonisation Strategy 2050 (ELP 2050) (2020); Royal decree-law 17/2019 establishing the new rate of reasonable return for renewable energy; Royal Decree 658/2019 on environmental subsidies; Royal Decree 244/2019 regulating the administrative, technical and economic conditions of the self-consumption of electric energy; Royal Decree-law 15/2018 on urgent measures for energy transition and consumer protection; Royal Decree No. 6/2018—Creates the Interministerial Commission for the incorporation of ecological criteria in public procurement; Royal Decrees on the Spanish Office for Climate Change (371/2001, 1000/2003, 1477/2004, 1334/2006, 424/2016, 895/2017); The Royal Decree 376/2001 created the Spanish Office for Climate Change (OECC); Royal Decree 617/2017, of 16 June, regulating the direct granting of aid for the acquisition of alternative energy vehicles, and for the implementation of charging points for electric vehicles in 2017; Royal Decree 564/2017 on the certification of energy efficiency in buildings (amending Royal Decree 235/2013); Energy Efficiency Action Plan 2011–2020; Royal Decree No. 425/2016—Regulatory basis for the granting of subsidies from the General State Administration to Agrarian Insurance; Royal Decree 389/2016, of 22 October, approving the Master Plan for the Network of Natural Reserves; The Royal Decree 389/2016 approves a revised Master Plan defining a broad range of rules to be followed by the Network of Natural Reserves. The Network was previously instated by the Law 30/2014; Royal Decree No. 18/2016—Flood risk management plans of the Guadalquivir, Segura, Júcar hydrographic demarcations and the Spanish part of the 22 23

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framework Mitigation Strategy for Climate Change and Clean Energy and the Plan for Urgent Measures (2007), as well as the National Climate Change Adaptation Plan (2006), which was one of the first adaptations plans in the EU. Supported by civil society, Spain’s mixed Congress-Senate Commission on Climate Change recommended the adoption of a Climate Change Law in 2011. Four years later, at the COP21 in Paris, the former Prime Minister Mariano Rajoy first pledged that Spain would have such a law (Presidencia de Gobierno, 2015) if the conservative party (Partido Popular, PP) won the then upcoming elections. The government started working on the draft text of the Climate Change and Energy Transition Law (CC-ETL) in 2017, but the ousting of the conservative party in June 2018 thwarted its adoption. Nonetheless, a few days after the conservative government was out of office, the PP presented its proposal for the CC-ETL (BOCG, 2018). Later, Teresa Ribera, Minister for Ecological Transition under the socialist government from June 2018 onwards, commissioned a draft CC-ETL bill that was presented in February 2019 (Presidencia de Gobierno, 2019). Other political parties, such as Ciudadanos (centre right) and VOX (far right) do not have detailed proposals for a climate law at the time of writing. While Ciudadanos included in its electoral programme for the general elections of 28 April 2019 its intention to promote a Climate Change Law (Ciudadanos, 2019), VOX did not mention climate change as such or the need for a law in its programme. VOX has publicly opposed climate action arguing that it amounts to ‘climate totalitarianism’, that the anthropogenic component of climate change is unclear and that ‘obscure economic interests’ drive proposals presented by the socialist party and Unidas Podemos (VOX, 2019a, b). Its proposals do, however, include an Energy Plan to ensure Spain’s energy independence (VOX, 2019b). The above attests to both the interest in adopting a framework CC-ETL, given the three distinct legislative proposals, and the difficulty Spain has had in adopting it. A

Miño-Sil; Royal Decree No. 19/2016—Flood risk management plan of the Galicia-Costa Hydrographic Demarcation; Royal Decree 900/2015 on Energy Self-Consumption; Royal Decree 525/2014, on the subsidization of the Incentives Programme for Efficient Vehicles (PIVE-6); Royal Decree 413/2014, regulating the production of electricity generation from renewable energy, cogeneration and waste; Royal Decree 415/2014 on the National Climate Council, repealing and replacing royal decrees 177/1998 and 1188/2001;Royal Decrees No. 163/2014 and No 1.007/2015 on carbon footprint, compensation and carbon dioxide absorption; Law No 45/2007 and Royal Decree No. 752/2010 on rural sustainable development; Royal Decree 635/2013, developing the 'Plan to Promote the Environment in the hotel sector PIMA SOL\ for the energy renovation of its installations, and regulating the further acquisition of carbon credits by the Carbon Fund for a sustainable economy; Royal Decree 233/2013, on energy saving of rental housing, building restoration and urban regeneration and renovation; Royal Decree 238/2013, incorporates the regulation on thermal installations in buildings; Royal Decree Law 2/2013, which implements urgent measures in the electricity and financial sectors; Royal Decree creating the Interministerial Commission for Climate Change; Plan for Renewable Energy in Spain PER 2011–2020; Royal Decree 903/2010, on the Assessment and Management of Flood Risk; National Renewable Energy Action Plan PANER 2011–2020; National Action Program against Desertification (PAND); Spanish Strategy for Climate Change and Clean Energy and the related Plan of Urgent Measures; Spanish Forest Plan, the Spanish Forest Plan has a 30-year time span (2002–2032).

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fragmented political landscape, with new parties and no clear majorities to form a stable government after the general elections that took place on 28 April 2019 and again on November 10th of the same year put on hold the adoption of a framework law. In this context the comparative analysis of political parties’ support for key elements to be included and their concrete proposals for a climate change and energy transition law could help shed some light on Spain’s potential energy transition scenarios and identify points of theoretical political convergence. Spanish Law 7/2021, of May 20, on Climate Change and Energy Transition came into force the day after its publication in the Official State Gazette of May 21, 2021. In the context of relative optimism generated by the Paris Agreement (2015), the Ministry of Environment started the drafting work, resulting in a first draft presented at the National Environmental Congress (2016). It envisaged broad authorizations in favor of the executive, shaping a type of provisions that will be maintained in successive proposals and in the current regulation. The fall of the Rajoy Government prevented the continuity of that specific regulatory process. However, after the motion of censure, the Grupo Parlamentario Popular recovered the text as a bill (2018), a fact to which some political importance can be granted, since, in contrast to the reductionist positions, it shows a broad commitment to the problem of climate change; in the words of the proposition’s explanatory memorandum: “the greatest environmental and socioeconomic challenge facing humanity in the 21st century”.26 Within the general international community, following the Paris Agreement (2015), the objective of keeping global warming well below 2°C compared to pre-industrial levels led to the demand for a climate-neutral economy by 2050. And if, initially, the targets could be considered light, as they depended on the will of the States, at the Katowice Conference (2018) reporting mechanisms, transparency rules, verification procedures and financial obligations were multiplied, in line with a general trend that has continued to strengthen. At the European level, the commitments to reduce emissions and improve energy efficiency were firmly established with Regulation 2018/1999, and then with the objectives established in the European Green Pact (2019). After arduous negotiations, in 2020, the Leyen Commission presented the draft of the so-called European Climate Law, a text that, a few weeks after the Spanish Law, has been approved by the European Council and Parliament as Regulation 2021/1119, with direct application. The main objective, in accordance with the Paris requirements, is to achieve climate neutrality by 2050, so that the greenhouse gases emitted into the atmosphere will then be offset by those captured in forests. The process of approval of the European Climate Law has been complex due to the strong tensions underlying its general acceptance. The economic sectors affected have lobbied directly and indirectly, with the dense network of academic, journalistic, financial and political contacts, to improve their competitive positions in heavily intervened markets. Environmental organizations, in turn, strengthened by the growing support of youth movements, advocating for increased EU

26

López Ramón (2021a), pp. 9–25.

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commitments, asking to extend the call for a 65 percent reduction in emissions by 2030. The denialist or reductionist groups, although they do not seem to be fighting head-on against the very existence of climate change, take the opportunity to lament the loss or reduction of economic freedoms and property rights. The same Member States, which at the outset showed a majority support for the initiative, have not ceased to present their own tendencies on the subject. The Climate Change Law is very important because introduces many other regulatory aspects related with environmental protection and energy transition. In fact, in order to achieve the final target of the reform, the slowing down of climate change, it is important to rebuild the energy sector. As said before, the Climate Change Law introduces several reforms in the laws on hydrocarbons and relating to the sectors of electricity, energy sustainability, land and the Government (first to fifth final provisions).27 It also provides for the referral to Parliament by the Government of bills on waste and contaminated soils to promote the Circular Economy (fifth additional provision), and on sustainable mobility and financing of transport (eighth final provision).28 However, there is no real legislative program. In a matter that needs such a boost and rationalization as green taxation, the law limits itself to requiring the constitution of a group of experts, specifying that, “in any case, the modifications to be introduced in this field will go hand in hand with the economic situation”, which seems as much as to say that nothing significant is going to be done (seventh additional provision). And in relation to the long-awaited reform of the electricity sector, the Government and the Commission of the National Securities Market are ordered to present “a proposal for the reform of the regulatory framework”, a proposal which, in these terms, must be understood to be addressed to the electricity sector itself (eleventh final provision). On the side of governmental power does not mean that the lLaw lacks regulatory powers. On the contrary, one of its characteristics is the consolidation and extension of the powers of the Government. The express attributions of powers of regulatory development, in addition to the usual formula that confers on the Government the approval of “as many provisions as may be necessary for the application, execution and development of the provisions of this Law” (sixth final provision), are scattered throughout the articles, with specific references to the integration of renewable energies in the exploitation of the public hydraulic domain (art. 7.2) or in the transport of water (art. 7.2). 7.2) or in transport (art. 13.2), as well as in relation to compliance with international and European commitments (art. 40.1), the regime of sinks provided for in the legislation on forests (seventh final provision) or the carbon footprint (twelfth final provision). There is even an explicit reference in the Law to a mechanism that is the subject of wide doctrinal debate such as algorithms, the use of which is attributed to the Government to promote the digitalization of the economy and contribute to decarbonization [art. 6.c)].

27 28

Ibid, López Ramón F. Delgado Piqueras et al. (2022).

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But, above all, the various planning, programming and even evaluation instruments that fall directly under the competence of the Council of Ministers should be highlighted: the Integrated National Energy and Climate Plan, the Decarbonization Strategy, the annual sustainable transport objectives, the National Plan for Adaptation to Climate Change, the Just Transition Strategy, the Water Strategy for Ecological Transition, together with other forms of administrative intervention.29 The lack of provisions on the procedures to be followed in the preparation and approval of such a wide range of mechanisms is striking. These are direct attributions of competence to the Government. The Ministry of Ecological Transition and the Demographic Challenge (in some precepts, we read “of the Minister” or “of the person in charge of the Ministry”) have the competence, sometimes jointly with other ministries. We do not know the decisive reason why only in the case of the Decarbonization Strategy has a parliamentary communication procedure been included (art. 5.2: “the Congress of Deputies and the Senate shall be informed”). The explanation for the absence of procedural references is perhaps to be found in the Community origin of the obligation to prepare these instruments, which generates an intense interplay of relations with the European Commission. However, the European commitments do not seem to provide adequate or sufficient justification for the lack of provisions from the national point of view. In this regard, it is surprising that the Committee of Experts, created in the Law as the main instrument of governance in this area, does not intervene in any of the planning and strategy documents established in the Law itself. A solution can be attempted by applying the general regimes established in our administrative procedure legislation. However, it is not clear that the instruments concerned correspond to the categories of that legislation. Thus, it seems doubtful that the plans and strategies provided for in the Climate Change Law can be considered in their entirety as legal norms of regulatory nature, for the purposes of applying the principles of good regulation and the rules of regulatory assessment contained in the Common Administrative Procedure Law (arts. 129–130). It is also problematic to observe the regime of strategic environmental assessment, since, in the main assumption of the Environmental Assessment Law, such procedure applies to the elaboration of plans and programs that “establish the framework for the future authorization of projects legally subject to environmental impact assessment” (art. 56.1).

3.1

The Fossil Energy in Spanish Law 7/2021

Together with the generous administrative authorizations to adopt promotion measures, we find a case of the opposite sign, since it is aimed at limiting them. These are 29

Ibid, Delgado Piqueras F et al.

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the tax benefits granted to energy products of fossil origin, whose application must be “duly justified for reasons of social or economic interest or in view of the inexistence of technological alternatives” (art. 11). The rule has a clear political sense in the fight against climate change, but it raises the question of whether the tax benefits in question are no longer governed by the rules that used to regulate them but must be subject to the particular justification now imposed, which it is assumed will have to be assessed by the competent tax authorities for the settlement of the corresponding tax. Doubt is increased by the complete reading of the precept, which continues to attribute to the Council of Ministers the approval of a timetable for the review precisely of the aids and measures that favor the use of fossil energy products. Special instruments of promotion are the transition agreements, which involve different authorities and other actors with the aim of “promoting economic activity and its modernization. . . in the transition to a low-carbon economy, particularly in cases of closure or reconversion of facilities” (art. 28.1). These are agreements signed between the Ministry for Ecological Transition and other public administrations, in particular local entities in vulnerable geographical areas, in which companies, business and trade union organizations, universities, non-governmental organizations and other entities may participate, with an enigmatic role foreseen for the autonomous communities, which “shall participate in accordance with the scope of their competences” (art. 28.2). The agreements are bound to generate controversy, since they allow the inclusion of broad fiscal measures and priority rights on electricity evacuation capacity, and on electricity generation concessions that are extinguished in the process of shutting down thermal power plants (art. 28.3). In general, we must understand that all these legal provisions cannot be used directly, since they will require the prior establishment of the specific measures adopted with their corresponding legal regime. In other words, neither tax or budgetary legislation, nor the general system of subsidies, with their requirements from the point of view of legality, cease to be applicable. Thus, for example, the subsidies that may be envisaged in the fight against climate change will not be subject to the same legal regime as those adopted in the fight against climate change.30 In short, we have a Climate Change Law whose drafting has indeed been the subject of a broad participation by a variety of social, economic and political actors. Not only the parties of the parliamentary coalition that allowed the law to be passed, but also professional groups, business sectors and non-governmental organizations are identified with its contents. However, it does not establish the state agreement involving the major ideological currents of the country. On the contrary, the result, given the contents and effects of the Law, is more akin to a governmental action plan than to a legal norm. It is, in fact, a reasoned and discursive text, but also a rhetorical and redundant one, that has very limited extent in regulating legal relations. It includes ambitious objectives and

30

López Ramón (2021b), pp. 1–22 cit.

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provides the means to achieve them, although it requires successive regulatory and programming developments, which remain in the hands of the Government and particularly of the Ministry of Ecological Transition. Was it necessary? Is it appropriate? Moreover, the reform and its application are tied with the National Recovery and Resilience Plan of Spain which in the “Green Spain” axe aims to reach ambitious targets: in 2050 100% of energy in Spain shall be renewable. Of the plan’s total allocation, 39.7% of the resources will be dedicated to measures related to green transition and biodiversity (criterion No 5). The plan is consistent with the 2020 Commission country-specific guidelines on implementing Spain’s national energy and climate plan: strong contributions are expected from energy renovations in housing and urban areas, sustainable mobility and renewable energy; measures related to biodiversity aim to preserve forest carbon sinks through fire prevention and stronger fire protection, and by increasing carbon absorption through enhanced sustainable forest management.

4 The Case of Italy The problem with COVID 19 has produced several present and future difficulties. The 2030 renewable energy goal for Italy has suffered and the final goal, nowadays seems to be unreachable. The global pandemic has provided the Italian government an opportunity to reform the institutional framework for renewable energy with a greater emphasis on european obligations, decarbonization, and energy transition. With the global pandemic diminishing and trade barriers relaxing, the RES (Renewable Energy Sources) business need immediate revaluation, focus, and effort to prevent Italy from reaching its Renewable Energy target for 2030. In a recent lecture, Ursula Von Der Leyen, president of the European Commission, stated that the Green New Deal will be a turning point for economic recovery following COVID-19. Some of the most important parts of the Green New Deal are the Global Energy Law and Sustainability investments in RES for decarbonization of Europe by 2050, energy efficiency optimization, electric vehicles, and a green revolution to make our cities and daily lives sustainable. After a worldwide health crisis instilled dread and despondency in several nations, normality and sustainability appeared implausible. Italy is among the nation’s most severely and rapidly impacted by the virus, leaving no time for a swift and effective reaction. Since the virus has become weaker, Italy has begun to examine the impact of the virus on the economy, and, of course, on the energy sector. The Integrated National Energy and Climate Plan (INECP), which was presented by Italy in January 2020 to fulfil European standards, describes Italy’s energy transition objectives within the context of European decarbonization.31 INECP lays forth in black and white aspirational

31

Pepe and Arcangioli (2020), pp. 200–204.

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goals without elaborating on how they would be attained, and if the methods for achieving these goals were unclear following the report’s release, the health crisis that precipitated the Italian deficit made them appear much more distant. The topic of renewables in the INECP looks to be of enormous importance, not only because to the crucial role renewable energies play in the energy transition, but also because Italy has set a goal of deriving 30 percent of its energy consumption by 2030 from RES. The objective of Directive (EU) 2018/2001 is to encourage renewable energy and comply with the Paris Agreement on reducing CO2 emissions. Article 3 of the Directive mandates that at least 32% of the Union’s gross final energy consumption must be derived from renewable sources by 2030. To this end, the Commission shall evaluate this target in order to submit a legislative proposal to increase it by 2023 in the event of further substantial reductions in the costs of producing renewable energy, if this is required to meet the Union’s international decarbonization commitments, or if the increase is justified by a significant decrease in energy consumption in the Union. Each member state shall contribute actively to the development and integration of renewable resources in order to meet the Renewable Energy Sources Scenario. The Regulation n.1999/2018 on the governance of the Energy Union states that, based on the Commission’s assessments of the INECP proposals, if they are insufficiently ambitious for European energy policy, the European Commission may formulate recommendations to the Member States in an initial phase to encourage their greater involvement and compliance with the targets, and then use its public enforcement powers in the event of noncompliance. The ambition of national energy plans in light of European policy will be essential to the international battle against climate change. In the first time of the pandemic crisis to the drop in oil prices and energy demand, the health crisis has paralysed all planned investments in the renewable energy sector because investing in Renewable energy was hazardous. After a short period, we are facing the opposite problem due to the Russo-Ukrainian war: oil and fossils fuels are reaching very high quotation, and everyone is running to a RES policy. Unfortunately, a RES policy can’t be built in few months following the waves of the prices of raw materials but it has to be well thought in order to work in the long period and, moreover, RES policies can not be strongly influenced by market’s waves; for these reasons a clear policy with a strong legal legitimation must be reached in the next few years. Italy’s shutdown has paralysed the permission, planning, and building processes for renewable energy installations. The firms have been paralysed by border restrictions and blocked exports and imports of vital goods. INECP has determined that in order to reach 30 percent of gross energy consumption from RES by 2030, it will be necessary to stimulate not only the production of electricity from RES with new plants, but also the maintenance of existing plants by modernising machines and technologies through investments in revamping and repowering. Nickel, cobalt, platinum, and lithium, which are essential for the construction of wind farms and solar panels, are in short supply in Italy and must be imported. Due

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to the global pandemic, economic crisis, and falling prices, the majority of mineral extraction projects that had begun or were about to begin have been cancelled or delayed.32 Secondly, the health issue has paralysed the approval and concession processes for RES plants. Regarding the development of new renewable plants, the delay in authorization procedures represents a clear misalignment with the rate of technological development, resulting in the authorization of projects characterised by obsolete technologies, as more efficient equipment has been developed in the interim. Some foresee a 67-year delay in INECP implementation if the intrinsic desire for speed in RES authorization is combined with the current incapacity of governmental entities to meet electronically for approval and permission of medium and big projects.33

5 Conclusion Coming to conclusions regarding the topic of RES in this particular historical period is certainly a difficult task. There are at least two aspects to focus on. The first is referable to the pre-covid world; as we have analysed, energy policies and the consequent European regulations stemmed from the need to coordinate the actions of member states by charting a standard path for all actors, leaving little room for differentiation of actions. On the one hand, such a course of action is certainly in line with the European acquis. However, it has been seen as necessary in the field of RES for each state to be able to identify the peculiar energy needs of its territory and, above all, use the type of renewable energy that is most readily available in its territory. Following the upheavals brought by the pandemic, the course of action has certainly changed. With the establishment of NRRPs, more discretion has been given to states: the initiative originates in the state and is validated by European institutions. Collaboration between states is present but to the extent that two states decide to collaborate on a given matter, an example being the collaboration settled between France and Germany on energy. Moreover, focusing on the legal perspective on sustainable energy democracy we can affirms that it works in a legal setting as an aim and not as a principle or norm. Sustainable energy democracy, which is more abstract than a concept, is an ultimate target for energy policies and laws: a normative vision of what the energy sector should become and a broad source of guidance for decision-makers. As such, it demands more concretization via principles and, ultimately, rules.

32

Ibid, Pepe L.M and Arcangioli A. ‘Ripartire Dopo Il Coronavirus Mettendo Al Centro Le Rinnovabili’, Infobuildenergia, accessed 7 July 2022, https://www.infobuildenergia.it/ripartire-dopo-il-coronavirus-mettendo-al-centro-lerinnovabili/. 33

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To build the universal rule to which Immanuel Kant34 also refers, energy law must employ comparative science effectively.35 A law that articulates universal norms under which the unrestricted use of arbitrariness coexists with individual liberty. The global health crisis of 2020 will signal a step forward for this academic field. A sector at the centre of the world’s economy, upon which the future and wellbeing of humanity rely, need substantial and expanded contributions from academics and practitioners.36 The new aim will be to employ the principles of energy law as a guide and compass in order to achieve the energy transition and, in a broader sense, a just transition to a low-carbon economy.37 Through energy education, policymakers, regulators, and institutions must promote the usage of energy law culture. Only by comprehending the difficulties and dynamics of this industry will the future generation recognise its importance in attempting to effect change in the world.

References Bellantuono G (2017) The misguided quest for regulatory stability in the renewable energy sector. J World Energy Law Bus 10(4):274–292 Delgado Piqueras F et al (2022) Los Desafíos Jurídicos de La Transición Energética. Editorial Aranzadi, Pamplona. https://www.marcialpons.es/libros/los-desafios-juridicos-de-la-transicionenergetica/9788413911946/ Fuschi D (2021) The relations between citizens and public administrations through electronic means : a comparative legal analysis. Il Politico 254(1):86–102 García EM (2021) Derecho de La Energía y El Clean Energy Package. Aranzadi/Civitas Guiot J, Cramer W (2016) Climate change: the 2015 Paris Agreement thresholds and mediterranean basin ecosystems. Science 354(6311):465–468. https://doi.org/10.1126/science.aah5015 Huhta K (2018) Too important to be entrusted to neighbours? The dynamics of security of electricity supply and mutual trust in EU law. Eur Law Rev 43:920–933 Huhta K (2019) Capacity mechanisms in EU energy law: ensuring security of supply in the energy transition. Kluwer Law International BV Huhta K (2020) Anchoring the energy transition with legal certainty in EU law. Maastricht J Eur Comp Law 27(4):425–444. https://doi.org/10.1177/1023263X20932056 López Ramón F (2021a) Notas de La Ley de Cambio Climático. Actualidad Jurídica Ambiental 114:9–25. https://www.actualidadjuridicaambiental.com/wp-content/uploads/2021/07/2021-0 7-19-Lopez-Ley-cambio-climatico.pdf López Ramón F (2021b) Notas de La Ley de Cambio Climático. Revista Actualidad Jurídica Ambiental 114:1–22 Montoya FG, Aguilera MJ, Manzano-Agugliaro F (2014) Renewable energy production in spain: a review. Renew Sustain Energy Rev 33:509–531 Pepe LM, Arcangioli A (2020) The scenario of renewable energy sources in Italy and the effects of COVID-19. Global Energy Law Sustain 1(2):200–204

34

Kant I, The Metaphysics of Morals, 2021. García (2021). 36 Ibid, García. 37 Ibid, García. 35

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Sharpston E (1990) European community law and the doctrine of legitimate expectations : how legitimate , and for whom? Northwest J Int Law Blus 11(1):87 Sisodia GS, Soares I, Ferreira P (2016) Modeling business risk: the effect of regulatory revision on renewable energy investment - the Iberian case. Renew Energy 95:303–313. https://doi.org/10. 1016/j.renene.2016.03.076 Talus K (2017) Decades of EU energy policy: towards politically driven markets. J World Energy Law Bus 10(5):380–388. https://doi.org/10.1093/jwelb/jwx027 Verbong G, Loorbach D (2012) Governing the energy transition: reality, illusion or necessity? Routledge, https://www.taylorfrancis.com/books/edit/10.4324/9780203126523/governingenergy-transition-geert-verbong-derk-loorbach

Damiano Fuschi PhD, is currently assistant Professor in Public Comparative Law at the University “la Statale” of Milan at the Department of Italian and Supranational Public Law. After graduating with honors from the University of Pavia, he is the winner, with a scholarship, of the competition for access to the PhD program in Public Law, Criminal and International Justice. During this period, he collaborates with the Chair of Comparative Public Law and with the Chair of Environmental Law. In November 2021 he was the winner for a position of Assistant Professor in Public Comparative Law at the University of Milan. In May 2018 he was the winner in the competition for a research fellowship in Public Law at the University of Pavia. In February 2018 he defended his Phd thesis earning the PhD title with honors. Since 2017, he has been a Visiting Researcher at the University of California, Los Angeles (UCLA). He is member of the board of the Journal “Rivista Giuridica dell’Ambiente” (“Legal Journal on the Environment”),“il Politico” and “DPCE (Diritto Pubblico Comparato ed Europeo”).

State and Market in China’s Coal-to-Gas Transition Francesco Sassi

Abstract With the aim of bolstering the transition to a low carbon energy system, China’s leadership has promoted the role of natural gas as a substitute for coal. Given the importance of environmental stewardship in Xi’s era, transitioning to gas assumes a political and social significance, other than an economic and industrial one. Domestically, the government has gradually intervened through unprecedented market-oriented and efficiency measures in order to boost gas production and consumption. Yet, the transition from a largely home-produced energy source to one that is increasingly imported poses a new set of strategic and policy challenges. In fact, Beijing has become in a very short time a major player of the international gas market. This has also increased the tensions between the country’s ambition to become a responsible great power embracing the imaginary of an “Ecological Civilisation” and the geopolitical ramifications of a growing dependency on a globalising commodity against a background of market volatility. The chapter helps to bridge a wide literature gap on China’s integration in the global gas market and its wider implications. Using an interdisciplinary approach and elements drawn from the English School of IR and institutionalism, the chapter suggests a new conceptualisation of the unfolding challenges to China’s transition to natural gas, transcending the internal and external dimensions. Also, the research provides key insights on the strategies of NOCs in securing gas production and imports, and the burgeoning role of independent companies amid the complex and multilayered State-Market nexus, embedded into a deeper institutional structure.

F. Sassi (✉) RIE - Ricerche Industriali ed Energetiche, Bologna, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_10

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1 Introduction By far, China is today the world’s largest carbon dioxide emitter. In 2020, the country totalled more than 9.899 million tonnes of carbon dioxide emissions, nearing almost 31% of world’s total from energy.1 Despite the government’s efforts in limiting the deterioration of the situation, from 2008 to 2018 the yearly average growth rate of emissions has been +2.6% and, as carbon-intensive and being predominant in the energy system, coal has been responsible for around 75% of total China’s CO2 emissions.2 Still today, whilst emissions have been slowing down due to transitions implemented across world’s most advanced economies, they continue to grow almost entirely on China’s shoulders.3 The mounting environmental problems and attached air pollution have increase the risks for China’s economy, public health, social stability, and international reputation, rapidly transforming China’s energy and climate politics into a securitised area of domestic policy.4 At the same time, Beijing is not insulated from the implications of the transformation of the global energy architecture, with profound geopolitical fallouts on energy systems, impacting national economies and shifting bilateral political dynamics between energy partners.5 Calls to understand the ramifications of the global energy transition are even greater today, after Covid19 pandemic urged policy-makers and scholars to debate how to embed transition goals into stimulus packages to the global economic recovery.6 Through the years, the Chinese government has implemented several programs in order to decelerate country’s negative externalities, regulate emission peaking and turn the energy industry away from burning some of the most polluting resources. Concurrently, market instruments have turned out to be useful tools to improve energy efficiency.7 Yet, today China’s transition has broader implications which advocates for a deeper understanding of how State and Market fit into the same logic of supporting a transformation of the country’s energy system.

1

BP (2021). China’s emissions amount to more than the combination of the ones from the United States, India, the Russian Federation, Japan and Germany. 2 Emissions growth has in fact accelerated in the 2018–2019 biennium. Zhang et al. (2017), pp. 644–652. 3 After increasing at the fastest rate for 7 years straight up to 2018, the rest of the world has experienced a reduction of emissions in 2019, in particular because of the falling presence of coal in the energy mix in US and Europe. Hausfather Z (2019) Analysis: Global Fossil-Fuel Emissions Up 0.6% in 2019 Due to China, Carbon Brief, Accessed 12 Jan 2019, https://www.carbonbrief.org/analysis-global-fossil-fuelemissions-up-zero-point-six-per-cent-in-2019-due-to-china. 4 Nyman and Zeng (2016), pp. 301–313; Economy (2007), pp. 38–59. 5 Hafner and Tagliapietra (2020), pp. xvii–xviii; Bazilian et al. (2019), p. e625. Goldthau et al. (2019). 6 Kuzemko et al. (2020). 7 Naughton (2018), pp. 543–569.

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Institutional approaches to China’s energy transition have started to gain more attention in the frame of analysing State-Market relationship and how governance could undermine the marketisation of the country’s energy system and the same low-carbon transition;8 focusing on how new policy packages would transform previous environmental policies and the same energy mix;9 analysing in which way institutions formulate the general direction of China’s overall sustainable strategy.10 Typically, institutionalism assumes that institutions are those “rules of the game and organisations are the players,” the last being groups of individuals with a common purpose and seeking the same objectives.11 Therefore, institutions are critical to understand economies, structuring systems of incentives and constraints, shaping the way it changes and evolves.12 In parallel, energy transitions have been conceptualised as a meddling of technologic, political regulation, tariff and pricing, mixed with producers and consumers behaviour.13 However, as it occurred with all transitions in the past, the coal to gas switch reveals certain “conceptual holes and political ambivalences” which build on existing institutional arrangements, depending on “the way in which these problems are framed and defined.”14 Without understanding the entanglements of institutional settings, the risk is to artificially depoliticise the governing forces transforming the energy systems. This means leaving politics at a rather amorphous ‘landscape’ level against the context in which the “transition takes place,” neglecting the influence of “power relations between the relevant actor groups, or of whether and how some actors are more influential than others” over governance and decision-making processes.15 This chapter delves into China’s coal-to-gas transition employing an interdisciplinary approach, drawing elements from institutionalism and the English School (ES) of IR. In doing so, the research tries to stimulate the debate over the growing interdependencies between States and Markets in global energy processes by endorsing the “progressive” and empirical16 nature of the ES of IR.17 Commonly, neo-institutionalist approaches have pointed to the multi-layered governance of 8

They concentrate their efforts on those reforms implemented in the oil and gas industry, electricity market and carbon emission trading. Zhang and Andrews-Speed (2020). 9 Li and Taeihagh (2020). 10 Chen (2016). 11 North (1990). 12 North (2005). 13 Sovacool (2016), pp. 202–215. According to neo-institutionalist approaches, governing sustainable energy innovation is contingent both upon a broader set of domestic political institutions as on indigenous energy resources, influencing the nature of changes taking place in the energy systems. 14 Hajer (1995), P.1–P.4. 15 Kuzemko et al. (2015), pp. 96–105. 16 Understood as deeply immersed in historical forms of inquiry. 17 Buzan and Lawson (2018), pp. 783–799.

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energy systems through the study of regulators or lobbyist, and to international groups of the multifaceted global energy governance,18 but few have dwelled with ‘abstract’ and historically developed types of primary institutions, as hierarchically conceptualised by the English School (ES) of IR. These are considered those principles and practices of the Global International Society (GIS) which, if in harmony between each other, induce stability both at the domestic and at the international levels. Differently, when primary institutions are in tensions between each other, they constitute a pressure for change both of and in institutions, also affecting those humanly-designed formal and informal institutions.19 Against this background, energy relations and the State-Market nexus is conceptualised in a specific historical context and deeper institutional structure, whereas economic policies and state sovereignty, formal and informal institutions, are embedded in a complex and multiple setting of institutions according to their hierarchical nature.20 As a result, governments are drawn back and forth into energy governance. They are driven by domestic, regional, and global energy market conditions, affecting the same structure of energy policies and mixes, but also by principles such as sustainable development and environmental protection.21 Inevitably, this affects the same context in which the transition takes place. Hence, the understanding of integration and tension among primary institutions and between primary and secondary types of institutions proposes an innovative approach to comprehend the unfolding transformation of the global energy systems. In this case, the chapter focuses on the way integration and tension among institutions could affect the same course of China’s coal-to-gas transition. In particular, as it has been little or not researched at all, the analysis provides a broader vision of the energy transition as a multi-layered process, creating a unique and hierarchical institutional set, typical of a specific State-Market relationship. Accordingly, the

18

Van de Graaf and Colgan (2016), p. 2,15047. Buzan (2004), pp. 250–251. For the English School tradition those institutions discussed in regime theory and liberal institutionalist analysis, which reproduce intergovernmental arrangements consciously designed by states, are considered as secondary institutions. They only appear at a late stage of human history and they are often associated with the liberal international society. 20 Aalto (2015), pp. 40–60. The hierarchical nature of institutions is a common remark of institutionalism, which is applied by Aalto in the context of the IPE and IR theory throughout the use of the English School. See: Aggarval (1998), pp. 1–31. Here, both formal institutions and human-made actors are embedded, serving different transaction costs functions which are typical of the energy markets, such as lower monitoring and enforcement costs, or helping conclude contracts, and mitigate information costs. Moreover, they also pursue other social functions like order-creation, typical of more sociological and political hemispheres, and respond to the Hobbesian problem of establishing order, guaranteeing and complementing formal rules implemented by the State. For more on the ordering functions of institutions: Mantzavinos (2001); Buzan (2014), pp. 16–17. 21 Prontera (2017); Belyi and Talus (2015). 19

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research suggests that in order to fulfil the premises of the coal-to-gas transition, Beijing must carefully balance and integrate as much as possible primary institutions among them. In turn, tension and misalignment among institutions could be very explicative of a deficient and vulnerable transition, hampering both domestic and international goals in China’s energy policy and strategy. Among the most important primary institutions for Beijing’s coal-to-gas transition, the chapter deals with the rising primacy of Environmental Stewardship, and the traditional institutions of the GIS of Sovereignty and Trade/Market.22 Methodologically, strategic reports and academic works make up the most of the documents analysed, together with press and think tank articles.

2 A ‘New’ Primary Institution in China’s Energy Policymaking: The Influence of Environmental Stewardship on China’s Coal-to-Gas Transition23 2.1

A Global Call for Coal-to-Gas Transition

Arresting global warming through the transformation of the energy sector requires the full strength of all available policy instruments. As the energy sector accounts for around 3/4 of global Greenhouse Gas (GHG) emissions, energy efficiency, the development of infrastructures and the promotion of essential behavioural changes play a crucial role in determining the success of climate policies, limiting fossil fuels

22 For the English School of IR, the Trade/Market institution is understood as one of the preeminent features of the GIS and one of its major solidarity components, which exists in the context of states cooperating in order to achieve joint gains. Historically speaking, despite its importance in determining international order, the Trade/Market institution has been underestimated in the ES because of the centrality of the state-system. Today, it remains a contested issue in the ES, caught between economic nationalism and liberalism. Yet, trade is also the institution where idea-based explanations for change are the most robust and compelling. Sovereignty is instead understood as the “constitutive principle of interstate relations” and features among the main primary institutions of the Westphalian and European-modelled GIS. Against the European conception, the Sovereignty institution in East Asia privileges the right of states to autonomously choose and self-determine their interests in the absence of foreign interferences. It also represents the political construction of ideological and material processes facing both internal and external forces and challenges. Therefore, sovereignty is here understood as those domestic and international legislative and regulatory initiatives endorsed by the Chinese authorities and related to energy policy and strategy. On the Trade/Market institution see: Buzan (2014), pp. 136–139; Holsti (2004), pp. 211–238. On the Sovereignty institution see Ba AD (2014), pp. 119–143.; James (1999), pp. 457–473. 23 Here, ‘Transition’ implies a multi-stage, multi-level and multi-actor process, which qualifies only in terms of historical coevolutionary processes connecting actors, factors and levels. In turn, they imply changing prevailing social practices and structures, also through the replacement of lock-ins of dominant technologies and the introduction of innovations. Rotmans et al. (2000).

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burning and redesigning cleaner energy systems. This process is considered the only way to decisively sever the link between economic activity and GHG emissions.24 In this context, the switch from coal to gas becomes a primary choice for those energy systems heavily reliant on coal, rapidly improving air quality as gas reduces CO2 emissions by around 40% for each unit of energy output compared to coal. Since the late 1980s, the debate has been focused on the issue of natural gas as a mid-term bridge fuel to substitute coal along the pathway towards decarbonisation.25 Natural gas is considered to be a typical transition fuel, bridging more polluting fossil fuels and zero-carbon technologies. Yet, its substitution of rival solid and liquid fossil counterparts has been proceeding at a slower pace than previous transitions. Also, natural gas could be used as a backup and peak demand support to intermittent renewables, but it should overcome its drawbacks and complications as any other energy sources, making its way in the global energy market against technical, financial, political and environmental challenges.26 The debate has also been spurred by two critical junctures defining global energy policies and strategies, being the emergence of new gas extraction practices in the course of the last 20 years, especially in the US, and the long-term goal of creating a climate-neutral economy by 2050, envisioned in the 2015 Paris Agreement.27 Opinions range from negative to moderately positive, based on the uncertainties of uncontrolled externalities across the entire value chain.28 In the mid-term future, gas consumption growth is expected outside OECD countries. Yet, as it has somehow navigated through global pandemic better than coal and oil, gas long-term prospects as transition fuel might weaken as it would heavily rely on governments’ policy support for air quality regulations and new infrastructures programs.29 Lastly, because of methane leaks, gas does not provide a single answer to the threat of climate change. Instead, it should be understood as a component of a multiple policy and technologic approach to energy transition.30

24

United Nations (2020), pp. 63–100. Policy Options for Stabilizing Global Climate. Report to Congress: Main Report (1990) US EPA, December 1990; Lelieveld and Crutzen (1992), pp. 339–342; Hayhoe et al. (2002), pp. 107–139. 26 Smil (2015). 27 European Council, Paris Agreement on Climate Change — Consilium, 2017, http://www. consilium.europa.eu/en/policies/climate-change/timeline/. The debate over the reliability of gas as a transition fuel has been raised with the age of horizontal drilling and hydraulic fracturing and the commercial exploitation of large unconventional gas basins. 28 For a summary of the debate over cost-benefits of coal-to-gas transition, See Negative assessments: Zhang et al. (2016), pp. 317–322; Howarth (2014), pp. 47–60; McJeon et al. (2014); Howarth and Ingraffea (2011), pp. 271–273. Positive assessments: Safari et al. (2019), pp. 1075–1094; Valadkhani (2019), pp. 268–278; Tanaka et al. (2019), pp. 389–396; Hausfather (2015), pp. 286–294. 29 International Energy Agency (2020), pp. 187–194. 30 International Energy Agency (2019). 25

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The Double-Faced Primacy of the Environmental Stewardship Institution

Environmental degradation is a primary concern and top political priority to address for China’s elite. It is also one of the main challenges for country’s internal stability, to be balanced out with its impressive economic growth. Therefore, the management of China’s deeply-rooted environmental problems is seen as a crucial element for the government’s legitimacy and the Chinese Communist Party (CCP) rule. By attracting urban middle-class, widespread societal reactions to environmental issues have drawn the largest crowds of protesters since Tiananmen. Indeed, environmental activism has become one of the most vigorous forces within the Chinese civil society, successfully influencing policy-making and indirectly contesting governmental energy and environmental policies.31 On the other hand, severe crises and the intense media coverage increased the existing awareness regarding air pollution among Chinese citizens.32 Even in rural areas, terms such as “ecological” and “environmental protection” have spread into the public language, urging the government to embrace a new imaginary of “Ecological Civilisation.”33 Unquestionably, China’s internal challenges have deep transboundary implications, influencing the broader Asia-Pacific region. These make the domestic political structure and the country’s economic growth model critical in determining the “sustainable” surfacing of a new superpower in the international society.34 As a matter of fact, Beijing does not face these questions unilaterally, but it does cope with the increasingly pluralist logic and shared norms of coexistence and cooperation in the same international society. China’s achievement of sustainable development binds together its responsibilities as a “major country” and the necessity to implement domestically defined and independent initiatives to decrease carbon emissions.35 Far from being an exclusive Western issue, the globalisation of the Environmental Stewardship has raised the status of this primary institution as an element of the ‘common fate’ agenda of the GIS.36

31

China’s environmental activism gathered a large consensus also by the means of social networks and new technologies, further elevating Environmental Stewardship as a more dominant primary institution shaping China’s energy policymaking. Brunner (2019); Zhong and Hwang (2016), pp. 216–232. 32 Schwabe (2018), pp. 135–157; Hook et al. (2017), pp. 74–97. 33 Halskov Harsen and Liu (2018), pp. 320–339. 34 Shapiro (2012). 35 Zhang G (2014) Build Consensus and Implement Actions for a Cooperative and Win-Win Global Climate Governance System, September 25, 2014, https://www.fmprc.gov.cn/mfa_eng/zxxx_662 805/t1194637.shtml. 36 According to the English School of IR, environmental stewardship calls for a ‘custodial responsibility for the planet’ of certain states. At the same time, the distinction whether the referent object is the environment itself or the environment as a human habitat means the sustainability of human life and civilization is less clear, entailing a possible interrelation between the two institutions of environmental stewardship and human rights. Falkner and Buzan (2019), pp. 1–25; Jackson (2000).

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To this aim, it is important to understand how the evolution of Environmental Stewardship into a norm accepted in the GIS naturally increases the tensions with other primary institutions, mainly Trade/Market and Sovereignty. China’s rise to a great power status and its willingness to assume a leadership role in climate and energy politics generates a new spin of international norms. In particular, these dynamics affect the accountability of mitigating negative externalities of energy policies and addressing regional policy initiatives related to the protection of the environment. On this issue, it is possible to sustain that Beijing’s engagement is motivated by calculations and beliefs about its identity as a nation.37 The same Xi Jinping has urged the country to take “a driving seat in international cooperation to respond to climate change” and contribute to the global endeavour of building an Ecological Civilisation.38 In spite of the U.S. withdrawal from the 2015 Paris Agreement under the Trump Administration, Xi confirmed China’s intention to “fully honour its obligations.”39 These pledges highlight his determination in transforming international negotiations from a distributional conflict over binding targets into a bottom-up process of voluntary ‘soft reciprocity’, which raises respective ambitions and responsibilities amid the signature parties.40 At the same time, the overall process leading to the Paris Agreement has shown Beijing’s capacity to transform its global image of being an environmental “wrecker” and “dead weight” into the one of a “climate leader” of international climate governance.41 Furthermore, the UN September 2020 announcement that China aims to peak CO2 emissions before 2030 and achieve carbon neutrality before 2060 has significant political nuances. On one hand, China could benefit from proactively engage with climate change as a way to defuse international angst over the handling of the first months of the Covid-19 pandemic. Apparently, Xi’s initiative has also been geopolitical in nature, anticipating the 2020 U.S. elections results and the EU climate pledges.42 The announcement is also aimed at messaging domestic agencies that the 37

Kopra (2018); Kopra (2020), pp. 62–89. Huang E, Lahiri T, (2017) Xi Jinping to China: “Any Harm We Inflict on Nature Will Eventually Return to Haunt Us”, Quartz, Accessed December 5, 2020 https://qz.com/1105119/watch-what-xijinpings-19th-chinese-communist-party-congress-work-report-said-on-climate-change/. 39 Xi J, (2017) Speech by President Xi Jinping at the United Nations Office at Geneva, Work Together to Build a Community of Shared Future for Mankind, Xinhua, January 23, Accessed January 3, 2021 http://www.xinhuanet.com/english/2017-01/19/c_135994707.htm. 40 Falkner (2016), pp. 1107–1125. 41 Eckersley (2020), pp. 1178–1202; Gao (2018), pp. 213–239. 42 September 2020 proposed CO2 emissions targets include intensity reduction of more than 65% from 2005 levels, compared to the earlier target of 60–65%, and non-fossil fuel share in primary energy to 25%, compared to the earlier 20% target. In practice, this means that the CO2 intensity target would reduce emissions per unit of GDP by at least of 16% per five-year period from 2021 to 2030. Also, non-fossil generation will reach between 45% and 50% of China’s electricity mix, with a strong implementation of wind, solar, gas and nuclear power. Hersley JP, (2020) Let’s End the COVID-19 Blame Game: Reconsidering China’s Role in the Pandemic, Brookings, August 19, https://www.brookings.edu/blog/order-from-chaos/2020/08/19/ 38

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Fig. 1 Forecast of China’s Energy Mix (2025–2060). Source: Institute of Climate Change and Sustainable Development (ICCSD), Tsinghua University; Bloomberg

time has come to renew the efforts in dealing with China’s coal addiction, raising again the issue of a tense relationship between the primacy of the Environmental Stewardship institution with those of Trade/Market and Sovereignty. (See Fig. 1). Thus, the release of the 14th-FYP is likely to determine a crossroad for the future of coal in China’s energy sector. The path towards carbon neutrality must respond to the challenges of a doubling of power generation needs projected over the next decades, an exceptional growth of renewables and the overturning, but not the complete phase-out of fossil fuels, including the end of the coal’s predominance in China’s energy mix (Fig. 3). Additionally, the required investments in the energy sector over the next 30 years will put incremental pressure on determining which paths will be chosen to phase-out coal, and how renewables, nuclear power and natural gas will fit into Beijing’s long-term transition strategy.43 Indeed, this could presumably boost further tensions between the Environmental Stewardship

lets-end-the-covid-19-blame-game-reconsidering-chinas-role-in-the-pandemic/; Le Corre P, Brattberg E, (2020) How the Coronavirus Pandemic Shattered Europe’s Illusions of China, Carnegie, July 9, https://carnegieendowment.org/2020/07/09/how-coronavirus-pandemicshattered-europe-s-illusions-of-china-pub-82265. Climate change and sustainability of the Sino-EU relationship feature high in the Comprehensive Agreement on Investment signed between Brussels and Beijing authorities at the end of December 2020. See: European Commission, EU and China Reach Agreement in Principle on Investment, December 30, 2020, https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2541. On the geopolitical significance of China’s initiative: Meidan (2020). 43 The challenge seems rather difficult as, by 2060, fossil-fuels should decrease from 85% to 16% in the total primary energy consumption (TPEC). According to ICCSD estimates, in order to achieve the 2 °C transition pathway, China’s energy system will need new investments for around 100 trillion yuan in the 2020–2050 period, or around 1.5–2.0% of annual GDP. To achieve the 1.5 °C transition pathway, new investments need to be nearly 138 trillion yuan, or over 2.5% of the annual GDP. Jiankun (2020).

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and other primary institutions, complicating the political and economic processes leading to China’s energy transition.

3 The Sovereign Transition from Coal to Gas in China’s Energy Mix: Tensions Between the Sovereignty and Environmental Stewardship Institutions 3.1

A Sovereign Transition: The Integration of Environmental Stewardship into China’s Energy Policies

A reflection of the mounting concerns by the Chinese government over coal share in the energy mix have already appeared in the binding targets of the 11th-Five Year Plan (FYP) 2006–2010 and the 12th-FYP 2011–2015. In these essential documents providing the structural guidance for macroeconomic activities, Beijing has taken its first pledges to reduce energy consumption per unit of GDP, abating major sulphur dioxide (SO2) and nitrogen oxide (NOx) emissions.44 In order to reform energy production and consumption, China’s energy policymakers have selected natural gas as a clean energy source. At the same time, the first centralised efforts have been aimed at curbing emissions by tackling coal consumption in major cities’ power sector.45 However, it has been under the new Xi-Li leadership call for a War Against Pollution that the pace of the coal-to-gas transition has accelerated. The same politicisation of environmental and energy issues has brought Premier Li to advocate for the creation of a “sound ecological environment” as a vital component for the present and the future of the country, reaffirming the primacy of the Environmental Stewardship institution.46 The struggle against air pollution has also permeated President Xi Jinping’s narrative about the “three tough battles,” with the reduction of coal usage and the promotion of clean energy as cornerstones of a moderately

44

Respectively, the 12th-FYP has aimed at 16%, 8% and 10% reduction by 2015 compared to 2010 levels. 45 In this early stage of China’s coal-to-gas transition, some of the major environmental policies introduced to support gas were 11th-FYP for National Environmental Protection (11-FYPE) in 2007, the Guidance on Joint Prevention and Control Work for Air Pollution for Improving Regional Air Quality in 2010, the 12-th FYP for National Environmental Protection (12FYPE) in 2011 with the inclusion of PM2.5 monitoring in Beiing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta regions and air pollution control over 333 cities all across the country, and the 12th-FYP for the Prevention and Control of Air Pollution in Key Areas of 2012 designing PM10, SO2, NOx, and PM2.5 target reduction in 2015 in major prefectures, cities and provinces. 46 Li K, (2014) Report on the Work of the Government, The State Council, March 14, http://english. www.gov.cn/archive/publications/2014/08/23/content_281474982987826.htm.

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prosperous society and the fulfilment of the ‘China Dream’.47 In the context of building a cleaner energy system, Chinese political authorities have displayed a significant interest in implementing policies favouring natural gas consumption as one of the main alternatives to coal. Within the span of a few years, diverse initiatives have been taken to end China’s addition to coal, revolutionise the energy mix and speed-up the coal-togas transition. To this aim, a first ‘Airborne Pollution Prevention and Control Action Plan’ (Action Plan) has been issued in 2013, urging the reduction of emissions in major urbanised areas and also in the Total Primary Energy Consumption (TPEC) through the use of alternative fuels, including gas.48 Another major call has come with the November 2014 Strategic Action Plan for Energy Development (Strategic Action Plan 2014–2020) and its double goal of raising country’s energy independence and optimising the energy mix. To balance coal reduction, energy authorities have promoted the utilisation of gas in both conventional and unconventional forms.49 Prominent signals to curb coal usage have been issued with the 13th-FYP Energy Plan and the Energy Supply and Consumption Revolution Strategy (Energy Revolution Strategy 2016–2030), respectively capping coal consumption, fixing CO2 emission reduction targets, and pledging short and long-term targets for coal and gas consumption.50

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Xinhua (2018). State Council (2013) Air Pollution Prevention and Control Action Plan, Guo Fa [2013] No.37, September 10, http://www.gov.cn/zwgk/2013-09/12/content_2486773.htm. The document is the first to set a direct link between PM10 and PM2.5 emissions to coal consumption, Moreover, it is the first to set urban targets for particulate emissions reduction at 10% and even sharper reduction targets in major regional and urban areas of Beijing-Tianjin-Hebei, Yangtze River Delta, and Pearl River Delta. Regional reductions of fine particulate concentration have been set to respectively 25%, 20%, and 15%. According to the document, to foster emission reduction, coal proportion in total primary energy consumption (TPEC) should fall from 68% in 2013 to 65% by 2017, replaced by other energy sources such as natural gas, electricity, nuclear and renewables. 49 State Council (2014) Energy Development Strategic Action Plan (2014–2020), November 19; National Energy Administration (2014) Notice of the General Office of the State Council on Issuing the Energy Development Strategic Action Plan (2014–2020), December 3. According to the document, the proportion of coal in TPEC should shrink to 62% by 2020, whilst natural gas should increase to 10% and meet urban areas energy demand. Strict targets have been given to conventional and unconventional gas production to diversify the supply and eventually let China enjoy the same results of the American shale revolution. See: Gao (2012); Gunningham (2014). 50 The Energy Supply and Consumption Revolution Strategy (2016–2030) stresses the need to cap coal consumption to 58% of TPEC and to reduce CO2 emissions. Released by top economic and energy planning agencies of National Development and Reform Commission and the National Energy Administration, the Supply and Consumption Revolution Strategy (2016–2030) lays out the 2020 and 2030 targets for coal and natural gas consumption, respectively passing from 60.4% to 49% and from 8.4% to 15% in the energy mix, with non-fossil fuels share to reach 20%. The document is also advocating for an increase of renewables and nuclear energy in China’s energy mix. 48

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An ad-hoc campaign to promote natural gas as a substitution fuel has been launched with the so-called Clean Winter Heating Plan (2017–2021). Trough this, the National Development and Reform Commission (NDRC), the top country’s economic agency, and the National Energy Administration (NEA), aim to gradually convert millions of households in Northern China from coal to gas-fired heating systems.51 In fact, peak consumption constitutes a serious environmental and energy dilemma for some of the coldest and most industrialised provinces, especially during the winter season. In mid-2018, the State Council has also launched the so-called Blue Sky Action Plan (2018–2020) confirming new emissions reduction targets and pushing for natural gas production, supply, storage and marketing in additional provinces.52 According to the late 2020 strategic document Energy in China’s New Era, natural gas figures among China’s energy sources for the optimisation and the cleaning of country’s energy consumption; an opportunity to also develop poor and rural areas. As a home-sourced energy resource, natural gas would also assist the diversification of supply systems and the strengthening of China’s energy security.53

3.2

A Transitioning Role for Natural Gas: A New Cornerstone in China’s Energy Mix?

Historically, natural gas has not been given a preeminent role in China’s energy mix and until the 2000s, it has gone unnoticed as a possible solution to the expanding needs of country’s blossoming economy (Fig. 4). Mainly, it has been because of the lack of a prospective market development within the national borders that the uncertainties over the outlook of natural gas in China have always been consistent. Nevertheless, gas has enjoyed a tremendous expansion during the last decade. Its very low starting base compared to other energy sources has made its success a

National Development and Reform Commission (2017) Energy Supply and Consumption Revolution Strategy (2016–2030), May 4, https://www.ndrc.gov.cn/xxgk/jd/jd/201705/t20170 504_1182809.html; For an English translation of the strategy’s main contents see International Energy Agency, https://www.iea.org/policies/1794-energy-supply-and-consumption-revolutionstrategy-2016-2030. 51 National Development and Reform Commission, (2017) Notice on the Issuance of the Winter Clean Heating Plan in the Northern Region (2017–2021), Fa Gai [2017], No.2100, December 20, http://www.gov.cn/xinwen/2017-12/20/content_5248855.htm. The program has been supervised by the recently-created Ministry of Ecology and Environment (MEE), which for the first time coordinates climate change (a task inherited by the NDRC) and emissions reduction policies, and so forth unifying supervision and enforcement responsibilities under a singular, stronger agency. Wang (2018), pp. 112–117. 52 The State Council (2018) Three-Year Action Plan for Winning the Blue Sky Defence War, State Development, No.22, July 3, http://www.gov.cn/zhengce/content/2018-07/03/content_5303158. htm. 53 The State Council Information Office, (2020) Energy in China’s New Era, December 2020.

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Fig. 2 China’s Energy Consumption Structure (2000–2020). Source: National Bureau of Statistics

growing challenge for coal’s predominance.54 In China, gas consumption has been positively affected by economic growth, energy intensity and economic structure, with secondary industry playing the role of major consumer.55 Still, Chinese authorities had to lower their initial expectations about the share of gas in China’s TPEC and, by the end of the 13-FYP period, it remains well below the average of industrialised countries. In light of this, gas usage could be expanded in the next decades, becoming a prominent energy source in the transition away from coal (See Figs. 2 and 3).56 Since the early 2000s, when first governmental policies have started to incentivise the shift from coal to gas, China has witnessed the acceleration of the infrastructural development of a national gas grid, including long-distance gas transport pipelines, underground gas storage (UGS) and Liquefied Natural Gas (LNG) receiving terminals.57 The ultimate goal in the development strategy of China’s gas infrastructure has been to increase national interconnectivity, achieving secure and stable operations, and enhancing resource allocation through the connection between resources

54

Downs (2006); Fridley (2008), pp. 7–65; Ratner et al. (2016); Li et al. (2018), pp. 303–312. Jiang et al. (2020). 56 As of 2020, OECD gas average stands at 29.14% of TPEC. According to China’s statistics, gas covers around 8,5% of TPEC. BP (2021). 57 As of the end of 2020, China operates slightly more than 20 LNG terminals with around 78 mtpa/ y of annual capacity. At least other 13 new re-gasification projects are expected to go online in the next few years as projects have been delayed to Covid-19 outbreak and construction stopped during 2020. At the same time, the regasification capacity addition rate has slipped from 20 mt/y in 2019 to 6.5mt/y in 2020, with only 2 out of 9 new terminals coming online. Data from: GIIGNL (2021). 55

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Fig. 3 China’s Electricity Generation by Fuel (2020). Source: BP Statistical Review of World Energy 2020, BP, 2021

and markets, and between gas reserves and markets.58 New infrastructural linkages are also required as the country’s main resource basins are located in the North and the West, far-away from the main consumption centres. For these reasons, natural gas consumption remains unbalanced and concentrated in China’s most urbanised and industrialised regions.59 During the last decade, China’s domestic gas 58 Shell International & the Development Research Centre (DRC) of the State Council, (2017) China’s Gas Development Strategies, Springer, pp. 233–246; China’s National People’s Congress, (2011) 12-th Five-Year Plan (2011–2015) for National Economic and Social Development, Retrieved at https://policy.asiapacificenergy.org/node/37. 59 As of the end of 2019, East China represents almost a third of national gas consumption, followed by North, Northwest and Southwest. The building of an interconnected energy transmission network, stable and reliable energy storage and transportation system has also been fostered as a principle in the “Four Revolutions and One Cooperation” strategy. Yet, today less than a third of the Chinese population and less than half of urban population has a pipeline connection. Moreover, China has built over 87,000 km of trunk gas pipelines and the primary transmission capacity exceeds 350 bcm, as many new long-distance pipelines have come into service. Moreover, 27 UGS facilities have been built nationwide, with a 10.2 bcm working capacity. National Energy Administration (2020) China Natural Gas Development Report, August 10.

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production has experienced one of the highest growth rates in the world. Still, the country’s demand for natural gas has ramped up on an unprecedented scale, eclipsing the capacity of domestic production to supply sufficient gas volumes (See Figs. 4 and 5). From mid-2000s until 2014, annual growth has continued at a double digit rate, slowing in 2014–2015, but then re-igniting at fast speed. The

Fig. 4 Natural Gas Production in China (2015–2020). Data: National Energy Administration, Natural Gas Development Report (Various years)

Fig. 5 China’s Natural Gas Supply and Demand Balance (2002–2020). Data: BP Statistical Review of World Energy (2002–2020)

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global Covid-19 pandemic has slowed down global gas demand, but China’s one has relentlessly grown during 2020 and by 2025 and 2050 it is expected to account for 450 bcm and 600 bcm respectively.60 Despite the abundance of reserves, China’s gas industry development is constrained by several physical factors such as poor technological innovations, uneven distribution and deterioration of reserves, and increasing upstream costs.61 Moreover, institutional obstacles have hampered industry’s renovation and its competitiveness against coal. The lack of a clear development strategy, the obstruction by vested interest groups, the absence of an effective market supervision and a pricing policy mismatching gas prices and supply costs, and thus allowing residential users to enjoy low prices at the expense of the industrial and commercial users, have encouraged the elaboration of a reform plan.62 At the same time, state authorities have been calling for stronger efforts by National Oil Companies (NOCs) to respond to the increasing domestic energy needs as a matter of national security. In turn, NOCs have disclosed key targets in their Seven-Year Action plans, focusing on gas production growth and reserve expansion in four core regions and the South China Sea, with exploration and development spending surging to unprecedented record levels.63

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CNPC ETRI (2020) World and China Energy Outlook in 2050, December 25; S & P Platts (2021) China’s Natural Gas Demand Set to Hit New Record in 2021, January 7, Accessed February 4, 2021 https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/china-s-natu ral-gas-demand-set-to-hit-new-record-in-2021-62023299. 61 Chengzao et al. (2014), pp. 1–13. 62 Dong et al. (2017), pp. 582–593; Higashi (2009). 63 In their Seven-Year Action Plans, CNPC and CNOOC have planned to respectively increase by 5 and 2 times exploration spending compared to pre-2019 levels, focusing on the most promising conventional and unconventional gas basins. During 2019, NOCs have invested 334.8 billion yuan (around $51billion and + 25.5% year-onyear) and 82 billion yuan (around $12,5). National Energy Administration, (2020) China Natural Gas Development Report, August 10; Zhu K, Sharma N, (2019) China Upstream Revitalized — The Implications for China’s Security Strategy, IHS Market, November 6, Accessed February 2, 2021, https://ihsmarkit.com/researchanalysis/china-upstream-revitalized%2D%2Dthe-implications-of-chinas-new-ene.html; The State Council, (2018) Several Opinions of the State Council on Promoting the Coordinated and Stable Development of Natural Gas, No.31, August 30, http://lawinfochina.com/display.aspx?id=28915& lib=law.

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4 Tensions Among Primary Institutions: Sovereignty Vs. Trade/Market in the Context of the Coal-to-Gas Transition 4.1

Gas Pricing Reform: Towards a Supply/Demand Balance?

The reforming process of the gas pricing system has become a decisive aspect of China’s response to balance supply and demand. Traditionally, natural gas prices had been set to compensate domestic suppliers for the cost of production. However, raising infrastructural investments, higher import prices and soaring governmentalinduced consumption have made them largely unsustainable. Thus, the resulting market-oriented reforms supported by the central government have raised tensions among primary institutions and between primary and secondary institutions. At the same time, these reforms highlight the urgent need for integration among primary institutions, pursuing stability and aiming for a successful coal-to-gas transition in China’s energy system. Since the mid-2000s, central agencies have been taking the first slow steps to review the pricing system. By early 2010s, reforms entered a new development phase. In 2013, after a brief test, the NDRC introduced a general reform aiming to gradually and fully marketise gas prices.64 For the first time, incremental volumes have been priced throughout a three-year adjustment process, whilst substitute import fuels prices such as fuel oil and liquefied petroleum gas (LPG) have been linked to gas, providing a first connection between domestic prices and international markets. Yet, information asymmetry and the lack of stable price formulation rules have been hindering the downstream expansion of natural gas. Indeed, these have been favouring certain types of consumers, leading to several market distortions and cross-subsidisation.65 Moreover, control over the wholesale gas prices continued to be semi-regulated by the government, holding companies back from investing in the sector. Speaking of power generation, a strategic sector for cutting coal consumption, benchmark power prices are still regulated as of the end of 2020. This deters investors from building new gas-fired plants in what constitutes a largely unprofitable market because coal is steadily cheaper than gas, even in provinces where pilot programs for fostering gas in power sector have been introduced.66 Consequently, it

Since 2011, a first attempt to implement a new gas pricing system had been carried out in the Guangdong and Guangxi provinces, obtaining positive results. NDRC (2013) Notice of the National Development and Reform Commission on Adjusting the natural Gas Prices 2013, National Development and Reform Commission, http://www.gov.cn/ gzdt/2013-06/28/content_2436328.htm. 65 Paltsev and Zhang (2015), pp. 43–56; Hu and Dong (2015), pp. 374–382. 66 Qin (2020). 64

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is no surprise that at the end of the 13th-FYP gas power installed capacity generation is more than 10% short of the targets set by the central government.67 The marketisation of commodities is among the main principles to reform and optimise China’s energy system, but fiscal and price subsidisation of gas are key in supporting national campaigns such as the Clean Winter Heating Plan (2017–2021). In addition, the central government is very careful in enforcing progressive pricing for disadvantaged consumers in Northern regions.68 Through the years, various measures have been introduced to support the expansion of the gas resource base as a source of clean energy during the winter season, bolstering the direct and indirect subsidies to the sector. This includes the use of special funds to reward and subsidise the mining of unconventional and conventional forms of gas.69 Overall, the reforms of gas pricing mechanisms have accelerated in the aftermath of 2015 and prices have become less regulated. Market forces have now been setting city gate prices, passing from ‘cost plus’ to ‘market minus’ formula. Also residential prices have been raised and paired to non-residential prices, altering a consolidated policy. Simultanoeously, there is still little transparency in the way domestic prices respond to international market fluctuations.70 Moreover, the NDRC has already foreseen a step-by-step elimination of city-gate prices whilst regulating transmission fees, which will likely affect coastal cities, with multiple entry points.71 The same process will also be smothered by the recently established gas trading exchange centres in Shanghai and Chongqing. According to IEA, the current system makes it difficult for China to earn the positive consequences resulting from the country’s large volumes of imported gas since major contracts remain priced without any tiering to Chinese indexes. Within the current system, market rules are unable to lead to resource allocation and the same frustrates new market entrants. Furthermore, it favours possible shortages and the under-performance of major infrastructures.72 As studies have demonstrated, different gas sources have dinstinct effects on China’s gas price fluctuations. Likewise, no mechanism exists to cope with extreme surges or falls. In this context, the disconnection between domestic and foreign markets hinders the timely transmission of gas prices. The ensuing lags of internal adjustments risk creating

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China Electricity Council (2020) China Electricity Sector in January to November 2020, December 22, https://www.cec.org.cn/detail/index.html?3-291651. 68 Against the 110GW of installed capacity generation projected by the end of the 13thFYP, gas power installed capacity is 97.51GW. National Energy Administration (2020) China Natural Gas Development Report, August 10. 69 Ministry of Finance, (2020) Notice On Issuing Special Funds for Clean Energy Development, No.216, June 24, http://www.gov.cn/zhengce/zhengceku/2020-07/06/content_5524490.htm. 70 O’Sullivan (2018). 71 Li L, (2020) Gas Price Market Reforms Go Further, People’s Daily, March 25, http://energy. people.com.cn/n1/2020/0325/c71661-31647694.html. 72 International Energy Agency, Gas Market Liberalisation Reform: Key Insights From International Experiences and the implications for China, IEA, May 2019, P.18.

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opportunities for long-term speculation, threatening gas industry players’ long-term development and downstream industrial chains.73 Under this light, the future challenge for the regulators of the Chinese gas market will be to strike a balance in the gas pricing mechanism to support different policy objectives, such as making gas competitive to alternative fuels and support its domestic production. Also, low prices for gas and renewables are considered essential to the goal of displacing coal, but whenever the former are kept artificially low at the downstream level, they are likely to restrain the growth of other sources like wind and solar energy, backfiring on other energy and transition policies.74

4.2

New Agencies for Old Dilemmas: Reforming the State-Companies Relationship in China’s Gas Market

Major tensions among primary institutions are observable due to the rise of the Trade/Market institution. These are a consequence of the reforms of gas industry, along the changes of State-owned enterprises in the energy sector (SOEs) in the form of State-agency relationship and the transformation of the NOCs’ role. Becoming functional to the state-capitalist and governmentally-regulated pricing system, SOEs have inherited a semi-autonomous rank of a ministry during the 1980s and 1990s reforms of China’s energy sector.75 Being in fact market participants and market regulators, but also possessing an outstanding influence over energy policy-making, the three SOEs established a complete monopoly over domestic gas production, managing most of the gas transmission and import infrastructures.76 NOCs prominence and political influence goes way beyond national borders and they have become significant global players. Also, their growing prestige has been paired with China’s rise in the international arena. As agents of Beijing’s global ambitions and providers of sufficient energy resources, NOCs have attracted much academic attention, having to balance economic interdependencies with political objectives. Besides this, after 2013 NOCs have become paramount for China’s energy diplomacy and the realisation of the Xi’s trademark Belt and Road Initiative (BRI).77 As a result of the SOEs capacity to fulfil economic and energy tasks, combined with backing China’s geopolitical ambitions, NOCs have shore up their

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Chai et al. (2019), pp. 940–949. U.S. Energy Information Administration (2020). 75 The three major Chinese NOCs are China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (SINOPEC), and China National Oil Offshore Corporation (CNOOC). 76 According to IHS Markit estimates, as of mid-2019 NOCs completely controlled China’s gas production and gas pipeline transmission lines. See also: Andrews-Speed and Dannreuther (2011); Kong (2010). 77 Liao (2019), pp. 1–33; Gueldry and Liang (2016), pp. 217–240; Zhang (2016). 74

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domestic legitimacy, fulfilling independent goals and pursuing unfair market practices, limiting new entrants’ room for manoeuvre and outcompeting them in the access to transmission and receiving infrastructures. However, as soon as Xi Jinping came to power he has used the spreading corruption in the oil and gas industry to tackle political rivals and take over NOCs management, re-shuffling positions with loyal officials, hindering their structural power.78 To this extent, reforms come as a reflection of the efforts to introduce competition and efficiency as guiding principles in the energy system, with the goal to expand China’s resource base. At the same time, they have been pursued in order to facilitate both energy and political objectives, but also reinstating the sovereign primacy of the State and Party control over the oil and gas sector.79 During the last decade, various government agencies have been advocating for sectoral reforms, favouring market rules in resource allocation and expanding the number of market players, including the State Council.80 By the early 2010s, the government has been trying to support new entrants’ participation, removing some of the major entry barriers. In December 2019, the Ministry of Natural Resources (MNR) issued a new so-called Opinion, opening to domestic and foreign investors the possibility to apply for oil and gas mining rights. This decision has been aimed to attract non-NOCs, heralding modifications to policies implemented for decades and inviting newcomers to gain from investing into the development of the upstream gas sector.81 Throughout the last decade, other so-called Measures have been introduced, advocating for the opening of oil and gas pipeline network facilities, the establishing of market rules to open the access to upstream infrastructures and persuade thirdparties to access surplus capacity. Within this process, controls have become harsher and rules more specific. Yet, as a consequence of the poor results achieved in thirdparty access (TPA) to major gas infrastructures, in 2019 the NDRC and NEA have

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Tiezzi S, (2015) Zhou Yongkang’s Greatest Crime, The Diplomat, April 21, https://thediplomat. com/2015/04/zhou-yongkangs-greatest-crime/. 79 Wang (2019), pp. 284–312; Leutert (2018), pp. 27–36. 80 The State Council has urged to liberalise exploration and production licenses, to increase supply capacity, to transform the mechanisms regulating transfers and exits from blocks, to improve corporate governance and mixed ownership, to revise reserve system response and safety of operations. The State Council (2017) Several Opinions on Deepening the Reform of the Oil and Gas System, May 21 http://www.gov.cn/zhengce/2017-05/21/content_5195683.htm. 81 Early 2010s reforms have allowed non-SOEs participation in the development of unconventional gas resources, but only in case they were venturing with Chinese majority-owned companies. The same clause has been removed in shale gas and in conventional oil and gas operations during the 2017–2019 biennium. As of the end of 2019, over 95% exploration acreage in China has been owned by the three NOCs. According to the reform, around 25% of the licensed area will be relinquished once their license is extended, thus giving new possibilities for non-NOCs players to bid for new upstream areas. Sun et al. (2020); Zhu and Sharma (2020).

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introduced more detailed specifics supporting TPA, welcoming additional investors, and imposed stricter conditions reducing information asymmetry between SOEs and market entrants.82 Even though being oriented towards a more competitive approach in TPA, these Measures do not impose strict consequences for non-compliance or define whose users should be qualified in accessing gas infrastructures.83 Still, the reform has prompted new independent buyers such as distribution, city gas companies and power utilities to enter the fray and trade the arbitrage between low international gas prices, regulated, and oil-linked contracts. Against the background of tense relations with NOCs and an uneasy path of regulatory roadblocks shaped by the lack of access to the pipeline gas transmission system, the over-reliance on LNG truck services, and the regulated piped gas prices, these companies have nonetheless started to build their own import facilitates, undertaking serious financial and commercial risks.84 In order to push for market-oriented reforms, split midstream and upstream sectors and encourage downstream market competition, in 2019 Beijing has also established a new company named China Oil & Gas Piping Network Corporation (PipeChina). Set to relentlessly finalise the unbundling of NOCs’ infrastructures, PipeChina would also increase the attention over the respect of TPA clauses.85 The reform should be understood as one of the major shifts towards the marketisation of China’s energy policy over the last 20 years. Positive results could be already seen in the outstanding number of new applicants for shippers’ licences and access to supply infrastructures, including private and international players, once tariffs and import capacity have been revealed.86 Nevertheless, the extent to which outcomes will stick

82 The gas facilities’ network include: pipelines and LNG terminals, storage, gasification liquefaction and compression units. Yet, 2014 NEA Measures did not specify what surplus capacity means. In practice, this gives free hand to operators for autonomously handling available space. The 2018 revision has specified the fair and open conditions under which NOCs should grant third party fair access, including how storage capacity should be allocated. National Energy Administration (2014) Measures for Fair Opening of Oil and Gas Pipeline Network Facilities (Trial), February 13, http://zfxxgk.nea.gov.cn/auto92/201402/t20140224_1768. htm; National Development and Reform Commission (2018) Measures for the Fair Opening of Oil and Gas Pipeline Network Facilities, August 3, https://www.ndrc.gov.cn/hdjl/yjzq/201808/t20180 803_1166015.html; National Development and Reform Commission (2019) Measures for the Supervision of Fair Opening of Oil and Gas Pipeline Network Facilities, May 24, https://www. ndrc.gov.cn/xxgk/zcfb/ghxwj/201905/t20190531_960966.html. 83 Sun et al. (2019). 84 New gas independent players include: ENN, Guanghui, Jovo, Beijing Gas Group, Huadian, Huaneng, and Guangdong Development. Yang (2019); S & P Platts (2018). 85 As of the end of 2020, PipeChina manages more than $60 billion gas network infrastructure assets inherited from main NOCs infrastructures. Xu and Aizhu (2020); Bloomberg (2020a). 86 S & P Platts (2020) PipeChina Attracts Wide Interest for Gas Supplier Licenses as Reforms Accelerate, November 25, Accessed January 25, 2021 https://www.spglobal.com/platts/en/marketinsights/latest-news/natural-gas/112520-pipechina-attracts-wide-interest-for-gas-supplier-licensesas-reforms-accelerate; Argus Media, (2020) PipeChina Outlines Tariffs for LNG Terminals,

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to policy-makers goals will depend on the capacity of authorities to enforce TPA rules and energy SOEs capacity to fight back competitors.87 On one hand, vested interests could be heavily influencing PipeChina operations given the fact that the new company is almost exclusively managed by former NOCs’ executives and that, in the future, infrastructures will be managed by a complete monopoly. On the other hand, logistical issues and the poor interconnectivity between producing, consuming and importing provinces remain a critical issue for the development of China’s gas market.

4.3

China Integration into the Global Gas Trade/Market Institution

In the interest of better understanding the significance of China’s growing reliance on natural gas in the country’s energy mix and to fully grasp the stability, coherence and feasibility of the coal-to-gas transition strategy, the study of the tensions between the primary institutions of Trade/Market, Sovereignty and Environmental Stewardship becomes crucial. In fact, China’s marketisation of gas has deep transboundary economic and political implications and its evolving outlook is today one of the main questions in the global energy markets. As of the end of 2020, China has become the second-largest LNG importer and by the first half of 2020s is set to become world’s largest. Even in the post Covid-19 outbreak scenario, China remains the main driver of global gas demand growth.88 Being at the forefront of this global trend, China’s coal-to-gas transition and the surging reliance from imported gas volumes have become issues of pivotal importance for all gas producers. De facto, China’s growing dependency will come against the backdrop of a much more turbulent international scenario compared to those years when the country’s oil dependency had been speeding-up. For sure, this brings up noteworthy security concerns for China’s government and policymakers.89 The more so, since China’s broadening gas appetite takes place in parallel with the

October 15, Accessed January 6, 2021, https://www.argusmedia.com/en/news/2150348-pipechinaoutlines-tariffs-for-lng-terminals. 87 Downs and Yan (2020). 88 During 2017, China’s imports have grown by 46% year-on-year (y-o-y) and the country has reached South Korea as the second world’s largest LNG importer. In the 2016–2018 biennium, LNG imports have more than doubled. China’s consumption is projected to grow by about 130 bcm/y up to 2025. The rising demand is led by the industrial, residential and commercial sectors, accounting for nearly 70% of the incremental demand. International Energy Agency, Gas 2020, IEA, June 2020; Wood Mackenzie, (2019) Japan to Lose Top LNG Importer Position to China by 2022, July 23, Accessed December 23, 2020, https:// www.woodmac.com/press-releases/japan-to-lose-top-lng-importer-position-to-china-by-2022/. 89 Gross (2020). O’Sullivan (2019).

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Fig. 6 Natural gas prices in selected markets 2016–2019. Source: International Energy Agency. *The average LNG import price is calculated through China, Japan and South Korea prices

so-called process of commoditisation of natural gas and an increasing share of gas is traded on a global scale in the form of LNG. On this point, and borrowing from the ES of IR, the rising primacy of the Trade/Market institution of the global gas market is a determinant of the contemporary GIS.90 This process is altering several features of the global gas market, such as supporting an high liquidity of the same, advocating competition between markets, spreading hub and gas-to-gas pricing, and facilitating the de-linking from traditional oil pricing indexation.91 Other major changes appeared in the supply, demand and distribution patterns,92 advancing the roles of specialisation and cooperation all along the global gas supply chain.93 Even though changes are also occurring in the Northeast-Asia markets, China is experiencing various negative externalities due to the unbalanced nature of global gas trade, where regional discrepancies are still considerable.94 Indeed, the so-called Asia Premium (See Fig. 6), with over 70% of natural gas sales subjected to oil price indexation, preserves the high price environment in the Northeast-Asia gas markets. Alongside the AsiaPremium, the lack of regional pipeline interconnectivity and the absence of a hub spot price reference, which makes spot price purchases costlier than those paid under

90

In the 2010–2020 period, pipeline and LNG natural gas trade have respectively shifted from 59% and 41% in 2010 to 48.1% and 51.9% in 2020. At the same time, from 2000 to 2020, the number of LNG exporters increased from 12 to 20. In the 2010-2020 period, the traded volume of LNG surged from 302.4 bcm/y to 487.9/y. Data from: BP (2021); GIIGNL (2021). 91 Stern (2014), pp. 43–48; Zhang et al. (2018), pp. 33–41. 92 Eggins and Holz (2016), pp. 468–479. 93 Kan et al. (2019), pp. 215–225. 94 IEA and KEEI (2019).

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Fig. 7 China’s LNG and Pipeline Imports by Source (2020). Data: BP (2021) BP Statistical Review of World Energy 2020, BP

long-term contracts, have consistently influenced the regional gas market. According to a recent study, China has been increasingly paying for gas imports because of its dependency on long-term contracts, thus affecting both its economic development and anti-pollution policies.95 On the other hand, in order to fulfil the task of providing enough gas for the rampant domestic needs, Chinese NOCs’ activities have remarkably shaped the evolution of the international gas markets over the last 15 years. Other than securing massive LNG deals, a substantial pipeline network has been built with neighbouring countries, implementing a Multiple Sourcing strategy, diversifying as much as possible imports for security and market power rationales through the construction of 5 main gas import corridors (See Fig. 7).96 After a period of inactivity, coal-to-gas transition campaigns have accelerated China’s international gas purchases, and the country has secured a vast proportion of global contracted volumes. A trend that has not slowed down, even during 2020 (See Fig. 8).97 In the first half of the year, spurred by delivery flexibility and the average lower prices of spot LNG compared to long-term contracts, China’s looming

95

With a 10% increase in gas consumption, the Asia-premium may increase up to 70%. Between 2010 and 2016, China’s additional import costs reached $58.8 billion. Overall, the Asia-Premium has become an heavy burden for China’s economic development, coal-to-gas transition and antipollution policies. Liu et al. (2021). 96 Bradshaw and Waterworth (2020); Zhang and Bai (2020). 97 In 2018–2020, the propensity of importers to secure a large share of global gas production has seen China accounting between 20% and 21% of contracted volumes worldwide. In 2020, amid pandemic-depressed market conditions, China has secured the largest share of import contracts among destination countries, despite total volumes and number of contracts have been significantly lower compared to 2019. International Energy Agency, Global Gas Security Review (2018–2020 Issues), IEA, October 2020.

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Fig. 8 Global Contracted Volumes of LNG By Importing Regions (2015–2020*). Source: International Energy Agency. *2020 data are referred to the period January–September. Note: “Portfolio players” volumes are contracted from a market player who may source product from one or multiple regions to fulfil contractual obligations

integration into the global gas market and growing primacy of the Trade/Market institution is highlighted by the increasing importance of short-term purchases. Those, together with long-term and averagely high-priced gas contracts, are increasingly present in Beijing gas security strategy.98

5 Integration and Tensions Unfolding in China’s Gas Import Dependency Amid the Covid-19 Pandemic In this section, State and Market relationship is explored through the study of the unfolding tensions between primary institutions in the near aftermath of Covid-19 market shock. The aim is to analyse the implications for primary institutions, the integration and tensions dynamics between them, as well as the influence of these dynamics over formal types of institutions, China’s energy system and coal-to-gas transition. In the first half of 2020, the combination of the so-called Oil Price War between Russia and Saudi Arabia and the Covid-19 pandemic has unleashed devastating effects on the global economy, causing the largest recorded shock on energy

98 GIIGNL, (2020–2019) The LNG Industry: GIIGNL Annual Report, International Group of liquefied Natural Gas Importers, (2020–2019).

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markets up to that moment.99 Restrictions and lockdowns have slashed energy consumption and emissions, including China’s, curtailing investments and generating a different set of market uncertainties to be felt for years to come. Even more, the pre-existent gas glut has expanded, making regional gas price differentials almost disappearing. By late May 2020, day-ahead prices on the European TTF hub fell below USD 1/MBtu and LNG spot prices in Asia fell below USD 2/MBtu, both historic lows. In parallel, long-term contracts gas prices have remained rather expensive due to their lag adjustment dynamics.100 On the domestic side, China’s gas consumers have been the one enjoying the most positive fallouts. In fact, the NDRC has decided to balance the impact of Covid-19 outbreak and the economic development, reducing domestic gas prices and tariffs in order to ease the economic recovery. The government has prioritised economic growth, employment and stability over other targets, shedding also light over checks and balances and political priorities ahead of the 14th-FYP. Additionally, since April–May 2020 an export boom has dragged the country outside the post-outbreak crisis, supporting GDP growth and energy consumption rebound.101 Indeed, the new global pricing environment has created several incentives for China to remodel its gas supply and bolster LNG imports, with both term and spot prices falling well below 2019 levels, becoming way more convenient than pipeline imports.102 In a rare step, both CNPC and CNOOC have declared ‘force majeure’ and reneged contractual obligations due to the lower capacity to accept delivered gas volumes, deferring shipments to the second half of the year and endangering suppliers’ economic stability.103 Besides this, LNG imports have been rising fast, in particular during the summer of 2020, with spot prices touching the lowest levels since 2009. The conditions have been slightly balanced by a weak yuan. Yet, gas 99

In March, the collapse of the OPEC+ agreement between Russia and Saudi Arabia led to a bitter competition for market share between exporters. The parties bitterly outcompeted each other, overflowing markets with additional oil supplies and undercutting the economy of competitors. See Gross S, Riedel B, Stent A, Maloney S, (2020) Brookings Experts Comment on Oil Market Development and Geopolitical Tensions, April 13; Salameh (2020), pp. 86–89. 100 Gas prices linked to long-term contracts, most of them exported to Asia, have become the most expensive international traded fossil fuel for much of 2020. International Energy Agency (2020); Oxford Institute for Energy Studies (2020). 101 Li (2020); S&P Platts (2020); The World Bank (2020). 102 Compared to LNG term, pipeline gas had reduced costs only by a third, making imports from central Asia networks rather costlier than other sources at the Shanghai city gate price benchmark. Nguyen Yang (2020). 103 During the first months of the crisis, Central Asian economies have been jeopardised by the heavy reliance on fossil fuels exports and their financial exposure to China. In the first 11 months of 2020, pipeline imports from Central Asia have fallen by 14%. Turkmenistan, by far the main Central Asia pipeline gas supplier to China, has seen around 3/4 of the overall supplies cut, with the remaining share split between Kazakhstan and Uzbekistan. Under this light, the Chinese decision to suddenly cut imports has crippled Central Asian countries’ capacity to implement the required investments for a safe and stable winter gas supply. In general, this could reveal the weaknesses of PetroChina/CNPC strategy to expand its gas pipeline network in the region. OECD (2020); Hashimova (2020); Hess (2020).

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importers have gained the most from these market conditions, including new market entrants.104 On the domestic side, the situation has created additional instability. On one hand, low regulated prices have kept relatively high consumption rates. However, because this has happened amid the low seasonal demand curve, it has poorly contributed to hamper China’s coal consumption. Moreover, without a sufficient storage capacity, imported gas has met natural barriers before entering the country’s energy system, causing also a slump in LNG imports, limiting the possibility to gain from the low price environment. Eventually, NOCs and city gas suppliers have been responsible for lagging behind government’s targets, as investing in this sector remains highly capital intensive and TPA is essential for long-term storage utilisation planning.105 In this context, suffering from consumption saturation in key regions, multi-year lows of domestic LNG wholesale and trucked LNG prices, different Chinese provinces have experienced gas-on-gas competition, with NOCs striving for market shares with new independent players.106 At some point, companies have come to a standstill. However, the serious implications for companies’ balance sheets and long-term strategies, coupled with the influence of external determinants such as global gas market conditions, point out once again how weak the new equilibrium remains. Against the backdrop of a decrease in both sales volume and prices of natural gas, energy SOEs finances have rapidly deteriorated, accelerating a structural crisis.107 Price fluctuations, increasing market competition, and international uncertainties have been indicated as the main causes of the situation. By undertaking the costs of importing highly-priced piped and LNG through long-term contracts, NOCs have contested the same rationale of allowing cheaper LNG to enter China’s market whilst letting them to suffer heavy financial losses.108 As a matter of fact, CNPC,

104 In 2020, short-term and spot purchases have experienced a 50% y-o-y increase, with China accounting for 40% of gross growth in global spot and short-term LNG trading. According to the Customs Department data, June and July 2020 LNG imports have respectively been up 29.2% and 9.3% y-o-y, whilst pipeline ones have respectively been down 15% and 23.2% y-o-y. Data: General Administration of Customs People’s Republic of China; International Energy Agency (2021). 105 Bloomberg (2020b); Liang and Ang (2020). 106 S & P Platts (2020) Price Wars Rage in China’s Domestic LNG Market as Supply Glut Worsens, S & P Platts, June 17, Accessed January 23, 2021 https://www.spglobal.com/platts/en/marketinsights/latest-news/natural-gas/061720-analysis-price-wars-rage-in-chinas-domestic-lng-marketas-supply-glut-worsens; Sharma S, (2020) China’s LNG Imports in June Jump 29%, Natural Gas World, July 23, Accessed January 27, 2021 https://www.naturalgasworld.com/chinas-lng-importsin-june-jump-29-80707. 107 Being CNPC’s main subsidiary and owner of international assets, PetroChina is by far the largest producer and importer of natural gas in China. During the first half of 2020, PetroChina has seen profits turning to losses and the gas pipeline segment decreasing its operation profits. Furthermore, net loss for sales volume of imported gas and LNG has increased compared 2019. PetroChina (2020). 108 Lee D, (2020) New Chinese Buyers Leap on Ultra-Cheap LNG, World Gas Intelligence, July 22, Accessed January 29, 2021 https://www.energyintel.com/pages/eig_article.aspx?DocId=10 78706.

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SINOPEC and CNOOC have clung to their key role in securing long term, vast volumes of internationally sourced gas to establish a de facto privileged condition in accessing transmission and import infrastructures. As things stand, NOCs have also guaranteed the supplies of city gas distributors and operators to final consumers. Evidently, these dynamics generate another source of influence over their domestic competitors. By the third quarter of 2020, the restructuring of import flows and procurement costs has made PetroChina’s financial conditions more stable. The company has also tried to undertake further efforts in controlling losses and imports, reducing costs, continuing its pipeline-to-spot LNG substitution and showing the positive implications of linking international market trends with domestic sales. Although having recovered some lost revenues, in the first 3 quarters of 2020 both CNOOC and Sinopec profits have remarkably dipped compared to the same period of 2019.109 In this scenario, NOCs have applied the heaviest possible capital expenditure cut all along the value chains. Nonetheless, they have also pledged supplementary investments on clean energy sources and low-carbon targets, raising gas share of their total outputs in the mid-term.110 These two dynamics reveal some of the structural tensions between State and Market actors and strategic dilemmas in China’s coal-to-gas transition. On one hand, both NOCs and NDRC have forecasted high winter gas consumption levels and anticipated market tightness.111 On the other, favourable market conditions have presumably influenced the MEE’s ambitious targets for 2020–2021, doubling down

According to the financial reports, profits for Sinopec have increased, but this result has been achieved through the company’s fixed assets sale to PipeChina before the official starting of the new midstream company by September 2020. PetroChina (2020) Third Quarterly Report of 2020, PetroChina, October; Sinopec, (2020), 3Q 2020 Results Announcement, October 29; CNOOC, (2020) 2020 Third Quarter Review, October 22. 110 Reuters (2021) CNOOC Plans Highest Capex Since 2014 After 5% Rise in Oil, Gas Output, February 4, Accessed February 8, 2021 https://www.reuters.com/article/idUSKBN2A417A; Aizhu C, (2020) China CNOOC Says to Raise Gas’ Share to Hold of Output by 2035, Reuters, October 22, Accessed December 3, 2020 https://www.reuters.com/article/idUSL4N2HD2RJ; S & P Platts (2020) PetroChina to Invest $1.5 Bil/Year in 2021–2025 for Low Carbon Emission Transitions, October 30, Accessed January 26, 2021, https://www.spglobal.com/platts/en/market-insights/ latest-news/oil/103020-petrochina-to-invest-15-bilyear-in-2021-25-for-low-carbon-emissiontransitions. 111 China’s NOCs have forecasted an overall 10% growth in 2020–2021 winter gas demand compared to a mild 0.3% in 2019–2020, spurred by the mix of economic recovery and government’ anti-pollution campaign and the possibility of tight supply conditions have been anticipated by the same NDRC. Xu M, Aizhu C, (2020) China’s Winter Gas Demand to Rise 10% on Economic Recovery, Reuters, October 29, Accessed January 3, 2021; Argus Media, (2020) PetroChina Expects Higher Natural Gas Imports in 2020, October 23, Accessed January 23, 2021 https://www.argusmedia. com/en/news/2152939-petrochina-expects-higher-natural-gas-imports-in-2020; Sheng W, (2020) Gas Prices Surge as Northern China Enters Winter Heating Season, Global Times, October 20, Accessed December 5, 2020, https://www.globaltimes.cn/content/1204071.shtml. 109

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on winter coal-to-gas transition in Northern China. Moreover, the acceleration of the coal to gas switch comes just weeks after Xi’s pledges in front of the UN General Assembly about of making China a carbon neutral country by 2060. A goal fully invested with a great political significance. At the same time, the government has linked the extension of the coal-to-gas transition to the availability of natural gas. Again, this highlights the critical importance reserved to the Trade/Market institution in driving China’s energy transition and lowering the costs of achieving its environmental goals.112 From this, it follows that China’s strategy could be undermined by the shifting international market fundamentals, possibly escalating tensions, rather than integration, among primary institutions. In late 2020, disruptions and shutdowns in different segments of the global supply chain have been matched with concerns over gas supplies and the beginning of winter buying season, adding new tightness in the spot LNG market and pushing up prices.113 This could increase costs for gas importers, deepening institutional conflicts between NOCs and independent companies, along with raising domestic consumption costs, which could jeopardise the stability and viability of China’s coal-to-gas transition.

6 Discussion and Conclusion With a fundamental role to play in driving growth within the global gas market and knowing the manifold transboundary economic and political issues connected to the aforementioned processes, China faces multiple challenges in developing its gas sector. Among these, the creation and marketisation of a coherent and enduring national energy policy pursuing a coal-to-gas transition constitutes a formidable task for China’s policymakers. As it appears, integration and tension between primary institutions are producing visible effects over secondary and formal institutions in China’s energy policy and energy system. On one hand, the reforms of gas industry are clearly following more

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MEE targets of switching around 7 million households to by end October for 2020–2021 are so ambitious that targets have been set even higher compared to the past 2 years combined. Yep E, Liang C, (2020) China Proposal to Replace Coal in Over 7 Million Homes May Boost Winter LNG Demand, S & P Platts, September 30, Accessed December 6, 2020 https://www. spglobal.com/platts/en/market-insights/latest-news/coal/093020-china-proposal-to-replace-coal-inover-7-million-homes-may-boost-winter-lng-demand; Argus Media, (2020) China Sets Targets for Winter Coal-to-Gas Conversions, September 30, Accessed January 4, 2021 https://www. argusmedia.com/en/news/2145730-china-sets-targets-for-winter-coaltogas-conversions. 113 Hui Tan J, Kanoi S, (2020) JKM Hits One-Year High on LNG Supply Disruptions, Winter Buying, October 20, Accessed December 28, 2020, https://www.spglobal.com/platts/en/marketinsights/latest-news/natural-gas/102020-jkm-hits-one-year-high-on-lng-supply-disruptions-winterbuying; Russell, (2020) Recovery in Asia Spot LNG Price More About Supply Than Demand, Reuters, September 10, Accessed November 3, 2020, https://jp.reuters.com/article/column-russelllng-asia-idUSL4N2G71A2.

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market-oriented principles and norms, introduced in the country for various purposes. As an example, the expanding correlation between international and domestic gas prices stands in stark contrast with the traditional state regulation. The same could be said about the rising competition between NOCs and independent players in the gas market, and the key role of TPA governance. On the other hand, state authorities have been capitalising on industry’s reforms to re-establish their primacy over state energy policies and strategies, imposing party and government decisions over NOCs corporate interests. The overall process is not just a consequence of the growing prominence of the Trade/Market institution per-se, but also the result of centrally-designed policies which aim at boosting gas use to limit the country’s environmental degradation and curb the over-reliance on coal. Politically, natural gas receives a widespread support as a clean energy source. In 2019–2020, Premier Li Keqiang has issued broader calls for safeguarding country’s energy security amid peak consumption, promoting gas for an high-quality energy development of China’s energy system and tackling pollution.114 As a matter of fact, Beijing’s successful integration between Trade/Market and Environmental Stewardship institutions over the last two decades has buttressed gas consumption. In late 2020, gas is emerging as a clean energy source for the country’s future and the 14-FYP would likely become a crossroad defining its role in the energy system. So far, the integration logic in coal-to-gas transition has produced positive results on a global scale, bolstering heating system transformation in key industrial areas and peak seasonal demand.115 However, the outlook of State and Market relationship in China’s coal-to-gas transition and the unfolding dynamics between Sovereignty and Trade/Market institutions falls short of the positive premises. The inability of the country’s energy industry to keep up with the rising national gas demand, the development of a consistent domestic gas market with more competitors and the role of China as a leading participant in the expanding international gas Trade/Market institution raise the question of how State and Market actors could coexist, integrate and foster the transition towards natural gas. In order to support indigenous gas production and imports, Chinese authorities have opted for a mix of innovative regulations and economic incentives, stimulating the integration of the domestic market into the international one. Also, this has been pursued according to Beijing’s quest to assert

114 CGTN (2020) Premier Li’s Speech at the Third Session of the 13th NPC, May 22, https://news. cgtn.com/news/2020-05-22/Full-text-Premier-Li-s-speech-at-the-third-session-of-the-13th-NPCQHaP1FpB8k/index.html; The State Council (2019) Premier Calls for High-Quality Energy Development, October 11, http://english.www.gov.cn/premier/news/201910/11/content_WS5da08a3 fc6d0bcf8c4c14e92.html. Interestingly, the same State Council’s document calls for an expanded role of gas to improve China’s self-sustainability, pointing to market-oriented reform and coal-to-gas transition, in particular during the winter season. 115 In the 2010-2018 timeframe, China and U.S. coal-to-gas transitions contributed to get rid of more than 500 million tonnes of CO2. International Energy Agency (2019).

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its great power status through its leadership in the global energy transition. As a consequence, China has become a source of pivotal importance for the stabilisation of the international gas market and the modalities through which this process will develop are expected to shape the evolution of regional and global markets in the decades ahead. Yet, the analysis of the complex and multi-faceted deeper institutional structure of China’s gas policy and strategy displays the tremendous challenges Beijing will face in completing the industry’s reforms, enforcing TPA rules and efficiency regulations. All this within a sector traditionally dominated by SOEs and far from being monolithically steered by the government. On the point, future market shocks and geopolitical tensions are likely to trigger unprecedented struggles in the State and Market relationship and between NOCs and independent companies. Once again, the relevance of authorities’ oversight on NOCs’ behaviour would become a critical factor in inhibiting the use of imports, domestic gas production and lobbying practices to thwart competition and limit TPA. The risk for China is double. First of all, underperforming results of the domestic industry could spur China’s dependency on foreign gas resources, provoking new conflicts between the Sovereignty and Trade/Market institutions. In particular, the anxieties of Chinese policymakers could grow on the back of a turbulent international scenario, with China’s role in the commoditisation of gas becoming a function of Beijing’s capacity to balance its global ambitions and great power status and those risks derived from its growing dependency on a strategic asset for both domestic industrialisation processes and the achievement of energy transition’s targets. Secondly, the mix of domestic inefficiencies and global trends could make natural gas an expensive energy resource, lowering the economic returns in substituting coal and, as a result, reinforcing its use in the energy mix. Inevitably, this would counter the same coal-togas transition premises, undermining one of the pillars of the Environmental Stewardship institution in China. Because of the higher volatility of global energy markets induced by the COVID-19 pandemic and other possible future shocks, this could also endanger China’s transition to renewables, hindering the flow of economic resources to this sector. As a concluding remark, reforms of China’s gas market will gradually influence the context in which the coal-to-gas transition will take place. The analysis of the State and Market relationship through the research of the integration and tension dynamics between primary institutions unveils an original approach towards a deeper understanding of the political and institutional landscape in which China’s energy transition takes place. This conceptualisation could also be used for other case studies, either a country or a specific energy transition process. As the same investigation of the unfolding domestic institutional reforms could not be severed from the international context in which China’s gas dependency is developing, the analysis of primary institutions displays Beijing’s double challenge in the years ahead. Against the background of a transforming domestic energy system and a more competitive, interconnected and prone-to-frictions global gas market, deeply influenced by international affairs, the integration and coordination between

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traditional and new gas market actors within the country will continue to present considerable hurdles to China’s transition to natural gas.

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Valadkhani A (2019) Pathways to reduce CO2 emissions as countries proceed through stages of economic development. Energy Policy 129:268–278 Van de Graaf T, Colgan J (2016) Global energy governance: a review and research agenda. Palgrave Commun 2:15047 Wang J (2018) Reform of China’s environmental governance: the creation of a Ministry of Ecology and Environment. Chinese J Environ Law 2(1):112–117 Wang X (2019) Does the structural power of business matter in state capitalism?: Evidence from China’s oil politics under Xi Jinping. Pacific Focus XXXIV(2):284–312 Xinhua (2018) Xi stresses efforts to win “three tough battles”, April 2, http://www.xinhuanet.com/ english/2018-04/02/c_137083515.htm. Accessed 29 Dec 2020 Xu M, Aizhu C (2020) PipeChina’s natural gas pipelines, storage facilities. Reuters, August 9, https://www.reuters.com/article/chinapipeline-gas-idUSL4N2F81MS. Accessed 2 Oct 2020 Yang J (2019) Unlocking the Potential of China’s New LNG Importers. IHS Markit, May 3 Zhang C (2016) The domestic dynamics of China’s energy diplomacy. World Scientific Publishing, Singapore Zhang D, Shi M, Shi X (2018) Oil indexation, market fundamentals, and natural gas prices: an investigation of the Asian premium in natural gas trade. Energy Econ 69:33–41 Zhang L, Bai W (2020) Risk assessment of China’s natural gas importation: a supply chain perspective. Sage Open Zhang S, Andrews-Speed P (2020) State versus market in China’s low-carbon energy transition: an institutional perspective. Energy Res Soc Sci 66 Zhang X, Myhrvold NP, Hausfather Z, Caldeira K (2016) Climate benefits of natural gas as a a bridge fuel and potential delay of near-zero energy systems. Appl Energy 167:317–322 Zhang X, Winchester N, Zhang X (2017) The future of coal in China. Energy Policy 110:644–652 Zhong Y, Hwang W (2016) Pollution, institutions and street protests in Urban China. J Contemp China 25(98):216–232 Zhu K, Sharma N (2020) China further opens oil and gas upstream to foreign investors: how much impact can we expect?, IHS Markit, April 24, https://ihsmarkit.com/research-analysis/chinafurther-opens-oil-and-gas-upstream-to-foreign-investors.html

Francesco Sassi (Ph.D.) is a Research Fellow in energy geopolitics and markets at RIE, Ricerche Industriali ed Energetiche, based in Bologna, Italy. He holds a Ph.D. in Geopolitics—Political Science at the University of Pisa. His academic activities aim at an interdisciplinary analysis of policies and strategies in the field of energy security and diplomacy. Francesco’s research interests cover the Eurasian geopolitical dynamics, the political and economic implications of the globalisation of the gas market and the decarbonisation of the gas sector, the relationship between the governments, State-Owned Enterprises (SOEs) and markets. China and Russia are the two main countries of interest for his research.

Tendencies of Legal Regulation in the Sphere of Renewable Energy in Russia Victoria Romanova

Abstract Today, legal regulation in the energy sector is characterized by the absence of a universal international Treaty establishing unified approaches to legal regulation in the energy sector. The development of legal regulation in the energy sector is carried out mainly on a sectoral basis, as well as within the framework of integration associations. The situation is different for the legal regulation of the use of renewable energy sources at the international level. There are no multilateral interstate agreements on renewable energy sources, in which States, including various integration associations, participate. In the Russian Federation, legal regulation of the use of renewable energy sources is gradually developing. The research establishes the general characteristics of legal regulation of the use of renewable energy sources, then on the history and current state of legal regulation in the use of renewable sources in the Russian Federation and on trends in the development of legal regulation in this area, taking into account the relevant documents of strategic planning.

1 Relevance of the Issue of the Conference 2020 was not the easiest year for everyone, but even despite the restrictions caused by coronavirus infection, scientific events are being held. I would like to note the relevance of the issue of the conference proposed by the organizers. Conducting interdisciplinary scientific events allows specialists in various fields of knowledge to exchange views, identify issues that require further study from a legal point of view, analyze the results of law enforcement practice, and identify areas of interaction for interdisciplinary research. The development of scientific cooperation is currently particularly important, and this also applies to cooperation in the field of energy

V. Romanova (✉) The Head of Energy Law Department of Moscow State Law University, The Head of the Еnergy Law Center of St. Petersburg State University of Economics, Moscow, Russia © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_11

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law,1 especially when it comes to the development of legal regulation of the use of new types of energy and technologies. I would like to focus first on the General characteristics of legal regulation of the use of renewable energy sources, then on the history and current state of legal regulation in the use of renewable sources in the Russian Federation and on trends in the development of legal regulation in this area, taking into account the relevant documents of strategic planning.

2 General Characteristics of Legal Regulation in the Field of Renewable Energy Sources Today, legal regulation in the energy sector is characterized by the absence of a universal international Treaty establishing unified approaches to legal regulation in the energy sector as a whole. The development of legal regulation in the energy sector is carried out mainly on a sectoral basis, as well as within the framework of integration associations.2 The most detailed and developed is the legal regulation in the field of nuclear energy use. A significant number of multilateral international agreements have been adopted in this area , which is due to the tasks of ensuring nuclear safety: Vienna Convention on civil liability for nuclear damage, joint Convention on the safety of spent fuel management and on the safety of radioactive waste management, Convention on nuclear safety, etc. The provisions of the conventions are appropriately enshrined in the legislation of the States parties to the conventions. The situation is different for legal regulation of the use of renewable energy sources at the international level. There are no multilateral interstate agreements on renewable energy sources, in which States, including various integration associations, participate. At the same time, it should be noted that in the development of the United Nations framework Convention on climate change (concluded in new York on 09.05.1992), the Paris agreement was concluded in 2015, according to which the parties to the agreement accept certain National determined contributions to prevent climate change. These acts have a common goal—to solve problems related to climate change. According to 2017 data—in 145 from 194 Nationally determined contributions the development of renewable energy is mentioned as a means to combat climate change. The UN framework Convention on climate change and the Paris agreement do not contain provisions on regulating the use of renewable energy sources, as well as provisions on the specifics of legal regulation of the use of oil and gas. At the same time, legal regulation in the field of renewable energy sources has been actively 1 2

Romanova (2020a), pp. 76–79; Heffron (2020a), pp. 80–82; Heffron (2020b), pp. 73–77. Romanova (2019), pp. 63–66.

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developed at the national level in many States, as well as at the level of integration associations within the European Union. This is due to the strategic objectives of using renewable energy sources, increasing the volume of energy production using renewable energy sources, and the global transition to low-carbon technologies. Many States have adopted separate laws that establish the procedure and methods for providing financial incentives, implementing projects using renewable energy sources, connecting to networks, selling energy, storing it, etc. The legal regulation in the field of support and use of renewable energy sources in the United States, China, Japan, Australia, India, member States of the European Union, and the legal regulation of the European Union deserve attention.

3 Legal Regulation of the Use of Renewable Energy Sources in the Russian Federation In the Russian Federation, legal regulation of the use of renewable energy sources is gradually developing.3 The main rules governing relations in the field of renewable energy sources are enshrined in the Federal law on electrical power industry. The first provisions on renewable energy sources were consolidated in the Federal law on electric power industry in 2007, and then the law was amended and supplemented to regulate the use of renewable energy sources and consolidate the powers of state bodies. The provisions of the Federal law are detailed at the level of regulatory legal acts, first of all—acts Of the Government of the Russian Federation, as well as at the level of acts of the market Council, an Association with special public powers granted by the legislator. Until 2017, legal regulation in the field of renewable energy sources was more focused on the wholesale electricity market. Further, legal regulation of the use of renewable energy sources in retail markets has become more actively developed. In 2019, the Federal law on electrical power industry also introduced provisions on microgeneration facilities that operate, among other things, using renewable energy sources. According to the Association for the development of renewable energy, it is noted that 2019 has become an extremely significant year for renewable energy in Russia, the first deliveries of Russian-made solar panels for export have started, the first multi-megawatt wind farms have been put into operation, enterprises for the production of key elements of wind turbines have reached serial capacity, and specialized educational programs in the field of renewable energy have prepared the first specialists.

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However, the legal regulation of the use of renewable energy sources needs to be improved, which follows from the new strategic objectives of the development of the energy industry.

4 Trends in the Further Development of Legal Regulation in the Use of Renewable Energy Sources Further trends in the development of legal regulation will be determined by the tasks set in the updated Strategic planning documents. In June 2020, the Government of the Russian Federation approved the Energy strategy of the Russian Federation for the period up to 2035.4 The new Energy strategy of Russia focuses on breakthrough technologies, the use of which will contribute to the transition of energy to a new technological basis (“energy transition”). Among these breakthrough technologies, renewable energy sources are listed in the first place. In 2020 the validity period of the Main directions of state policy in the sphere of energy efficiency of electrical power industry based on renewable energy extended until 2035. This order of the Government of the Russian Federation establishes the objectives and principles of the use of renewable energy sources, contain targets for the production of electric energy using renewable energy sources and energy consumption in the total balance of production and consumption of electric energy, set goals for their degree of localization in the territory of the Russian Federation of production of the main and (or) auxiliary generating equipment for the production of electric energy using renewable energy sources, as well as measures to achieve these indicators. Among the principles of state policy in this area are: – the application of measures of state support for the development of electric power generation based on the use of renewable energy sources in accordance with the budget legislation of the Russian Federation to achieve real competitiveness of technologies for using renewable energy sources in relation to technologies for generating energy based on fossil fuels; – use of mechanisms to support the development of the electric power industry based on the use of renewable energy sources in accordance with the budget legislation of the Russian Federation to achieve the necessary rates of attracting investment funds; – creating economic incentives for the development on the territory of the Russian Federation of production of main and (or) auxiliary generating equipment used in the production of electric energy using renewable energy sources, etc.

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https://minenergo.gov.ru/node/18038.

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The targets have not yet been revised in comparison with the previous version of the act, and are currently the subject of discussion. To date, the target for the production and consumption of electricity using renewable energy sources (other than hydroelectric power plants with an installed capacity of more than 25 MW) is set at 4.5 percent for 2024. The extension of the main directions of the state policy in the field of renewable energy sources until 2035 is already positive. It is also important to determine the amount of financial support for projects in the field of renewable energy sources, and to develop a stable mechanism for stimulating investment in renewable energy generation. To achieve the strategic goals of developing the use of renewable energy sources, significant normative work will be required, as legal support is required. This is indicated by representatives of state bodies, experts, and the scientific community. Directions for further development of legal regulation in the field of renewable energy use in the Russian Federation include investment, including investment protection mechanisms, tax, tariff, urban planning, land, customs regulation, etc. Special attention should be paid to the development of legal support for the use of renewable energy sources in isolated and hard-to-reach areas to ensure uninterrupted power supply. In this regard, it will be necessary to develop and amend the current legislation. This may be a variant of making changes to the Federal law On the electrical power industry, it may be the adoption of a separate legislative act, as well as making changes to a special regulation.5 Legal analysis of foreign legal regulation in the field of renewable energy sources shows that it is appropriate to raise the issue of using grant financing mechanisms in the Russian Federation, special tax, customs, construction regimes, and the use of venture investment mechanisms. Taking into account that this field of legal regulation has considerable experience abroad, it will be useful to conduct comparative legal researches of foreign legislation in the field of renewable energy sources and law enforcement practice for further development of legal regulation in the field of renewable energy sources, including at the level of integration associations. Once again, I would like to thank the organizers and participants of the conference, personally Professor R. Heffron, Professor K. Gromek-Brok for the invitation to participate in the conference, assistance and support. I hope for further development of our scientific cooperation! I would also like to wish all participants of the conference health, good luck and prosperity!

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References Heffron RJ (2020a) Energy law from 2020 to 2030 (Part 1). Energy Law Forum 2:80–82 Heffron RJ (2020b) Energy law from 2020 to 2030 (Part 2). Energy Law Forum 3:73–77 Romanova VV (2019) Development of Russian energy law science: achievements and topical tasks. Energy Law Forum 4:63–66 Romanova VV (2020a) Current tasks of energy law as a science and an academic discipline. Energy Law Forum 2:76–79 Romanova VV (2020b) On strategic tasks of the use of renewable energy sources and the development of legal regulation. Energy Law Forum 4:84–89

Victoria Romanova Doctor of law, The Head of Energy Law Department of Moscow State Law University named after O.E.Kutafin (MSAL), The Head of the Еnergy Law Center of St. Petersburg State University of Economics, Editor in chief of International Journal: Energy Law Forum.

Energy Transition in Latin-American Countries, Example Cuba: Looking for Interconnections with Food Sovereignty Jorge Freddy Milian Gómez, José Grabiel Luis Cordova, and Yanelys Delgado Triana

Abstract The energy transition is a current priority and recurring issue on the global agenda. Latin American governments show a high level of interest and commitment to develop public policies to address energy transition. Cuba, a Caribbean country, is equally hard hit by the fuel and energy crisis. Cuba’s reality becomes much more complex when it must face the US economic and financial blockade and a direct climate change impact. Cuba is developing an energy policy aimed at transition to other generation sources such as biomass, hydro, wind and solar. For the country, energy development is highly related to food production, which guarantees the population’s right to food and food sovereignty. In order to find some interconnections between energy transition and food sovereignty, it is necessary to apply a Human Rights-based Approach to development through PANTHER principles. This research deals with some reflections on energy transition in Latin America, Cuban energy transition from a political, legal and practical level and a better understanding of energy transition in Cuban food production. The main results are based on demonstrating some key points to develop a coherent energy transition process in Cuba, generally and particularly in the food industry to achieve food sovereignty.

1 Introduction Energy transition is currently a priority and recurring issue on the global agenda and within the States. The growing penetration of renewable energy sources in energy matrices is proof of this. Energy transition is evident in a palpable way at the level of public policies, the legal system and at the practical level.1 In this sense, energy

1 REN21, ‘Renewables 2020 Global Status Report’, Global Status Report for Buildings and Construction: Towards a Zero-Emission, Efficient and Resilient Buildings and Construction Sector, 2020, http://www.ren21.net/resources/publications/%0Ahttps://www.ren21.net/wp-content/ uploads/2019/05/gsr_2020_full_report_en.pdf.

J. F. Milian Gómez (✉) · J. G. Luis Cordova · Y. Delgado Triana Universidad Central “Marta Abreu” de Las Villas, Santa Clara, Cuba © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_12

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transition involves a combination of structural changes in the economic, political, legal, institutional and socio-cultural fields.2 This growing concern of the States has been encouraged by multiple factors, including sustainable development, energy crises, scarcity of fossil fuels and a constant rise in their prices, as well as the growth of demand and the decarbonization of societies.3 Latin America and the Caribbean have not escaped out of this context, so at a regional level energy transition has become a cardinal issue in State energy policies. Cuba, a state located in the Caribbean, does not escape from common problems that affect countries of the region in energy generation issues. The country is doubly affected, both by climate change and by economic and United States financial blockade. From an environmental point of view, the increase in the intensity and occurrence of natural phenomena is affecting energy generation network. From an economic perspective, as a developing country, there is a high dependence on energy generation through fossil fuels. Access to fuels has been negatively impacted by the measures taken during Trump administration that prevented ships and cargo vessels from reaching Cuba. The supply chain interruption forced Cuban State to take control and saving measures in all sectors, public and private, to prevent power cuts in residential sector. These events demonstrated the need that the country had and still must make an energy transition towards the use of renewable energy sources. To carry out this process, it is necessary to analyse economic, political, social and legal contexts to propose coherent solutions that allow for an orderly energy transition. Energy sector is a priority field in Cuba, and it is a transversal axis in its economic and social development. For the country, energy development is highly related to food production, which guarantees the population’s right to food and food sovereignty. In recent years, Cuba has been creating synergies and complementarities between its public policies and legal norms. An example of these synergies is the energy and food sector policies, which propose to achieve food sovereignty using renewable energy sources in food production. Energy and food are Cuban policy two main pillars and a link between them it is essential. This article seeks to answer the following questions: – What is energy transition reflection in Latin American and Caribbean region? – How does energy transition in Cuba manifest itself on the political, legal and practical level? – How to better understand energy transition in Cuban food production for strengthening food sovereignty? For developing this article, it will be used as methods and research techniques: the legal-historical to analyse the evolution of energy transition at the regional level in Latin America and the Caribbean from a legal and policy perspective. The

2 3

Berkhout et al. (2012), pp. 109–111. IRENA (2020).

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legal-analytic method to determine the meaning and scope of the legal norms that support energy transition. The analysis and review of documents for the evaluation of reports issued by competent bodies in the field of energy.

2 Energy Transition in Latin America, Regional Projections The current global context, extremely convulsed, has imposed challenges on States in all spheres, including energy sector. Since the occurrence of the health, humanitarian, social and economic crisis because of COVID-19, the reactivation of economies has become vitally important. Therefore, the use of sustainable mechanisms to increase resilience is today an imperative. In this context, renewable sources of energy play an important role.4 An economic development supported by sustainable energy matrices is today the way to go, especially in developing countries. In this way, energy transition has been unavoidably integrated into State public policies to meet energy demand, especially in Latin America. Satisfaction of the energy demand from renewable energies constitutes the propitious means to contribute to energy security to guarantee society functioning. One of the cardinal elements to analyse energy transition is the participation of renewable energy sources in energy matrixes. In this respect Latin America is one is the most dynamic energy markets in the world which highlights prima facie Hydropower with a leading role and emphasize the exploitation of geothermal energy and biofuels.5 Energy generation using renewable energy sources has experienced sustained growth over the years, doubling since 2009 compared to 2018. In this sense, the following stand out in the Central American region: Costa Rica, Guatemala and Panama; the latter has increased its generation capacity 2.5 times (see Table 1). Within South American countries the biggest energy generators using renewable sources are Peru, with an installed capacity of 265,262 MW, Bolivia and Venezuela. Regional state commitments have been aligned around sustainable energy development with an increase in the penetration of renewable sources to reduce CO2 emissions to the atmosphere. Nine Latin American States have aligned their strategic projections towards a generation of 70% of electrical energy by 2030. These States include: Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Haiti, Honduras and Peru.6

4

IRENA. IRENA, ‘Plan de Acción Regional: Acelerando El Despliegue de Energía Renovable En América Latina’ (Abu Dhabi, 2019), https://www.irena.org/-/media/Files/IRENA/Agency/Regional-Group/ Latin-America-and-the-Caribbean/IRENA_LatAm_plan_de_accion_2019_ES.PDF?la=en & hash=5DE35BAFD5941A43F110B7E6F0B88B5B5FC26C5D. 6 REN21, ‘Renewables 2020 Global Status Report’. 5

CAP (MW) Mexico Central America + Caribbean Anguilla Antigua Barb Aruba Bahamas Barbados Belize BES Islands Br Virgin Is Costa Rica Cuba Curacao Dominica Dominica Rep El Salvador Grenada Guadalupe Guatemala Haiti Honduras Jamaica Martinique Nicaragua Panama Puerto Rico 0 30 0 1 63 11 1 1889 618 9 7 537 785 0 100 1311 57 622 95 32 381 957 154

0 30 0 1 63 11

1844 612 9 5 524 794 0 87 1206 56 621 76 19 357 899 160

2010 13,515 7671

2009 13,207 7384 0 30 0 2 82 11 1 2045 621 9 7 571 754 0 106 1341 57 773 95 53 382 1382 154

2011 13,480 8488

2012 14,770 9319 0 0 31 1 2 83 11 1 2120 594 30 7 714 827 0 138 1515 57 751 96 65 556 1500 208

2013 15,176 9648 0 0 32 1 3 83 11 1 2150 555 33 7 719 840 1 144 1646 58 789 103 67 562 1548 281

2014 15,176 10,342 1 0 37 1 7 84 11 1 2307 596 38 7 730 844 1 141 1775 58 897 105 68 604 1715 296

2015 16,568 11,936 1 3 38 1 9 86 11 1 2496 629 40 7 741 929 1 148 2178 58 1362 108 71 622 2053 316

2016 18,853 13,531 2 4 38 1 19 102 13 1 2920 610 47 7 870 1057 2 148 2667 58 1469 189 72 679 2164 361

2017 19,462 14,108 2 4 38 1 19 110 16 1 2984 638 65 7 905 1150 2 153 2753 59 1597 217 73 690 2227 369

2018 20,128 14,888 1 8 38 1 24 110 16 1 3070 669 65 7 1017 1250 3 158 2995 81 1692 217 113 690 2261 369

Table 1 IRENA (2019) Renewable capacity statistics 2019, International Renewable Energy Agency. ISBN 978-92-9260-123-2. (IRENA), Abu Dhabi

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St Kitts Nevis St Lucia St Martin St Vincent Gren Trinidad Tobago Turks Caicos US Virgin Is Caiman Is South America Argentina Bolivia Colombia Ecuador Falklands Malv Guyana Peru Suriname Uruguay 6 3

249,960 4954 71,149 0600 6120 0340 0422 163,511 0154 0100

6 2

253,428 3986 70,983 0600 6020 0340 0332 170,257

0100

2 0

0

334,660 4801 72,301 0600 6480 0340 0701 215,166 0661 0500

1

0 251,865 4801 71,602 0600 6140 0340 0552 164,339 0281 0400

6 3

2 0

6 3

2 0

340,523 3695 73,705 0600 6800 0340 0805 200,025 0943 0500

1

3 0 1 6 3

387,289 6237 96,035 0600 10,250 0340 1038 216,884 1195 0500

5

4 0 2 6 3

406,512 4748 105,735 0918 12,250 0820 1272 223,114 2845 0600

4 1 3 6 3 0 9

4 1 2 7 3 0 9 3 432,317 4753 105,735 1978 12,320 0820 1609 246,947 2845 1100

4 1 0 7 3 0 5 9 605,468 4753 105,735 7018 12,320 0820 3058 404,779 2875 9900

4 4 0 7 3 0 5 10 466,333 4753 105,761 7018 12,333 0820 3058 265,262 3575 9953

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These good practices application has not been an isolated event, but it has been supported by recent modifications of national legal systems and their energy policies for energy transition. As part of these modifications incentive systems have been provided to promote the use of renewable sources for self-consumption and for the injection of eventual surpluses of energy into the distribution network.7 The necessity of energy availability has transcended time and space, qualified itself today with a renewable perspective to have inexhaustible sources that satisfy the energy demand and contribute to sustainable development. Energy matrices are today a reflection of the above by achieving an energy mix that meets human needs in a context of intergenerational equity.

3 Cuba: Energy Transition, Present and Future Perspectives Cuban current reality has faced the world existing issues, but with aggravated consequences because of the economic and financial siege of the United States of America over Cuba since the 1960s. Cuba, a developing country, highly dependent on imported fuels and with high financial deficiencies for investment, it faces the debacles of a growing energy demand.8 The imperative need to import fossil fuels responds to the low percentage of participation from renewable sources, which until 2017 only represented 4.65%.9 To palliate this situation were settled the Lineamientos de la Política Económica y Social del Partido y la Revolución which establishes the main guidelines for the Cuban energy policy.10 This national energy strategy is projected to achieve 24% of electricity generation from renewable sources where the main protagonists would be solar energy, wind, hydro and bioenergy (see Fig. 1). Similarly, the national energy strategy is focused on increasing energy efficiency.

OLADE, ‘Panorama Energético de América Latina y El Caribe’ (Quito, 2019), https://biblioteca. olade.org/opac-tmpl/Documentos/old0433a.pdf. 8 The residential sector has increased its consumption by 6.4% in the last 5 years. Oficina Nacional de Estadística e Información de la República de Cuba, ‘Anuario Estadístico de Cuba’ (Havana, 2019), http://www.onei.gob.cu/sites/default/files/10_mineria_y_energia_2019_0.pdf. 9 Odalis Riquenes Cutiño, ‘Cuba Apuesta Por La Energía Renovable Con El Aporte Joven’, 15 June 2017, https://www.juventudrebelde.cu/cuba/2017-06-15/cuba-apuesta-por-la-energia-renovablecon-el-aporte-joven. 10 Ministerio de Energía y Minas and Oficina Nacional de Estadística e Información de la República de Cuba, ‘Taller: Desarrollo de Capacidades Para La Integración de Objetivos de Desarrollo Sostenible de Energía, Metas e Indicadores En Los Programas Nacionales de Estadísticas En Países de América Latina’ (Havana, 2015), https://docplayer.es/13690467-7-2-aumentar-sustancialmenteel-porcentaje-de-la-energia-renovable-7-3-duplicar-la-tasa-mundial-de-mejora-de-la-eficienciaenergetica.html. 7

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Fuel Térmicas 5% Fuel Motores 9% Diesel 1%

Crudo 32%

Gas Acompañante 8%

Hidraúlica 1%

Otros Combusbles Fósiles 21%

Biomasa 14% Eólica 6%

Solar 3%

Fig. 1 Ministerio de Energía y Minas and Oficina Nacional de Estadística e Información de la República de Cuba, ‘Taller: Desarrollo de Capacidades Para La Integración de Objetivos de Desarrollo Sostenible de Energía, Metas e Indicadores En Los Programas Nacionales de Estadísticas En Países de América Latina’ (Havana, 2015), https://docplayer.es/13690467-7-2aumentar-sustancialmente-el-porcentaje-de-la-energia-renovable-7-3-duplicar-la-tasa-mundial-demejora-de-la-eficiencia-energetica.html

3.1

Cuban Legal System Reform, a Long-Term Need

Considering so many changes in Cuba’s energy policy, it began to manifest new legal instruments in the Cuban legal system, that system had not undergone profound changes until 2019 in renewable energy sources. From the constitutional perspective, this year the new Cuban Constitution was approved by popular referendum. Even though this normative body does not refer to renewable sources of energy, it includes a series of categories that underpin energy transition in Cuba. Among the fundamental pillars provided in the 2019 Constitution are sustainable development, well-being, environment protection, state sovereignty over natural resources and human rights.

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Towards 2017, the proposal for Decree-Law 345 “Del desarrollo de las fuentes renovables y el uso eficiente de la energía” was prepared, which was put into effect on November 28, 2019.11 Decree-Law 345 constitutes one of the most revolutionary legal instruments regarding the energy transition in Cuba. Its legal body supports Cuban energy strategy aspirations and pursues among its goals: increasing participation of renewable energy sources in the generation of electricity; the progressive substitution of fossil fuels; the diversification of the structure of fossil fuels used in the generation of electrical energy; to increase efficiency and energy savings; the stimulation of investment, research and the increase of energy efficiency, as well as the production and use of energy from renewable sources, through the establishment of incentives and other instruments that stimulate their development and the development of equipment production, means and spare parts for the national industry, for the use of renewable sources and energy efficiency. Despite the advances of Decree-Law 345, there are many elements that must be perfected in the legal regulation of renewable sources. A first element to be pointed out is derived from article 8 of the legal instrument.12 This article is developed by Instruction No. 6 of 201913 from Banco Central de Cuba that establishes the possibility of granting credits to natural persons for the acquisition of equipment that uses renewable sources, specifically: water heaters and photovoltaic solar systems. In this way, the possibility of acquiring credits for the acquisition of other technologies from alternative sources is restricted. A second element appears from article 15.2.14 This article, for its configuration, gives rise to its development through lower hierarchy rules that establish the conditions and terms the purchase will be made and the destination that will be given to the purchased energy. In this matter, ‘On 23 August 2021, Resolution No. 359 of the Ministry of Finance and Prices entered into force, unifying in a single regulatory body the energy purchase prices according to the type of producer.’15 This resolution establish the price of 3 Cuban pesos/kWh for the residential sector

Consejo de Estado, ‘Decreto Ley 345 “Del Desarrollo de Las Fuentes Renovables y El Uso Eficiente de La Energía”’ (2019), https://www.gacetaoficial.gob.cu/es/decreto-ley-345-de-2019-deconsejo-de-estado. 12 Consejo de Estado. Article 8: “Natural and legal persons can acquire equipment that uses renewable sources and others that allow the efficient use of energy, and if required, avail themselves of bank credit, according to the principles for granting established in current legislation (. . .).” 13 Banco Central de Cuba, ‘Instrucción 6’ (2019), https://www.gacetaoficial.gob.cu/es/instruccion6-de-2019-de-banco-central-de-cuba. 14 Consejo de Estado, Decreto Ley 345 “Del Desarrollo de las Fuentes Renovables y el Uso Eficiente de la Energía”. Article 15.2: “The Unión Eléctrica purchases all the electrical energy generated from renewable energy sources, produced by independent producers, as long as it meets the established technical standards. Independent producers, for the purposes of what is established in the previous paragraph, are understood to be those energy producers that do not belong to Unión Eléctrica.” 15 Luis Cordova et al. (2021), pp. 1–20; Ministerio de Finanzas y Precios, ‘Resolución 359-2021’, Gaceta Oficial de la República de Cuba § (2021), https://www.minem.gob.cu/sites/default/files/ documentos/res-359-2021_-aprobar_sistema_de_tarifas_para_compra_energia_electriga_.pdf. 11

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and 1.81 Cuban pesos/kWh for the non-residential sector based on energy delivered to the central grid and generated through photovoltaic systems. The necessity for specific rules governing the contracting process in the field of Power Purchase Agreements is a need today for the Cuban legal system. Until now some of the regulatory deficiencies of renewable energies in the Cuban legal system are illustrated. The necessity of developing Energy Law, today non-existent in Cuban legal doctrine,16 can lay the foundations for energy transition in the country and guarantee energy security on a national scale, as well as the adequate elaboration of public policies associated with energy. Cuba, as a developing country sieged by financial sanctions, has projected a coherent policy for energy transition considering its available resources. Despite the Cuban State policy there are a lot of elements to be perfected from the scientific, legal and practical perspective in the field of renewable energy sources and energy transition. A solid energy transition legal framework could be a key stone for achieving the national projections through promoting renewable energy source.

4 A Multidisciplinary Look at Energy Transition in Public Policies: National Plan for Food Sovereignty and Nutritional Education 4.1

Sustainability in the New Constitution of 2019 as a Link Among Energy Development and Food Security and Sovereignty: A Necessary Legal Platform

In 1992, the Earth Summit in Rio de Janeiro introduced sustainability as a core element of development. In this way, economic vision of development was combined with the environmental vision, giving it a markedly humanist character in the search for protection of future generations.17 Humanity decided to ensure its future, to approve Sustainable Development Goals in 2015, later called Agenda 2030.18 This agenda establishes the guidelines for humanity development without compromising the needs of future generations. Furthermore, this international legal 16

The Cuban legal doctrine of Energy Law has not been developed in depth, which has led to doctrinal gaps and ignorance of the cardinal elements of this branch of Law. The scarce development of Energy Law in Cuba is today a priority for the legal regulation of the energy transition. 17 United Nations, ‘A/CONF.151/26/Vol.I: Rio Declaration on Environment and Development’, Report of the United Nations Conference on Environment and Development, vol. I, 1992, http:// www.un.org/documents/ga/conf151/aSaat ini, orang yang dimaksud adalah bank, yaitu suatu lembaga keuangan berupa perusahaan yang mewakili nasabah untuk melakukan:conf151261annex1.htm. 18 Sustainable Development Goals. Agenda 2030 adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. United Nations, ‘2030 Agenda’, 2015, https://sdgs.un.org/#goal_section.

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instrument reflects the greatest aspirations of human beings as a species, positioning sustainable development as the only alternative for survival. Cuban new Constitution approval in April 2019 brought with it several challenges to transform and update its legal system. It is a modern constitution, adapted to twenty-first Century Cuban society needs and that respect international commitments made by Cuban state. Sustainable development is unequivocally one of its axes and a first reference to sustainable development can be found in Title I, Political Foundations, Chapter I Fundamental Principles, Article number 13 (e) when it highlights among the State objectives the promotion of sustainable development that secures individual and collective prosperity.19 This position adopted by Cuban legislator has obliged the State, as never before, to achieve sustainable development in all its spheres in order to satisfy individual and collective needs of present generations without compromising the needs of future ones. This proclamation within the constitutional body establishes general guidelines by which all State institutions must outline their development policies. In more detail, Article 75 refers to right to enjoy a healthy and balanced environment and, in its second section, recognizes the close relationship with sustainable development for guaranteeing the survival, well-being and security of present and future generations.20 Constitutional precepts are clear in establishing sustainability as a link of all public policies and as State purpose itself. Another legal basis that facilitates integration of sustainable energy development and food security and sovereignty lies in recognition of right to healthy and adequate food for people and the State guarantee in strengthening entire population food security in Article 77.21 Nevertheless, the issue is becoming more relevant and connected at the level of public policy, beyond the regulation in State supreme norm. The National Plan for Sustainable Energy Development and the National Plan for Food Sovereignty and Nutritional Education are examples of this. The Constitution becomes the main platform for topic legal recognition guided by sustainable development as a link and enables public policies on energy transition in food production to be highlighted by the common denominator of sustainability.

Asamblea Nacional del Poder Popular, ‘Constitución de La República de Cuba’ (2019), https:// www.gacetaoficial.gob.cu/sites/default/files/goc-2019-ex5.pdf. Article 13. The State’s essential objectives include the following: (e) To promote sustainable development that secures individual and collective prosperity, and to obtain greater levels of equity and social justice, as well as to preserve and to multiply the achievements of the Revolution. 20 Asamblea Nacional del Poder Popular. Article 75: All persons have the right to enjoy a natural environment that is healthy and stable. The State protects the environment and the country’s natural resources. It recognizes their close linkage with the sustainable development of the economy and society to make human life more rational and to ensure the security of current and future generations. 21 Asamblea Nacional del Poder Popular. Article 77: All people have the right to a healthy and adequate food. The State works to achieve the food security of the entire population. 19

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Constitutional protection of sustainability in actions and performance of state functions in Cuba generates the following needs regarding the relationship between sustainable energy development and food security and sovereignty: – Creating resilient and sustainable food systems. – Developing environmentally orientated sustainable agricultural practices based on the use of renewable energy sources. – To ensure sustainable energy development based on a commitment to protect future generation’s needs. – Promoting equitable, affordable and fair access to energy to improve living conditions in rural areas and farming communities, elements that have an impact on increasing the quantity and quality of food. – Making a gradual but continuous transition to the use of renewable energy sources, eliminating dependence on the use of fossil fuels in food production. – To encourage energy efficiency in agricultural and industrial production process.

4.2

Why Energy Transition in Food Production from Food Sovereignty Perspective?

According to the Food and Agriculture Organization (FAO): Food systems currently consume 30% of the world’s available energy, with over 70% of this being produced off-farm and generate over 20% of global greenhouse gas emissions. More than a third of the food we produce is lost or wasted, and thus 38 percent of the energy consumed in food systems. Modern food systems are highly dependent on fossil fuels. Currently, 85 percent of primary energy is based on fossil fuels.22 The relationship between energy costs and food costs is highlighted in an excellent systematization provided by FELIX and DUBOIS: Historical trends indicate an evident link between food prices and energy prices (. . .). Between 2007 and 2008, world oil prices dramatically increased, reaching close to US$ 150 per barrel at its highest peak (. . .). According to FAO, the higher fuel costs increased the cost of producing and transporting agricultural commodities (. . .). Recent studies have further established that energy was one of the key drivers that caused food prices to surge to their highest levels in nearly 50 years (. . .). FAO’s The State of Food Insecurity in the World 2008, noted that higher food prices affected food access, which drove millions of people into food insecurity, worsened conditions for many who were already food insecure and threatened long-term global food security (. . .).

Food and Agriculture Organization, ‘“Climate-Smart” Agriculture Policies, Practices and Financing for Food Security, Adaptation and Mitigation’ (Rome, 2010), https://www.fao.org/3/i1881e/i1 881e00.pdf. 22

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According to the report, in 2007, seventy-five million more people were added to the total number of undernourished relative to 2003-05 (. . .).23 The connection between sustainable energy development, based on a transition towards the use of renewable energy sources and food security, is undeniable, affecting their spheres of regulation (production, availability, access).24 Food sovereignty definition,25 which is not antagonistic to food security but complementary to it, is intricately linked to the energy transition towards the use of renewable energy sources in food production and agricultural policies. Looking at Cuban case, the high dependence on fossil fuels in energy generation is an element that makes necessary to think about a change and transformation in energy matrix through renewable sources use, particularly in food production. Taking the following FAO approach as a guide: A food sector that is less dependent on fossil fuels could help stabilize food prices for consumers and reduce financial risks for food producers and others involved in the food supply chain.26 Food sovereignty defends communities, countries or unions of states’ rights, to define their agricultural and food policy. It emphasises the adoption of policies of access to land and credit for small farmers the recovery of agriculture ecological dimension and the strengthening of internal, local and regional food markets. This concept is composed by people’s individual right to healthy and adequate food and at the same time population collective right to food. Based on this autonomy, agricultural policies must incorporate two essential elements related to energy transition and sustainability: i. Promoting and incentivizing (economically and financially) the use of renewable energy sources in food production at agricultural and industrial level. ii. Increasing energy efficiency in the agricultural sector for a coherent development of a sustainable agri-food system. Energy transition in agricultural sector and food production is a key element of food sovereignty. A stable food market ensures compliance with food security standards on food availability and access, both economically and physically. The use of

Food and Agriculture Organization, ‘Energy-Smart Food at FAO: An Overview’, 53 (Rome, 2012), https://www.fao.org/3/an913e/an913e.pdf. 24 Food security definition emerged in the 1970s, based on global and national food production and availability. In the 1980s, the idea of access to food, both economic and physical, was added. And in the 1990s, the current concept was arrived at, incorporating safety and cultural preferences, and reaffirming food security as a human right. 25 Food sovereignty definition, which is closely linked to the right to food, emerged in 1996 in the Parallel Forum of civil society related to the World Forum for Food Security. The concept was promoted by Via Campesina, an international movement that coordinates organisations of peasants, small and medium-sized producers, rural women, indigenous communities, migrant agricultural workers, young people and landless labourers; it includes 148 organisations from around 69 countries. Andino (2009), p. 34. 26 Food and Agriculture Organization, ‘Energy-Smart Food for People and Climate’ (Rome, 2011), https://www.fao.org/3/i2454e/i2454e.pdf. 23

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renewable energy sources as a substitute of fossil fuels in food sector creates a material guarantee for food security and food sovereignty objectives fulfilment.

4.3

Renewable Energy Sources in Food Production: A Look at the National Plan for Food Sovereignty and Nutritional Education

The National Plan for Food Sovereignty and Nutritional Education, approved in July 2020 by the Council of Ministers, and first of its kind in country history, establishes territorial and sustainable food systems organization. It integrates production, transformation, trading and consumption of food. It also promotes a food culture and an adequate nutrition. This plan is undoubtedly one of the most relevant public policy developed in Cuba in 2020. This document addresses food sovereignty and is linked with all country’s strategic sectors taking an inter, multi and transdisciplinary perspective. Clean energy use and fossil fuels dependence reduction are fundamental pillars within this policy. Four main characteristics of this policy can be presented to support the link between energy transition and food sovereignty in Cuba: I. Deep relation with other Public Policies: in this topic can be found the link and harmony with Policy for the use and perspective development of Renewable Energy Sources, which in an organised way proposes the creation of synergies and complementarities for food production by increasing renewable energy sources use. II. Improving Energy Efficiency: is one of the foundations and components for sustainable food production model development based on an optimal generation energy . The impact will be given in the relationship between service quality and energy generated use in food production to achieve productive and environmental sustainability. III. Sustainable Management of Renewable Energy: food sovereignty proposes food production with local resources mobilisation, considering natural resources and renewable energies. Sustainable management should be understood as the conscious natural and material resources administration to solve financial, economic, social or environmental issues through actions, sustained over time and equitable, aimed at achieving effectiveness and efficiency in results. IV. Reducing Fossil Fuel Dependency: reduction of fossil fuels dependency, which are finite in time and not easily accessible in Cuba, makes it possible to consider a necessary energy transition in food production. Energy transition in food production, as a process, cannot be the mere public policy implementation. How to build energy transition in food sector by looking at food sovereignty? To do so, it is necessary to combine several basic principles that go beyond the right to food and food sovereignty. In this context, it is necessary to apply

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the Human Rights-based approach to development, known by its acronym PANTHER. These guidelines implementation enables a coherent, organised and contextualised energy transition development towards renewable energy sources use in Cuba food production. These principles selection is not random, constitutes a deep analysis between rights relationship, in this case the right to adequate food and the right to access to energy. FAO has proposed using the PANTHER principles (participation, accountability, non-discrimination, transparency, human dignity, empowerment and rule of law) when applying a human rights-based approach to policies and programs related to food security and nutrition at all levels and process stages.27 These principles are contextualised as follows, looking for energy transition implementation in food sector, related with Cuba’s food sovereignty policy: – The first principle, participation, is based on a citizen participation in decisionmaking. Farmers rural communities, cooperatives and workers in food production enterprises should be involved in selecting the best ways to carry out the energy transition in their sector. It is a fact of active participation in determining the strengths and weaknesses in each country region and renewable energy source types to be used in production process. It takes place at all levels: national, territorial and local. The energy transition must combine and respond to each Cuban region needs, opportunities, advantages and benefits for producers, their families and communities. Cuba’s supreme law recognises popular participation in more than a dozen of its articles, such as Article 80 (d) on Cuban citizens right to participate in elections, plebiscites, referendums, popular consultations and other democratic participation forms, and Article 20, which mentions that workers participate in planning, regulation, management and economy control processes.28 – The second principle, accountability, is based on managers, decision-makers and implementers accountability and responsibility in front public policies related to farmers, rural communities, cooperatives and companies regarding the energy transition process in their sector. At this point, legal guarantees regulated in Cuban Constitution in case of fundamental rights violation, can be assessed.29 Not only legal, but also administrative and political responsibility must be considered. This principle makes it necessary to establish a scheme of those responsible for each action carried out in energy transition process. The Food and Agriculture Organization, ‘The Human Right to Adequate Food in the Global Strategic Framework for Food Security and Nutrition. A Global Consensus’ (Rome, 2013), 7, https://www. fao.org/3/i3546e/i3546e.pdf. 28 Asamblea Nacional del Poder Popular, Constitución de la República de Cuba. 29 Asamblea Nacional del Poder Popular. Article 99: Anyone whose rights as enshrined in this Constitution are violated and who, as a consequence, has suffered harm or prejudice by organs of the State, its leaders, functionaries, or employees while exercising their duties of their position or by undue oversight of these duties, as well as by individuals or by non-State entities, has the right to issue a complaint with the court to obtain restitution of their rights and, in accordance with the law, the corresponding redress or indemnity. The law establishes the rights protected under this guarantee, and the preferential, expedited, and reduced proceedings to comply with it. 27

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responsibility and commitment of farmers, rural communities, cooperatives and companies in food sector must be considered. – The following principle of non-discrimination, based on the participation of all people involved in energy transition in food industry implementation, without discrimination of gender, race, religious beliefs and sexual preferences. This principle is regulated in Cuban Constitution in Article 16 (g), Article 41 and Article 42.30 From this point of view, the active and conscious participation of women and girls in decision-making must be encouraged to achieve an appropriate and coherent energy transition in both agri-food production in the Cuban countryside and in industry. Considering the role of rural women in rural areas will allow for a correct and sustainable management in the implementation of public policies designed for this purpose. – The principle of transparency is because all necessary information on energy transition process in agri-food industry must be provided to those involved. Clear and simple language must be used, which can be understood by all actors and subjects involved. Farmers, rural communities, cooperatives and companies have the right to receive all the information on the management and implementation of public policies and programmes affecting them, either positively or negatively. Cuban Constitution Article 53 recognises that: all persons have the right to request and receive truthful, objective and timely information from the State, and to access information generated by State bodies and entities, in accordance with established regulations.31 – Human dignity, recognised as a core principle, ensures that any action must be taken observing human dignity and due respect for all human rights. Energy transition process in food industry must be carried out with unrestricted respect of involved people and communities’ rights, as is regulated in Constitution. Article

30 Asamblea Nacional del Poder Popular. Article 16. The Republic of Cuba bases its international relations on the exercise of its sovereignty as well as on the antiimperialist and internationalist principles in accordance with the interests of the people and, in consequence: (g) Defends and protects the enjoyment of human rights and repudiates any manifestation of racism or discrimination. Article 41. The Cuban State recognizes and guarantees to a person the non-renounceable, indivisible, and interdependent enjoyment and exercise of human rights, in correspondence with the principles of progressivity and non-discrimination. Their respect and guarantee are obligatory for all. Article 42. All people are equal before the law, receive the same protection and treatment from the authorities, and enjoy the same rights, liberties, and opportunities, without any discrimination for reasons of sex, gender, sexual orientation, gender identity, age, ethnic origin, skin color, religious belief, disability, national or territorial origin, or any other personal condition or circumstance that implies a distinction injurious to human dignity. All people have the right to enjoy the same public spaces and service facilities. Likewise, they receive equal salary for equal work, with no discrimination whatsoever. The violation of this principle is proscribed and is sanctioned by law. 31 Asamblea Nacional del Poder Popular. Article 53.

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13 (f) recognises that one of the essential aims of the Cuban state is to guarantee the full dignity of the people and their integral development.32 – Empowerment is based on strengthening skills and capacities of farmers, rural communities, cooperatives and companies on the energy transition, its advantage and opportunities. This process of knowledge transmission allows the subjects involved to understand the objectives and goals in the use of renewable energy sources in food production. This point creates synergy with the objectives and goals of other public policies in Cuba that pursue the strengthening of local food and energy production. This step strengthens the decision-making process and the improvement of public policies by having more qualified and prepared people on the subject. – The rule of law application, as principle, must be based on the knowledge of political decisionmakers and the state in general of constitutional norms and public policies in respect of citizens’ rights. This principle must be based on the fundamental guarantee of all the other principles that make up this sustainable management system for energy transition in food production in Cuba implementation. The authorities work must be carried out under guidance and total observance of legality.

5 Conclusions Latin America is experiencing a growth in renewable energy sources use as an alternative to the energy crisis and the high dependence on fossil fuels to generate electricity. Latin American governments show an important level of interest and commitment to develop public policies to address energy transition and efficiency issues. At regional level, it is needed a comprehensive regional policy about energy transition. Latin America should develop an energy system capable of meeting current energy demands without compromising future generations needs and without causing environmental damages. Cuba is developing an energy policy aimed at transition to other generation sources such as biomass, hydro, wind and solar. Cuban Constitution does not expressly regulate energy transition, but it establishes several pilars that support it. Decree Law 345 represents great progress in renewable sources regulation. The legal norms derived from the Constitution and the Decree Law 345 need to pay attention to incentives (economic, financial. . .) allowing sustainable energy development based on energy transition. Developing a doctrine of Energy Law in Cuba undoubtedly contributes to the understanding of the energy transition process.

32

Asamblea Nacional del Poder Popular. Article 13 f) in relation with Article 40. Human dignity is the supreme value that underpins the recognition and exercise of the rights and duties enshrined in the Constitution, treaties, and laws.

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To ensure energy transition in Cuban food sector is necessary to apply a Human Rights-based approach to development. PANTHER principles application establishes fundamental guidelines that must be considered when implementing energy transition process in food production. It has been demonstrated that it must be a process enriched with citizen involvement, respecting constitutional rights together with compliance and observance of legality and transparency. It cannot be a sudden process, but a gradual and progressive one. Food industry acts as a guarantor for human right to food and it is a pillar of food sovereignty. Besides, energy transition is necessary to achieve the goal of sustainable food systems. Cuba needs an integral energy transition to break United States blockade and to achieve energy and food sovereignty.

References Andino V (2009) Soberanía Alimentaria y Derecho a La Alimentación: Elección de Políticas Públicas Desde El Enfoque de La Economía Solidaria. Alteridad 4(1):34. https://doi.org/10. 17163/alt.v4n1.2009.03 Berkhout F, Marcotullio P, Hanaoka T (2012) Understanding energy transitions. Sustain Sci 7(2): 109–111. https://doi.org/10.1007/s11625-012-0173-5 IRENA (2020) Global renewables outlook: energy transformation 2050. International Renewable Energy Agency, Abu Dhabi. https://www.irena.org/publications/2020/Apr/Global-RenewablesOutlook-2020 Luis Cordova JG et al (2021) Energy and law. A critical approach to the Cuban context. Global Jurist:1–20. https://doi.org/10.1515/gj-2021-0085

Jorge Freddy Milian Gómez Professor of Agricultural and Food Law. Professor and Researcher at the Law Department, Faculty of Social Sciences, Universidad Central “Marta Abreu” de Las Villas. Associated Researcher Free University of Brussels (Vrije Universiteit Brussel). CICOPS Fellow University of Pavia, Italy. E-mail: [email protected]. José Grabiel Luis Cordova Professor of Energy Law. Professor and Researcher at the Law Department, Faculty of Social Sciences, Universidad Central “Marta Abreu” de Las Villas. Associated Researcher Free University of Brussels (Vrije Universiteit Brussel). E-mail: Jose.Gabriel. [email protected]. Yanelys Delgado Triana Full Professor of Constitutional Law. Full Professor and Researcher at the Law Department, Faculty of Social Sciences, Universidad Central “Marta Abreu” de Las Villas. CICOPS Fellow University of Pavia, Italy. E-mail: [email protected].

Is There a Regional Approach to the Energy Transition in Sub-Saharan Africa? Elias Zigah

Abstract Africa is a minor contributor to global warming and responsible for only 1.8 per cent of global CO2 emissions, yet suffers the most from the adverse impact of climate change. Given the dire threats that climate change poses to Africa’s economic development, most countries in Africa have pledged their commitments to reduce harmful emissions to achieve a low-carbon economy under the Paris agreement in 2015. This paper used a comparative case study analysis of Ghana, Kenya, and South Africa to answer the question: Is there a regional approach to energy transition in Africa. The study aims to assess the commitments of African countries to energy transition and a low-carbon economy. The study found adequate policies, specific low-carbon legislation and reasonable market incentives established by the various countries to attract investments in the renewable energy sector. There were also some similarities and differences in the three countries’ approaches to aid a smooth, clean energy transition. However, the lack of consistency in the various national policy initiatives and their implementations reveals the absence of a regional approach to promoting Africa’s low-carbon economy. The paper further identified gaps in the individual countries’ policies and their implementation.

1 Introduction The World Energy Council defined energy transition as “a long-term structural change in energy systems” (World Energy Council 2014). Similarly, Smil (2010) also referred to energy transition as “a term used most often to describe the change in the composition (structure) of primary energy supply, the gradual shift from a specific pattern of energy provision to a new state of an energy system”. According to Smil (2010), the world has gone through various phases of the energy transition— from wood to charcoal for household cooking and heating, from coal to oil to fuel industrial mechanisation, from oil to natural gas to power thermal electricity generation. However, the current accelerated energy transition from fossil fuel to E. Zigah (✉) Florence School of Regulation, EUI, Florence, Italy © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_13

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renewable energy has been motivated by climate change concerns. Climate change emerged on the political agenda in the mid-1980s with the increasing scientific evidence of human interference, such as the emission of greenhouse gases (GHG) in the global climate system and the growing public concern about the environment. Thus, the current energy transition aims to transform the global energy sector from fossil-based to zero-carbon emission by 2050 (IRENA 2019a). Developing countries, especially those in Sub-Saharan Africa (SSA), are the least contributors to global warming. They are responsible for only 1.8 per cent of global CO2 emissions yet suffer the most from climate change conditions (IEA Energy Outlook 2018). Most SSA countries are highly dependent upon agriculture for economic growth and food security. However, severe weather events such as rising temperatures and heavier rain resulting in extreme drought and flooding pose significant implications for crop and meat production within the region. Given the dire threat that climate change poses to the environment, health, and economic development, a transition from fossil fuels to renewable energy has become a matter of global priority. Most countries have pledged their commitments to reduce harmful emissions to achieve a low-carbon economy under the Paris agreement in 2015. Sub-Saharan Africa (SSA) represented by several countries, including Ghana, Kenya and South Africa, at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) in Paris in 2015 and have participated in the signing and ratification of the Paris Agreement. However, owing to the region’s dire energy access situation, SSA faces a significant challenge in honouring its commitments to the Paris agreement (Kazimierczuk 2019). Access to energy in SSA is a significant challenge. The energy infrastructure in the region is underdeveloped, and the supply of electricity is highly unreliable throughout the region except for South Africa and a few other countries. The region has the lowest energy access rates in the world. The situation in rural parts is dire. Most parts do not have access to electricity, and rural electrification is as low as 5 per cent in many African countries (Eralil and Sokona 2020). The lack and unreliability of electricity access impede the development of a competitive and thriving private sector furthermore. Although there are ongoing international interventions to improve the poor energy situation in SSA using green technology, it is not keeping pace with the region’s rapidly growing population. Thus, the absolute number of people without access to energy keeps rising (Bawakyillenuo et al. 2018). According to the International Energy Agency (IEA), about 600 million people in SSA lack access to electricity and roughly 890 million people rely on unsafe and unhealthy solid fuel such as firewood, charcoal and cow dung for cooking and heating (Brandt and Media 2014). Moreover, Africa is the region with the highest proportion of businesses without access to reliable electricity. The situation has compelled most industries (79 per cent) and affluent households to rely on back-up diesel generators for power, while the low-income household, mostly in rural communities, deplete forest cover for firewood and charcoal. The low access to energy in SSA has significant implications for quality health and education. It also undermines economic growth and sustainable development.

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For instance, according to a report by the UN Sustainable Energy for All Initiative, the use of traditional solid fuel for cooking and heating in SSA is a leading cause of indoor air pollution which is responsible for 600,000 premature deaths per year, 80 per cent of whom are women and children (SEforALL 2018). Although SSA economies are diversifying and industrialising at a fast pace, because of the lack of reliable access to power, the region’s economic growth rate estimated at 3.3 per cent in 2019 is relatively low compared to other regions such as South Asia, with an estimated economic growth rate of 6.8% (IMF 2019). Therefore, the primary concern of public authorities dealing with the energy sector in Africa is to achieve a reasonably reliable energy supply at an affordable price, and with an acceptable environmental impact, over the long term. In this regard, most African countries’ focus in the short-term is primarily on extending electricity access to unconnected areas and ensuring energy systems’ reliability and efficiency. Although these short-term approaches to dealing with the energy challenge in Africa are justifiable under the current conditions, Pérez-Arriaga and Linares (2008) argue that a comprehensive approach to the energy problem should not be limited to a short-term and local perspective. However, a realistic and thoughtful approach to the energy issue also has to consider the reliability of supply for future generations and has to be aware of the consequences of the environmental impact of energy production and consumption. According to the IEA’s World Energy model, the world is currently not on track to meet the Sustainable Development Goals’ energy-related components (SDGs) (IEA 2020), especially in low-income countries where current energy models are unsustainable—unsustainable in economic, social and environmental terms. The primary concerns about the current energy model in Africa are as follows. First, access to a reliable electricity supply at an affordable price is essential for improving livelihood and promoting sustainable development. In many developing countries, households depend on electricity for various subsistence economic activities such as tailoring, corn milling, farm irrigation and hairdressing. Thus, the absence of a reliable electricity supply condemns people to underdevelopment. Second, the absence of a functioning and modern energy system is prevailing despite vast clean energy sources. The use of fossil fuels currently accounts for more than 80 per cent of Africa’s electricity generation mix. Meanwhile, its massive use is a significant source of anthropogenic greenhouse gases, whose intense and sustained increase is a significant driver of climate change, with potentially adverse economic, social and environmental effects (Pérez-Arriaga and Linares 2008). Third, a centralised, large-scale, and one-directional model characterises the continent’s energy landscape and electricity provision. On the one hand, the following authors: Kazimierczuk (2019), Bellos (2018) and Mulugetta and Gujba (2012), have argued that the widening energy access gap in SSA may be a significant setback for the region to fulfil its transition to a low-carbon economy commitment. On the other hand, several studies carried out by reliable institutions (Bloomberg 2018; IEA 2019) argue that the current poor energy situation of SSA creates a unique opportunity for the region to attract investors to use

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green energy technology to address the region’s energy challenge, while at the same time fulfilling its low-carbon economy ambition. Moreover, the electric power sector is currently undergoing several vital transformations, altering the design, operation, and characteristics of electricity systems individually and collectively. Among these transformations are the digitisation of power systems, increased adoption of distributed energy resources and decentralisation of electricity service provision, electrification of more significant shares of transportation, heating and industrial energy demand, and the growth of variable renewable energy resources such as wind and solar energy (Jenkins and Sepulveda 2017). Therefore, by addressing its energy challenges, Africa can materialise on the many opportunities lying ahead of the continent. For instance, Africa can avoid expanding centralised and large-scale power grid systems and instead build decentralised and interconnected electricity networks to increase access and reliability (Eralil and Sokona 2020). The literature on energy transition in Sub-Saharan Africa is less developed despite its unique energy feature; however, other regions, especially developed economies, have attracted much academic interest, including studies by Isoaho et al. (2016), Cherp et al. (2018), Jacobsson and Lauber (2006), Foxon (2012), Hultman et al. (2011), and Cherp et al. (2016). It is against this background that this study seeks to analyse the energy transition in SAA, focusing on SSA governments commitments towards developing a low-carbon economy to contribute to the limited literature on the subject of the energy transition in SSA. The study also seeks to answer the question: is there a regional approach to energy transition in Sub-Saharan Africa? The rest of the paper is organised as follows: Sect. 2 briefly discusses its methodology. Section 3 presents a general overview of the Africa Union’s energy transition programme. In what follows, the paper presents a three-country case study of the energy transition in Africa in Sect. 3. Section 4 presents a comparative analysis of the various legislation and policies’ key features and the gaps identified in the various policies. In Sect. 5, the paper presents the conclusion and recommendations.

2 Methodology The study adopts the general framework methodology for analysing energy transition developed by Cherp et al. (2018) and the three parameters used by Bloomberg’s Climatescope to analyse Kenya, South Africa and Ghana’s energy legislation policies. The study concentrates on power sector legislation and policies. Cherp et al. (2018) argued that national energy transition involves a change in energy flow, technology and policy, which occurs through three unique types of systems: (1) Techno-economic systems defined by energy flows associated with energy extraction, conversion and use processes involved in energy production and consumption as coordinated by energy markets; (2) Socio-technical systems delineated

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by knowledge, practices and networks associated with energy technologies and (3) Systems of political actions influencing energy-related policies. Therefore, they based their general framework for analysing energy transition on the above three systems. However, this study focuses on the third system: Systems of political actions influencing energy-related policy as an essential tool for accessing the commitments of SSA towards the just transition to a low-carbon economy. This choice is primarily supported by most literature on energy transition Saidur et al. (2010), Kayizzi-Mugerwa et al. (2017), Cherp et al. (2018), Kazimierczuk (2019), which recognised the vital role energy policy plays in ensuring a smooth transition to a low-carbon economy. In this regard, the study blends in the first parameter of Bloomberg’s Climatescope methodology: ‘Fundamentals’ to analyse existing fundamental structures in terms of policies and legislative instruments implemented to help promote the clean energy economy. The study’s primary data source includes literature from science direct, Government and other development partners websites, energy legislation and policies documents, and other internet sources such as google scholar.

3 Africa Union’s Energy Transition Programme The IEA’s Africa Energy Outlook suggests that unlike many of today’s industrialised economies, Africa is on the cusp of a system that avoids lock-in to carbon-intense development pathways. Instead of building and investing heavily in high emission infrastructure based on fossil fuels, many African countries have the opportunity to leapfrog dirty energy and create a clean and sustainable energy model from the start (IEA 2019). Given this background, Africa leaders have signed some landmark agreements, including the Paris Agreement and the Nationally Determined Contributions (NDCs). The Africa Union (AU) has also embarked on some initiatives, including Agenda 2063, the United Nation’s Sustainable Development Goals (SDGs) and, in particular, the Africa Energy Transition Program (AFRETRAP), to drive its energy transition agenda. The AU further sets seven key strategic objectives to guide the energy transition programme of member countries. These are: Energy Infrastructure for Economic and Social Development Starting with agriculture, which employs the largest share of the population but remains at a nearsubsistence level of production in most parts of the continent; Development of the Renewable Energy Sector In alignment with the Paris Agreement on climate change and a strong manufacturing sector for local production of renewable energy technologies, AFRETRAP aims to exploit Africa’s great potential for solar, wind, hydropower and other renewable sources and build African capacity for developing these technologies;

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Energy Efficiency Programs The authorities also plan to improve buildings, industry, and transport’s energy efficiency. This programme will involve local manufacturing of efficient equipment, as well as regulatory and behavioural interventions; National, Regional and Intercontinental Gas Pipelines The Africa energy commission is considering construction of regional and inter-continental gas pipelines, where this can be justified from a long-term climate and economic perspective, with recognition of risks of stranded assets and the global need to rapidly move away from fossil fuels (AFREC 2019); Development of an Integrated African Electricity Market According to AFRC, the development of an integrated African electricity market and interconnected electricity network would significantly decrease average electricity costs across the continent and increase energy sustainability and security; Decarbonisation of the Energy Sector As part of Africa’s commitments to fulfilling the UNFCCC’s nationally determined commitments under the Paris Agreement, the continent is aiming at Decarbonising the energy and other sectors to put its countries firmly on a low- to zero-carbon energy trajectory; Strengthening Energy Systems Innovation and Leveraging the Potential of Social Innovation Lastly, AFRC plans to implement a systematic, continent-wide approach to innovation to harness the research and development capacities required to meet all the above objectives. The Africa Energy Transition Program has a multidimensional approach that will operate in three phases for six to seven years (Eralil and Sokona 2020). The first phase aims to take stock of exiting and past policy initiatives implemented at the national and regional level to address the energy transition in Africa. This process will enable the Africa Energy Commission (AFREC)—the institution coordinating AFRETRAP, to evaluate the extent to which existing strategic plans and visions across countries and regions in Africa are compatible with the programme’s strategic objectives. During the first phase, AFREC will liaise with all relevant stakeholders to mobilise and build individuals and relevant institutions’ capacities to lead the energy transition programme. In the second phase, AFREC plans to identify, and frontrunner countries pilot its energy transition programme. Also, AFREC will form a team of experts from the five regions in Africa (West, East Central, South and North) to engage with academics and research institutions and develop the energy transition implementation plan for their respective regions. Once developed, the implantation plan will serve as the roadmap to guide and inform the country-specific energy policy initiatives. During the last phase, AFREC will appraise the pilot programme in frontrunner countries and scale-up AFRETRAP in other African countries.

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Potential Barriers to the African Energy Transition Programme

Indeed, Africa’s strategic objectives seem well suited for the African energy transition programme and, if well implemented, will meaningfully advance the transformation of the continent’s energy sector. Despite the potential of AFRETRAP to transform Africa’s energy landscape, this paper identifies two fundamental factors that may hinder the successful implementation of the programme: “energy trilemma” and lack of well-functioning supranational institutions.

3.1.1

The Energy Trilemma

This term stands for energy security, energy equity, and environmental sustainability. It is a term the World Energy Council (WEC) used to define energy sustainability. Energy security is a nation’s ability to secure sufficient, affordable and consistent energy supplies for its domestic, industrial, transport and military requirements. It means that current and future energy needs have a high probability of being met, irrespective of economic or political instability. Energy equity indicates the distribution of costs and benefits of an energy system (e.g., an electric grid) and the accessibility to affordable energy services. The environmental sustainability dimension ensures that we do not cause substantial damage to the environment (AffulDadzie et al. 2020). The energy trilemma is a significant challenge for Africa, and it does not seem possible with the current energy model of the continent to satisfy the energy needs of its population in a way that is well-matched with the current population and economic growth, equality in access to energy or at an acceptable environmental impact. There is a broad consensus on Africa’s current energy model and the general strategies required to address its energy trilemma. “When analysed carefully, any country facing financial difficulties and high levels of unmet energy demand namely energy demanded but not supplied because of a lack of generation capacity and interruption of power supply - would have to make a trade-off between the three dimensions” (Afful-Dadzie et al. 2020, p. 3). Therefore, many African countries’ main priority is investing in generation technologies that minimise the total cost of providing electricity to meet its high unmet demand. Despite the rapidly decreasing cost of renewable energy technologies, widely considered competitive with conventional electricity generators, their high initial and capital costs increase the cost of providing electricity in countries with limited financial resources (Afful-Dadzie et al. 2016). Moreover, the argument that authorities in Africa advance in support for the low uptake of renewable energy technologies is the intermittency of renewable energy sources that affect the reliability of energy supply and, to a large extent, the energy security dimension. Given the trade-offs that various authorities dealing with the energy sector in Africa must make between the three dimensions, this paper argues that the energy

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trilemma challenge is a potential threat to AFRETRAP successful implementation. Besides, lack of financial resources further exacerbates Africa’s energy trilemma challenge. Afful-Dadzie et al. (2020) argue that with more financial resources available, all three dimensions of the energy trilemma could be improved at the same time. Also, energy efficiency is a critical factor in achieving universal energy for all by 2030. The efficiency standard of the appliances people use can reduce the investment cost of delivering electricity access using off-grid and mini-grid solutions by 30% (IEA et al. 2019). Therefore, energy efficiency can significantly impact both the economics of delivering electricity access and its reliability in SSA. Nonetheless, most of the energy appliances used in SSA are second-hand products that have low-efficiency standards, thereby posing a severe threat to the universal access to electricity in the region.

3.1.2

Lack of Well-Developed Supranational Institutions

Among other principles, African ownership, leadership, and strong political will are critical pillars required to drive AFRETRAP. The fear of losing one’s national sovereignty (the ability of a country to make its own decision) is the underlying factor for the lack of political will from heads of member-countries to grant full supranational status and powers to Africa Union. Thus, its supranational institutions, including the Africa Energy Commission, are not well-developed to enhance the effective harmonisation of the AU’s policies and decisions to accelerate the energy transition programme. However, it is nearly impossible to achieve a successful regional project of this sort without a well-functioning supranational institution. Furthermore, some scholars argue that bureaucracy is the worst enemy of regional integration. In this respect, this paper identifies bureaucracy as a significant barrier to successful regional projects such as the AFRETRAP. Although the AU has taken action to deal with it by mandating the Africa Energy Commission to coordinates its energy programmes, the lack of well-functioning supranational authority of the Commission still leaves room for bureaucracy in its operations.

4 Countries Specific Case Studies This section discusses the Governments’ policy and legislative framework adopted and implemented in Ghana, Kenya and South Africa to facilitate a cleaner and more sustainable energy economy.

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Ghana

Ghana is one of the politically stable and democratic economies in Sub-Sharan Africa. The country is one of the fastest-growing economies in Sub-Saharan Africa, with a GDP growth rate of 8.5% and GDP per capita of US$1668 (USAID 2018a). The population estimate of Ghana is 29.6 million. Ghana’s power sector has an installed generation capacity of 4533 MW in 2018, comprising 2906 MW thermal, 1584 MW hydroelectric, and 42.5 MW solar. Ghana’s total electricity generation in 2018 comprised of hydropower (39.6% from three dams), oil and natural gas-fired power plants (58.14%), electricity imports (2.26%), and renewable energy (0.2% from solar). Ghana also has one of the highest electricity access rates in SSA. The country’s overall electricity access rate in 2019 is 82.3%, 94.2% urban, and 67.3% rural. The world Bank’s 2019 report on the ease of doing business scored Ghana at 59% (World Bank 2019). The Ease of Doing Business is a World Bank flagship annual report that measures the efficiency and the quality of a country’s regulatory framework in enhancing business activities in the country (see Fig. 8). Ghana’s concern about the environment date as far back as 1972, when the country participated in the Stockholm Conference on the human environment and other subsequent conferences on the environment and climate change, demonstrating its readiness to implement policies at protecting its environment. Ghana’s central policy on climate change is to transition from generating electricity from crude oil to natural gas and renewable energy sources. As part of the country’s policy on climate change, all energy projects developers must conduct an environmental and social impact assessment and associated adaptation and mitigation plans for the environment and climate change.

4.1.1

Legislative Framework

In 2011, the Government of Ghana enacted the Renewable Energy Act – Act 832 with the objective “to provide for the development, management and utilisation of renewable energy sources to produce heat and power in an efficient and environmentally sustainable manner” (Republic of Ghana 2011). Section 1, sub-section 2a of the Act also required the Government to create a policy framework to support renewable energy sources’ development and utilisation and provide the enabling environment to attract investment in renewable energy resources. Key Features of the Renewable Energy Act – Act 832 The key features of the Ac – 832 include but not limited to the following provisions: The Object of the Act Section, One of the Act defined the Renewable Energy Act’s critical objectives as discussed earlier.

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Regulators’ Responsibilities Section Four of the states the roles and expectations and defined the two energy regulators’ critical responsibilities—Energy Commission and Public Utilities Regulation Commission to achieve the Act’s objective. Feed-in-Tariff Scheme Section Twenty-Five of the Act established a feed-in-tariff scheme to guarantee the sale of electricity generated from renewable energy sources. Renewable Energy Purchase Obligation Under Section Twenty-Six of the Act, the Act makes it mandatory for an electricity distribution utility and bulk customer to purchase a predetermined percentage of electricity from renewable energy sources and mandate the PURC to determine the required percentage and also prescribed punitive actions against those who fail to comply with this provision. Also, Section Thirty of the Act required the system operator to connect electricity generated from renewable sources into the transmission and distribution system, and failure to do so could lead to a conviction. Renewable Energy Fund Section Thirty-one through to Thirty-six of the renewable energy act talks about establishing a Renewable Energy Fund, its purpose, sources of fund and management. As stated in Section Thirty-two, the fund aims to provide a financial resource for promoting, developing, and sustainable management and utilising renewable energy resources.

4.1.2

Policy Framework

As required by Act 832, the Government of Ghana has developed the renewable energy master plan (REMP) published in February 2019 as a strategic policy document to guide the implementation of the Renewable Energy Act’s overall objective. The objective of the REMP is to achieve the following targets by 2030: • Increase the proportion of renewable energy in the national energy generation mix from 42.5 MW in 2015 to 1363.63 MW (with grid-connected systems totalling 1094.63 MW); • Reduce the dependence on biomass as the primary fuel for thermal energy applications; • Provide renewable energy-based decentralised electrification options in 1000 off-grid communities; • Promote local content and local participation in the renewable energy industry The total estimated amount of investment required for the full implementation of the REMP by 2030 is US$ 5.6 billion. Thus, it would require the Government investment of US$ 460 million per annum over 12 years (2019–2030) (REMP 2019). The Government plans to attract more than 80% of the total amount from the private sector. When successfully implemented, upon completion of the plan, it is expected that the country would have a total installed capacity of 1363.63 MW from renewable energy sources, out of which 1094.63 MW would be connected directly to the

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grid. Also, Ghana would be making a net savings of about 11 million tonnes of CO2 emissions by 2030 (REMP 2019).

4.2

Kenya

The total population of Kenya is 49.7 million, a GDP per capita of US$2926 and a growth rate of 4.9% as of 2017 (USAID 2018b). As a result of active private sector participation in Kenya’s power sector and its long track record as a creditworthy off-taker, the ease of doing business in Kenya is 70.3, according to a USAID report in November 2019. The Kenyan power sector has a total installed generation capacity of 2.3 GW. hydropower constitutes 36%, thermal:33%, geothermal: 29% and Other Renewables: 2%. Electricity access rate by population is 64.5% (USAID 2018b) (see Fig. 9). Kenya is one of the signatories to the Paris Agreement on climate change, which seeks to reduce global temperature rise to 1.5 degrees Celsius by lowering greenhouse gas (GHG) emissions. As part of Kenya’s nationally determined contributions, the authorities have since put several policies and legislation to mitigate climate change. In particular, the Kenyan Government established the Climate Change Act in 2016, the National Climate Change Response Strategy, and the National Climate Change Action Plan (NCCAP). Also, Kenya has set an ambitious target in the NCCAP to limit its carbon greenhouse gas emission to 30% by 2030 by increasing its share of renewable energy generation while reducing its reliance on fossil and wood fuel. Therefore, renewable energy investments have increased rapidly across the wind, small-scale hydro and solar projects, biofuel and geothermal. From 2012 to 2016, Kenya has invested a total amount of USD 3.56 billion in clean energy generation (DWF 2017). The electricity generation share from the geothermal source in the generation mix increased to 28% in 2017 (see Fig. 1). Thus, making Kenya the largest producer of geothermal power in Africa.

4.2.1

Legislative Framework

From a legislative point of view, as discussed earlier, Kenya has enacted the Climate Change Act, 2016 to develop, manage, implement, and regulate mechanisms to enhance climate change resilience and low carbon development for Kenya’s sustainable development. Also, the Parliament of Kenya has amended the Energy Act, 2006 with the introduction of the Energy Act, 2019 “to consolidate the laws relating to energy, to provide for National and County Government functions about energy, to provide for the establishment, powers and functions of the energy sector entities; promotion of renewable energy; exploration, recovery and commercial utilisation of geothermal energy; regulation of midstream and downstream petroleum and coal activities; regulation, production, supply and use of electricity and other energy forms; and for connected purposes” (Energy Act, 2019).

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Fig. 1 Electricity generation mix, 2017

Generation Mix, 2017 Cogenration 1%

Wind 1% Hydro 36%

Thermal 34%

geothermal 28% Hydro

geothermal

Thermal

Cogenration

Wind

Key Features of the Climate Change Act, 2016 The followings are the key features of the Kenyan Climate Change Act, 2016 Establishment of the Climate Change Council Section Five of the Climate Change Act establishes the National Climate Change Council with clearly defined functions in Section Six of the Act, including setting the targets for regulating greenhouse gas emissions. Integration of Climate Change into Curricula Section Twenty-one of the Act recommends the development and the inclusion of lessons on Climate Change into various disciplines and subjects of the national education curricula at all levels. Enforcement of Rights Relating to Climate Change Section Twenty-three of the Act gives the general public the power to take legal action against a person who acts in a manner that has or is likely to adversely affect efforts towards mitigation and adaptation of the effects of climate change. Climate Change Fund Section Twenty-five establishes the Climate Change Fund, a financing mechanism for priority climate change actions and interventions approved by the Council. Incentives for the Promotion of Climate Change Initiatives Section Twenty-six recommended incentives to promote renewable energy use. In contrast, section Thirty-three prescribed punitive measures for offenders of the provisions in the Act.

Key Features of the Energy Act, 2019 Also discussed below are the key features of the Energy Act, 2019.

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Establishment of a Renewable Energy Feed-in-Tariff System Section 91 of the Energy Act 2019 establishes the renewable energy feed-in-tariff system, among other objectives to catalyse electricity generation through renewable energy sources. Also, Section 92 makes provisions on the regulation of the feed-in-tariff system. It provides for the priority of purchase by distribution licensees of electrical energy generated from renewable sources. Decommissioning and Abandonment Section 186 of the Act makes provisions for removing energy infrastructure after its useful life. Establishment of Funds Section 194. (1) empowers a County Government to establish a fund to promote efficient energy use and conservation within the County. Also, Section 216 of the Energy Act 2019 provides a Consolidated Energy Fund to promote renewable energy initiatives, carter for the decommissioning of energy infrastructure.

4.2.2

Policy Framework

Besides the above legislative instruments, Kenya has also developed several policies and regulations to aid the smooth transition to a low-carbon economy. Some of the policies include: • • • •

The National Climate Change Response Strategy The National Climate Change Action Plan (NCCAP) The Energy (Solar Water Heating) Regulations The carbon credit trading policy established in Section 44 (1q) and Section 75 (2g) of the Energy Act 2019 aims to promote renewable energy sources’ development and exploitation.

From a policy point of view, the Energy Policy highlights the role of the Government in promoting the use of renewable sources of energy, such as designing incentive packages to promote private sector investments in renewable energy and other off-grid generation and government support in research and development in emerging technologies like wind energy generation.

4.3

South Africa

South Africa has a total population of 54.8 million and a GDP per capita (PPP) of US $13,500, with a GDP growth rate of 1.3% (USAID 2018c). The total installed generation capacity of South Africa is 51.3 GW–46,776 MW of thermal, 661 MW of Hydropower, and 3872 MW of other renewables (see Fig. 10). The chart in Fig. 2 demonstrates the total power generation capacity mix of South Africa. According to World Bank data, South Africa has one of the highest electricity access rates in Sub-Saharan Africa. The national electricity access by population is

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Gas 6%

Pumped Storage Hydro 1% Nuclear 6% 4%

Coal 83%

Fig. 2 Maximum power generation capacity mix, 2017. Source: Department of Energy, 2018

86%, 96% in urban areas and 66% in rural areas (USAID 2018c). The ease of doing business in South Africa is (USAID 2018c) 64%. The Government of South Africa has also joined other world leaders to pledge its commitment to protecting the environment by transitioning from polluting environmental sources of energy to a cleaner and renewable energy source by signing the Paris Agreement. Consistent with the National Development Plan 2030, South Africa has pledged in its nationally determined contributions to reduce greenhouse gas emissions and mitigate climate change. This commitment has seen South Africa introduced policies and regulations aimed at stimulating investments in clean energy production. Total investments in clean energy production between 2012 and 2016 amounted to USD 17.26 billion (see Fig. 2).

4.3.1

Legislative Framework

The main legislative instrument governing the electricity sector in South Africa is the Electricity Regulation Act (ERA), 2006 (Act No. 4 of 2006). Portions of the ERA, 2006 were amended to include the introduction of the Electricity Regulations on New Generation Capacity in 2011, to regulate the procurement of new generation capacity to include generation from renewable sources by organs of the State (DoE 2011). South Africa is also considering the National Climate Change Bill, whose fundamental objective is to “build an effective climate change response and ensure the long-term, just transition to a climate-resilient and lower carbon economy and society”. Also, based on the recommendations of the Government’s White Paper on National Climate Change Response in 2011, the National Treasury has in both 2015,

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and 2017 published the first and second Carbon Tax Bill respectively, for public comment.

Key Features of South Africa’s Electricity Regulation Act (REA), Act 2006 Ministerial Determination: the key feature of the ERA, 2006 is the amendment of Section 34(1) to introduce the Electricity Regulations on New Generation Capacity, where the minister of energy has the authority to decide on the procurement of new generation capacity by the state in consultation with the National Energy Regulator of South Africa (NERSA). Acting under this authority, the Minister of Energy in 2015 introduced the Renewable Energy IPP Procurement Programme (REIPPPP) that target to procure 17,800 MW of energy generated from renewable sources by 2030.

4.3.2

Policy Framework

In line with South Africa’s commitments to transition to a low carbon economy, the Government has since 2003 introduced some policies to aid the smooth transition. One such policy is the Government’s White Paper on Renewable Energy introduced in 2003 to promote energy from renewable sources such as solar, hydro, biomass, and wind. The following are the objectives of the Government’s policy on renewable energy, as stated in the White Paper: • Ensure the investment of equitable level of national resources in renewable energy technologies; • Direct public resources to the implementation of renewable energy technologies; • Introduce suitable fiscal incentives for renewable energy and; • Create an investment climate for the development of the renewable energy sector. Also, the establishment of the REIPPP policy was to encourage private sector investments in renewable energy technologies.

5 Comparative Analysis of the Legislation, Policies, and Market Incentives This section outlined the similarities and differences in the individual countries’ approach towards a just transition to a low-carbon economy. It also compares the surveyed countries’ market incentives to attract investment in clean energy technologies and the progress of the investment made in that regard.

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Similarities in the Approaches

The following are the similarities identified in the legislative instruments, policy framework, and market incentives in all three countries: Ghana, Kenya, and South Africa, to aid the smooth transition to a low-carbon economy. Renewable Energy Purchase Obligations Ghana, Kenya, and South Africa have all introduced the renewable energy purchase obligation by licensee distributors and bulk customers to promote renewable energy generation investments and expand its share of the generation mix. (reference acts:) Feed-in-Tariff Scheme Section 26 of the Renewable Energy Act, 2011 of Ghana and Section 91 of the Energy Act, 2019 of Kenya has established the feed-in-tariff scheme to guarantee the sale of electricity from renewable sources of generation. However, South Africa has replaced its feed-in-tariff system with a comprehensive bidding process in 2011 (Meyer-Renschhausen 2013). Renewable Energy Fund Section 216 of the Energy Act, 2019 of Kenya provides for the establishment of a consolidated fund to support investments in renewable energy generation, while Section 31 of the Renewable Energy Act, 2011 of Ghana establishes the renewable energy act to provide financial resources for the promotion and development of renewable energy resources. Tax Exemption Both Kenya and Ghana offer exemptions from value-added tax (VAT) and import duties for supplies imported or bought to construct renewable power-generating plants. VAT Act, 2014 of Kenya and the Renewable Energy Act, 2011 of Ghana.

5.2

Different Approaches

This study has also identified some unique approaches adopted by the individual countries to transition from fossil-fuel to a more sustainable and clean energy generation. In what follows, the paper discusses some of those unique approaches below.

5.2.1

Legislation

Kenya and Ghana have established dedicated legislation to give more legal support for the low-carbon economy transition. Kenya has established the Climate Change Act, 2016 and its existing Energy Act 2006, which was recently amended to Energy Act 2019 to give solid legal backing to its climate change mitigation and adaptation strategies. Similarly, Ghana has also established the Renewable Energy Act, 2011, to

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promote renewable energy. South Africa is also considering a bill on climate change which is currently at the review stage.

5.2.2

Public Education and Capacity Building

Ghana and South Africa advocate for public education and local capacity building in clean energy technologies. However, in Kenya, the Government has gone an extra mile to enact specific legal provisions in the Energy and Climate Change Act to ensure lessons on Climate are included in the national curriculum and taught at all educational levels in the country.

5.2.3

Market Incentives and Interventions

Carbon Market Kenya appears to be the only Sub-Saharan African country at the moment to be operating a carbon credit trading scheme aimed at reducing GHG emission while incentivising investments in renewable energy as well. Again, South Africa is also considering this policy which is currently under review. Tax Incentives In South Africa, Section 12B of the Income Tax Act amended in 2015 provides 100% capital allowance for movable assets used in renewable energy production in the asset’s first financial year. However, Ghana and Kenya are using the tax exemption approach to import and purchase renewable energy technologies. Renewable Energy Auctions South Africa introduces the price competitive auction scheme for renewable-based electricity to promote private investments in developing clean energy technologies. At the same time, Ghana and Kenya have both by law established the Feed-In-Tariff scheme to guarantee an off-taker agreement for electricity generated from renewable sources.

5.2.4

Least Cost Development Plans

Kenya has developed and implemented the Least Cost renewable power development plan (2011–2031), which has identified its geothermal technology as the least cost investment option. As discussed earlier, Ghana has also developed the renewable energy master plan 2019–2030 to drive private sector investment in developing renewable technologies. However, the plan has not emphasised the least cost development option.

5.2.5

Public and Private Sector Investment

Kenya has invested 6.9% of its GDP in developing its renewable energy resources and technology between 2010 and 2016. South Africa has also 2010–2016 invested

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5.9% of its GDP in clean energy technology (Bloomberg NEF 2018). Similarly, Kenya and South Africa have introduced attractive investment incentives to attract significant private investment in the renewable energy development sector. However, public and private investment in clean energy technology in Ghana is poor. Some of the factors that account for the low private investment in renewable energy development in Ghana are the poor implementation of the feed-in-tariff scheme; inadequate investment incentives, weak supervision mechanisms; poor coordination of research and development, and weak local capacity building initiatives (Energy Commission 2015). Although Kenya and South Africa also share some of these challenges, they have managed them quite well. The graphs below illustrate the individual countries’ progress about increasing the share of renewable energy installed generation capacity and electricity generated from renewable sources from 2000 to 2016. The source of data for all the graph below is from the International Renewable Energy Agency resource database (IRENA 2019b). Figure 3 shows the electricity generated from renewable sources in Ghana in gigawatts per hour (GWh) from the year 2000 to 2016. Ghana (see Fig. 3): The graphs above clearly demonstrate poor public and private investment commitments in developing clean energy technology in Ghana. The graph also shows a significant reduction in clean energy generation in the country. Kenya: However, Kenya is making remarkable progress in the development of its renewable energy resources and technology. Figure 4, which shows the electricity generated from renewable sources in Kenya, shows evidence of public and private sector’s commitment to developing a low-carbon economy (see Fig. 4). The growth in the geothermal installed capacity and electricity generation is also signal of the GH Renewable Power Generation -GWh 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Hydro

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Fig. 3 Electricity generated from renewable sources in Ghana. Source: Author’s elaboration

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KE Renewable Power Generation -GWh 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Hydro

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Fig. 4 Electricity generated from renewable sources in Kenya. Source: Author’s elaboration

Government’s commitment to implementing a least cost renewable power development plan. South Africa: The continuous growth in the installed generation capacity and electricity production from wind and solar technologies, as exhibited in Fig. 5, show significant progress in the investment and development of clean energy resources and generation in South Africa (see Fig. 5).

5.2.6

Clean Energy Investments in the Three Countries

Using a World Bank’s data, the paper also assesses the investment patterns in conventional energy infrastructure with private sector support during the past two decades. The study looked at the integrated number of investments in energy projects such as electricity generation, transmissions and distributions, excluding smallscaled projects (renewable energy-based mini-grids and). South Africa emerged as the country with the highest commitment to investing in the energy infrastructure expansion with a total investment of $19.95 billion, followed by Ghana with a total investment of $4.99 billion. The study analysed the various countries’ investment in conventional and renewable energy and observed that, in South Africa and Ghana, investments in conventional energy systems (thermal generation) were much higher than the investments in clean energy technologies. For instance, the total clean energy investment in Ghana between 2007 and 2017 was $63.3, while the country’s investment in conventional energy infrastructure amount to approximately $5 billion. Similarly, Kenya, South Africa, are investing a lot in coal and gas power plants to guarantee the

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Fig. 5 Electricity generated from renewable sources in South Africa. Source: Author’s elaboration

power supply’s security. Bellos (2018) attributes this trend to the conflict between energy security and energy transition. Figure 6 illustrates the three countries investment pattern in clean energy (see Fig. 6).

5.3 5.3.1

Barriers to the Energy Transition Institutional and Regulatory Framework

Weak institutional and regulatory framework and the absence of clear, consistent and coherent policies make investments in clean energy technology in SSA unattractive to the private sector (Green Climate Fund 2019). Some Governments manage to define policies on the development and promotion of Renewable Energy Technologies (RETs), as evident in Ghana, Kenya and South Africa. However, due to poor planning, most of the policies were consistent with the national power master plan. Thus, there is often a disconnect between the policy targets and the commitment to follow through with their implementation. For instance, despite Ghana’s pledge to significantly reduce the share of fossil fuel and increase the share of renewables in the country’s energy mix, in reality, not much has been seen in that regard. Instead, the current energy statistics from the Energy Commission of Ghana shows the exact opposite. In 2006, electricity generation from renewable energy sources (Hydro with less than 1% contribution from small-solar systems) accounted for 67% of the country’s energy mix while thermal generation accounted for 33%. However, twelve years later, generation from renewable sources (still hydro with less than 1% contribution from small scale solar system) has declined to 38%, while thermal generation increased to 61%. The diagrams in Fig. 7 illustrate the electricity

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CLEAN ENERGY INVESTMENTS 6000.00

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Fig. 7 Electricity generation mix of Ghana, 2018. Source: Author’s elaboration with data from the Ghana Energy Commission

generation mix of Ghana in 2006 and 2018. Given Ghana lack of commitment to its clean energy policies, Afful-Dadzie et al. (2020) observed that the country is nowhere close to even 1% of the 10% renewable electricity target that was due in 2020, and why it is likely it might not achieve its goal in the new targeted year of 2030 (see Fig. 7). Also, another case of a disconnect between policy and implementation is the case of South Africa. Coal-fired plants dominate South Africa’s electricity generation and account for 90% of the country’s electricity. Thus, making South Africa one of the largest CO2 emitters per capita in the world (Bohlmann et al. 2019). On the one hand, as part of South Africa’s nationally determined commitment to reduce global emissions, the country has planned to reduce coal share in its electricity generation. On the other hand, consistent with the national development plan, South Africa plans

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to allow its emission to follow a plateau trajectory by allowing emission to peak between 2020 and 2025 and then flatten for a decade before it declines (Climatescope 2018). In line with this policy, Eskom—a state-owned national energy supplier, continues to invest in coal-fired plants due to Commission two new coal-fired plants in 2020.

5.3.2

Attracting Investment Funding

Development indices characterise Sub-Saharan African countries are as low-income and middle-income economies. Thus, the ability to meet a low-carbon economy’s investment needs is one of the significant challenges that the continent faces. Besides, most SSA countries are not attractive investment destination to international investors due to the high risk of investment loss, such as the weak financial position of off-takers, poor tariff structure and payment history, weak currency, high possibility of low return, political instability and corruption (DWF 2017).

5.3.3

Energy Trilemma vs Energy Transition

The energy trilemma, particularly its security dimension in Africa, is a significant challenge as the region cannot generate enough energy to meet its growing demand, leaving a big energy access gap. Also, the limited electricity supply in most African countries is unreliable due to erratic power cuts. Thus, African governments are more likely to prioritise energy security above the dynamics of energy transition (Bellos 2018). For Example, in Ghana, between 2014 and 2016, the country experienced a shortage in electricity supply due to the low water level in its hydro dam, which is the dominant electricity generation source of the country. In response to addressing the power shortage, the Government invested a lot in the procurement of thermal plants at the expense of its climate policy on clean energy technologies. South Africa is also very reluctant to accelerate its low-carbon economy transition due to the competition between energy securing the country’s energy needs and its desire for a low-carbon economy. The conflict between energy security and energy transition and the uncertainty around energy transition may account for the gap between policy targets and implementations.

5.3.4

Energy Efficiency

Also, energy efficiency is a critical factor in achieving universal energy for all by 2030. Improving the efficiency standard of buildings, industries, and household appliances have the potential to reduce the investment cost of delivering electricity access using off-grid and mini-grid solutions by 30% (IEA et al. 2019). Therefore, energy efficiency can significantly impact both the economics of delivering electricity access and its reliability in SSA. Nonetheless, most of the energy appliances used

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in SSA are second-hand products that have low-efficiency standards, thereby posing a severe threat to the universal access to electricity in the region.

6 Conclusion Ghana, Kenya, and South Africa were among other Sub-Saharan Africa countries that pledged to cut down on harmful emissions and increase the share of renewable energy in their respective national power generation mix. Given this, this study assessed the three countries’ commitments to transition to a low-carbon economy by analysing the various policy frameworks, legislation and market incentives to promote and attract investments in renewable energy development energy in the region. The study found adequate policies, specific low-carbon legislation and reasonable market incentives established by the various countries to attract investments in the renewable energy sector. There were also some noticeable similarities and differences in the three countries’ approaches to aid a smooth, clean energy transition. The paper further identified some gaps in the various policies and their implementation. These are mainly due to potential barriers to renewable energy development in Ghana, Kenya and South Africa. Some of these barriers include weak regulatory and institutional framework, the conflict between energy trilemma and energy transition, and weak investment incentives. In terms of the individual country’s commitments to the low-carbon economy transition, Kenya has demonstrated firm commitments in implementing policies and market incentives, resulting in the country’s renewable energy production’s rapid growth. South Africa’s plateau trajectory of harmful emission reduction plan does not suggest a strong commitment to a just transition to a low-carbon economy even though it has also made some progress in developing the renewable energy sector. Instead, it emphasised the tension between energy transition and security in the region. The decline in electricity production from renewable sources and low public investments in clean energy technologies in Ghana demonstrates its low commitments to the clean energy economy transition. In terms of Africa’s commitment to clean energy transition, the study acknowledged that the objectives and guiding principles outlined under the Africa Energy Transition Programme put together by the Africa Union show the continents readiness to embrace the energy transition challenge. However, developing AFRETRAP alone is not enough to demonstrate Africa’s commitment to the energy transition agenda. It requires strong political will, leadership, and African ownership to drive Africa’s energy transition ambition. Unfortunately, these are the qualities currently lacking in Africa’s energy transition commitments. Unlike Europe, the AU lacks well-developed and well-functioning supranational institutions to drive its energy transition agenda. Moreover, the energy trilemma, a significant challenge in Africa, further casts doubt on Africa’s energy transition target. Although the countries studied do not form a significant representation of Africa, given the relative homogeneity of most African countries’ economies, they reflect

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most African governments’ general attitude towards the continent’s energy transition situation. In this regard, the paper argues that there are no firm commitments to the transition to a low-carbon economy in Africa except for very few isolated cases. Despite some similarities in the various RE supporting national initiatives reviewed, the lack of consistency of an approach in the various national initiatives and their implementations revealed the absence of a well-coordinated regional approach to promoting a low-carbon economy transition.

7 Recommendations Africa needs a comprehensive regional approach with clear timelines and deliverables to drive its energy transition agenda. The approach should specifically address the continent’s energy trilemma and account for geopolitical considerations and the consequences of different strategies of security of supply. Adopting a regional approach towards developing the low-carbon economy in Africa may help drive developers and investors of clean energy technology to the region. Above all, Heads of States of the Africa Union must demonstrate leadership and strong political will to honour their commitments under the Paris Agreement. The individual countries must show leadership and commitment to implementing prudent fiscal policies and public financing scheme to attract private investment in its clean energy agenda. The various Governments should also consider investing in research and development to develop a least-cost renewable energy development plan and its implementation. Moreover, some experts consider natural gas a cleaner and cheaper energy source (Zigah 2019). It is the least polluting fossil fuel and serves as a bridge for the transition from dirty fuel to clean energy sources. However, Saharan Africa has accessed only 1% of its conventional natural gas deposits; thus, in the short- and mid-term, tapping into the natural gas reserves in Africa could facilitate the development of critical economic sectors and also allow increased and safer energy use at the household level (Eralil and Sokona 2020). Furthermore, Governments must invest more in the power sector to make it more credible to honour off-taker agreements to attract private investment.

Appendix The development of regulations and policies to support the deployment of renewable energy has been making steady progress.

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GH Reneable Power Installed Capacity -MW 1800 1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Hydro

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Fig. 8 Total installed capacity of renewable power in Ghana

KE Renewable Power Installed Capacity - MW 1800 1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Hydro

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Elias Zigah is an Energy Analyst with keen research interests in energy transition, environmental sustainability and sustainable development. He has over four years of working experience in Energy Policy Analysis and Research. He was a former researcher at the Climate Economics Chair in Paris, an organisation which researches the economics of climate change to inform the actions of policy makers, industry, academia and the public. Elias holds Master of Development Economics from Clermont Auvergne University in France and Master of Science in International Energy Studies from the University of Dundee in the United Kingdom.

Ineluctable Transnationalism, and the Regional Approach to the Energy Transition Navraj Singh Ghaleigh

Abstract About the regional approach to the energy transition, many papers answered this question by focusing on the low carbon transition within a particular region. The approach herein is rather to consider the transition across regions by focussing on the interface of climate law, trade law, and energy financing. The basic argument is that the cross-regional perspective—what I term transnationalism—is ineluctable in many contexts, especially in financing the energy transition. Using the example of export finance undertaken by export credit agencies, the low carbon transition is inescapably shaped by transnational activity in which multilateral regulation operates in ways inimical to ‘Paris alignment’. Whilst some European and other advanced economies rush to make net-zero commitments, the structure of export finance regulation allows them to simultaneously invest in high carbon activities. Legal climate interventions in these contexts which are seen as a driver of the energy transition are deeply transnational. Using climate litigation, they seek to drive the energy transition forward to force and compel governments and commercial actors in particular investment funds to transition to a low-carbon future.

1 Scene Setting The symposium at which this paper was presented asked whether there is a regional approach to the energy transition? Many papers answered this question by focussed on the low carbon transition within particular regions. The approach herein is rather to consider the transition across regions by focussing on the interface of climate law, trade law, and energy financing. The basic argument is that the cross-regional perspective—what I term transnationalism—is ineluctable in many contexts, especially financing the energy transition. Using the example of export finance undertaken by export credit agencies, the low carbon transition is inescapably shaped by transnational activity in which multilateral regulation operates in ways inimical to N. S. Ghaleigh (✉) Edinburgh Law School, Old College, Edinburgh, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_14

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‘Paris alignment’. Whilst some European and other advanced economies rush to make net zero commitments, the structure of export finance regulation allows them to simultaneously invest in high carbon activities. Whether characterised as hypocrisy or poor policy alignment, this is but once example of the challenge of actually implementing the low carbon transition.

2 Scope—Institutions and Territory Elsewhere in this symposium it was said that we do not talk enough about the money side of things. Apt here is Mark Hanna’s famous remark about American Politics: “There are two things that are important in politics. The first is money and I can’t remember what the second one is.” What was true about US politics in 1885 is equally true (allowing for rhetorical flourishes), about the low carbon energy transition and climate change. Without adequate finance, we need not need talk about the rest of it, because nothing is going to happen. To some extent this has been recognised by the climate regime. We are familiar with Article 2(1)(a) of the Paris Agreement, which aims to make “finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” In the context of the multi-trillion dollar scale of the challenge, and its scope—territorial, technological, and ideational—the low carbon transition is a truly a wicked problem. This paper focusses on one particular institutional actor, export credit agencies. These rather covert actors have had and may continue to have a significant role in the financing energy globally. They form one discrete part of the financing undertaken public finance institutions (PFI). In terms of territories, I am looking just at two. Whereas we used to talk about the European Union, we in the UK now have to talk about Europe, which means the EU plus the United Kingdom for these purposes. Why talk about Europe? It is a tiny and declining global emitter, and it is a former, not present, climate leader. But as others papers in this collection have explored, Europe has very significant ambitions to get back on the horse and lead the international politics of climate once again. The Green New Deal is in places an interesting and ambitious package to move towards that. The second region addressed in this paper is East Asia and Asia, in general. It is I argue climatically the most significant region globally for a number of reasons. In terms of consequences many parts of Asia are very vulnerable to the impacts of climate change owing to their large coastal populations and the frequency of natural disasters, as well as, very rapid urbanisation.1 Across Asia, sea-level rise is already threatening heavily populated coastlines and low-lying regions.2 Rising temperatures are also

1

IPCC (2014), Chapter 24, pp. 1327–1370. Amit Prakash, “Boiling Point,” International Monetary Fund Finance and Development, September 2018. https://www.imf.org/external/pubs/ft/fandd/2018/09/pdf/southeast-asia-climatechange-and-greenhouse-gas-emissions-prakash.pdf.

2

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causing Himalayan glacial melt, increasing the risk of floods, and depleting the flow of major rivers.3 According to the World Bank 800 million South Asians will experience declining productivity, incomes, crop yields and health due to climate change.4 Simultaneously, Asia’s emerging economies are a hotbed of human activities which drive global heating. Asia is home to five of the world’s top ten emitters: China, India, Japan, South Korea and Indonesia.5 These five nations alone account for over 40% of global emissions,6 exceeding the combined total of the Americas, the EU, and Africa.7 These remarkable figures make clear the singular role of Asia in addressing climate change, and are substantially a function of regional coal use. If those five nations do not decarbonise, almost totally and instantly (within 15–20 years), then there is no prospect of meeting the temperature targets of the Paris Agreement.

3 Paris Alignment The overarching framing of this discussion is the idea of Paris alignment, a term used quite unsystematically. Alignment in terms of climate finance, or adaptation, or loss and damage, are variously used. It is a term used by governments and, increasingly, also by the corporate sector. If you read the Financial Times, scarcely a day passed in 2020 without a corporation or fund reportedly aligning its activities with Paris in the near term and move towards a net-zero approach by 2050 or so. That net-zero approach is almost a mania currently, though its substance remains to be seen. In the scholarly literature,8 net zero means that economies and societies must translate their ratification of the Paris Agreement, which is nearly universally ratified, into a fundamental reorientation of societal and economic systems such that they are aligned with key provisions of the PA. These include the temperature target in Article 2 PA, but especially, Article 4(1) of the Paris Agreement which commits parties “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity. . .” For advanced economies and historically larger emitters such as the UK, this provision has been interpreted9 to mean that net zero no later than 2050 ‘How climate change will affect Asia’, South China Morning Post, 11 March 2019. Muthukumara Mani and Gulrez Shah Azhar, “As South Asia’s heat rises, living standards decline,” End Poverty in Southeast Asia, World Bank Blogs, 26 August 2019, https://blogs. worldbank.org/endpovertyinsouthasia/south-asias-heat-rises-living-standards-decline. 5 “Global Carbon Atlas 2018,” http://www.globalcarbonatlas.org/en/CO2-emissions. 6 Combined total of 15,154 MtCO2 representing 41% of the global total of 36,573 MtCO2: UNFCCC, “National Inventory Submissions 2019.” 7 Respectively, 3445 MtCO2, 1401 MtCO2 and 7766 MtCO2, all 2018 data: UNFCCC, “National Inventory Submissions 2019.” 8 Cochrane and Pauthier (2019). 9 https://www.theccc.org.uk/uk-action-on-climate-change/reaching-net-zero-in-the-uk/. 3 4

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equals aligning with the Paris Agreement.10 Paris Alignment has two central elements: ‘do no harm’, and ‘foster transformative change’, both of which must be fulfilled.11 Given the starting point of all major economies, the former is the focus of practically all policy discussions—decarbonisation of the power sector, or exiting from fossil fuel finance—noting that this is a necessary but insufficient step. Transformation of economies and societies are also necessary. Another contextual issue is that of regulatory displacement. My focus today is on export credit agencies (ECAs) and climate litigation and interventions. My conclusion essentially is that whilst it is very useful to talk about regional energy transitions, they have significant, inevitable transnational consequences. ‘Transnational’ is used in this context to explain the reality of relationships in which one party, generally the project host, is situated in the Global South whilst the other party, the ECA funder, is situated in the Global North. Both are subject to different normative regimes by virtue of the function in the supply chain, as well as their jurisdiction. The resulting regulatory matrix is one characterized by fragmentation and decentralization. Accordingly, whatever we do in Europe in terms of export financing has enormous consequences elsewhere.

4 Public Fossil Fuel Finance ECAs are essentially public finance institutions. They are government-owned or affiliated entities which support the export of domestic good and services by providing financing to foreign purchasers of goods and services. Italy, for instance, has a very significant ECA called SACE. Typically, only the most highly advanced or developed ‘Annex I’ economies have an ECA. That said, in very recent years, India has developed an ECA, but it is relatively unimportant on a global scale. Contrarily, a very important one is Sinosure, China’s ECA. It is one of the vehicles by which China is financing the multi-billion Belt and Road Initiative. ECAs have, in recent years, moved from the margin to the center of debates on climate action and finance. One reason for this is the withdrawal of Public and Development banks (PDB) such as the Multilateral Development Banks (MDBs) from international coal-finance.12 The PDBs play a central role in global finance. They oversee c10% of global finance, which amounts to approximately $2.3 trillion p.a.13 Their enduring relevant is accounted for in part by their counter-cyclical

10

https://www.gov.uk/government/news/uk-sets-ambitious-new-climate-target-ahead-of-unsummit. 11 Cochrane and Pauthier (2019). 12 Direct financing of coal from MDBs has declined, but the African Development Bank is a notable exception, along with newer MDBs (i.e. Asian Infrastructure Investment Bank and the Islamic Development Bank). 13 https://financeincommon.org/why-finance-in-common.

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character. In circumstances of economic crisis—including but not limited to the current pandemic—they are able to provide lending where commercial banks may not. PDB used to be deeply engaged in the provision of global coal finance. Over the past decade however, led by the World Bank and the IMF, they begun to withdraw from that market and support the low carbon transition. This has occurred through a variety of policies, from accounting for greenhouse gas impact of their investments, to transparency, the integration of climate in their lending strategies, and most pertinently for present purposes, fossil fuel exclusion policies. A leader in the field would be the European Investment Bank which has excluded unabated fossil fuel investments from the end 2021 from its lending policy, and already implemented exclusions on coal and upstream oil and gas. The World Bank and IFC have a near complete exclusion of coal and upstream oil and gas, though downstream oil and gas investments are still permitted, and coal financing is permitted only in ‘rare circumstances’, although in practice there is a complete exclusion. The last remaining laggards are the African Development Bank and the Asian Infrastructure Investment Bank. As a community though, the PDB are well on the way to have fully evacuated the fossil fuel, but especially coal, marketplace. That space though has since been filled by ECAs. We are seeing an almost dollar-for-dollar substitution. Where MDBs have left the financing territory, ECA’s have stepped in. Between 2016 and 2018, ECAs provided $31.6 billion annually to support fossil fuel projects, $7.1 billion for coal, and $24.5 billion for oil and gas. In comparison, support for renewable energy stands at only $2.7 billion p.a.14 These are essentially entities that fund major high carbon infrastructure beyond their territories. ECA financing enables commercial banks and manufacturers to reduce their risk exposure and therefore leverage additional finance for fossil fuel investments. Obviously, almost none of these projects can be financed within the parameters of Paris alignment. Paris alignment allows for essentially zero coal in the future and almost zero oil and gas. It is therefore very difficult to square those two things, if not impossible.

5 ECA’s Regulatory Regime The regulatory regime for ECAs is rather unusual. You might think it is part of the global trade regime, but ECAs are actually regulated by what is an OECD carve-out from the WTO regime. The central instrument for regulating ECAs is the 1978

Kate DeAngelis and Bronwen Tucker, “Adding Fuel to the Fire” Friends of the Earth/Oil Change International, January 2020, http://priceofoil.org/content/uploads/2020/01/2020.01.30_AddingFuel-to-the-Fire_final.pdf. p. 3. See also: Christine Shearer et al., “Boom and Bust 2020,” Global Energy Monitor/ Sierra Club/ Greenpeace/ CREA, March 2020, https://endcoal.org/wp-content/ uploads/2020/03/BoomAndBust_2020_English.pdf. 14

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OECD Arrangement on Officially Supported Export Credits (“the Arrangement”),15 which constrains subsidies and potential trade distortions arising from ECA support. This is principally an instrument of trade law, which aims to buttress a global trade system allowing exporters to compete on a level playing field, and carves out an exception under anti-subsidies WTO rules. The Council Recommendation on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence16 (Common Approaches) was added in 2003, setting out measures to address, among others, potential environmental and social impacts of projects seeking official export credit support. With these Common Approaches, the general trade regime and the “Arrangement” are essentially given an ESG gloss. Supplementing the Arrangement are six “Sector Understandings.” For present purposes, 2016’s Annex VI Sector Understanding on Export Credits for Coal-Fired Electricity Generation Projects (CFSU) is most relevant. The CFSU limits export credit support for new coal-fired power plants and prohibits OECD ECAs from supporting coal plants unless they use ultra-supercritical technology17 or are smaller plants in the poorest countries (less than 300 MW for subcritical and less than 500 MW for supercritical). The Common Approaches, as presently constituted, are widely recognized as inadequate to the task of decarbonizing ECAs.18 In fact, an ongoing review should have been concluded in 2020 but that is now scheduled for summer 2021. Many OECD ECAs structure their support (i.e. by use of foreign investment loans, or development finance products) to avoid coming within the scope of the Common Approaches. Moreover, the share of Arrangement activity by Participants to the OECD Arrangement was in 1999 at approximately 100%—it now stands at 36%.19 Its importance has diminished as non-OECD ECA finance (principally from China) has increased exponentially. Japan and South Korea are Asia’s only members, and so the only two Asian jurisdictions subject to the OECD’s treaty regime. Note that China’s official export and trade-related support in 2018 totaled $64.2 billion,20 yet it is entirely unencumbered by the Arrangement. This regulatory regime has no application beyond the velvet rope of the OECD.

“Arrangement on Officially Supported Export Credits,” Arrangement and Sector Understandings, OECD, accessed 8 June 2020, http://www.oecd.org/tad/xcred/theexportcreditsarrangementtext. htm. 16 “Environmental and social due diligence,” Environmental and social due diligence, OECD, accessed 8 June 2020, http://www.oecd.org/trade/topics/export-credits/environmental-and-socialdue-diligence/. 17 That is, a marginally more efficient type of boiler used in thermal power production. 18 Tucker et al., “Still Digging.” 19 Report to the US Congress on Global Export Credit Competition, Export-Import Bank of the United States, June 2019, 31, https://www.exim.gov/sites/default/files/reports/competitiveness_ reports/2019/EXIM2019CompetitivenessReport-final.pdf. 20 Report to the US Congress, EIB US, 16. 15

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6 ECAs and Carbon Accounting How does this engage with the broader climate regime? The climate regime, including the Paris Agreement, seeks to count and then reduce/ratchet down emissions which are measured on a territorial production basis. So, emissions of goods and services which are produced, say in the territory of Italy, count towards Italy’s accounts but those that are imported into Italy do not. The reason for this is the 2006 IPCC guideline on National Inventories which includes GHG emissions and removals taking place within the national territory and offshore areas over which the country has jurisdiction.21 What does this mean for the purposes of ECAs? Firstly, ECA financing is typically highly carbon-intensive. A recent report on the UK ECA UKEF found that well over 90% of ECA financing fell into the highlight carbon-intensive category, such as coal-fired powerplants, up- and down-stream oil and gas activities, refineries, the financing of airports or aircrafts or cruise ships. All of these are highly intensive carbon activities which fall outside of any idea of Paris alignment. The second issue is that ECA projects generate emissions in host countries, not in the home countries. Financing an activity that takes place not in Italy or the UK, but somewhere else, means those emissions are counted there, so they do not count towards Italian or UK emissions under the international climate regime.

7 ECA Regional Divergences—How Do ECAs Operate Globally? The ECAs of China, Japan, and South Korea remain the largest source of public finance for coal-fired power plants overseas; they account for almost 82% of coal pipeline finance outside China and India since 2013. They have plans to support approximately thirty-five additional coal plants predominately across South and South East Asia. In particular in Indonesia, Vietnam, and Laos, we can observe a very significant ECA-financed coal-buildout. This build-out is mainly financed by KEXIM, the South Korean ECA, and JBIC, and Nexi from Japan. How are they able to continue the financing of coal when South Korea and Japan when they are both OECD jurisdictions and ratified the Coal-Fired Sectoral Understanding (CFSU)? They have been particularly adept in interpreting the loose language of the CFSU to their best advantage, permitting large-scale financing of new CFPP in Asia.22 For example, excluded CFPP can be justified on the grounds of grandfathering, or prior EIAs, or the non-prescription of finance for coal mining, transportation, and other coal infrastructure. Above all, the CFSU fails to cohere

21 22

UNFCCC, Articles 1(4) and (9), 4(1) and 4(2). Tucker et al., “Still Digging.”

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with the above stated character of the Paris Agreement. No fossil fuel financing can, in 2021, satisfy the ‘do no harm’ test. For these reasons, the CFSU was due to be revised by June 2020. The goal of the revision was to strengthen its contribution to the “common goal of addressing climate change and to continue phasing down official support for coal-fired power plants.”23 As mentioned above, the revision process, set to end in June 2020, has still not been concluded. From a European perspective, the best that can be said is that performance has not been terrible. If we apply a leader/laggard lens, the East Asian ECAs are very clearly appalling laggards. However, the European ECAs have very little to be proud of. None of them have committed to 1.5 degrees Paris Alignment. Some ECAs are in the process of phasing out coal and others have ceased to finance any coal. Denmark, the United Kingdom, Sweden, and the Netherlands have all either already phased-out coal or have pledged to do so. At the Climate Ambition Summit leading up to COP 26 at the end of 2020, the United Kingdom announced that its ECA UKEF will end all fossil fuel support overseas.24 French and Dutch officials tell us that they are watching this development very closely, so it will be interesting to observe if the UK announcement will produce a domino effect. Nonetheless, oil and fossil gas generally have continued support and minimal commitments for low-carbon technology exist. As described in other papers in this collection, the promotion of low-carbon technologies requires a range of activities which in turn require enormous financing. ECAs are not committing to such financing, and merely exiting from the fossil fuel economy will not deliver a Paris aligned future. That is as true for ECA as for all economies and industries globally. Transformation in this sense means large-scale, systemic and structural changes. There is a need for genuinely transformative pathways to dramatic decarbonisation through innovation, development and resilience, which alter the basis of existing technologies, infrastructure, supply chains and more. It is clear that the depth and range of this transformation is only slowly being realized. For the purposes of ECA, the exit from fossil fuel finance creates obvious incentives to engage more directly with the renewables sector. As was noted in the EAC Inquiry, only a tiny percentage of UKEF finance goes to this sector, although this is changing.25 There are also proximate models—the Danish ECA, EKF, has a c70% portfolio weighting in wind energy. But renewables alone do not suffice.

23

Arrangement on Officially Supported Export Credits, Trade and Agriculture Directorate/Participants to the Arrangement on Officially Supported Export Credits, OECD, 15 January 2020, 111, http://oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=tad/pg (2020)1. 24 https://www.gov.uk/government/news/pm-announces-the-uk-will-end-support-for-fossil-fuelsector-overseas. 25 https://www.gov.uk/government/news/230-million-in-ukef-support-for-offshore-wind-farm-intaiwan.

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8 Climate Litigation, Campaigning, and Interventions Within environmental law scholarship and beyond, climate litigation is currently an enormous obsession. Every environmental and energy law journal has a great deal to say on this topic. One thing that is very noticeable and obvious about the climate campaigners who work on ECAs, is that they are highly transnational, they exist all over the world, and they are very well networked. Lawyers, scientists, analysts, and communications experts work intimately together and they have had enormous success. The new lending policy of the European Investment Bank’s (EIB), which was concluded 14 months ago, not only excludes coal but also gas. This can be seen very substantially as a function of this community and its activism. The scope of the EIB’s commitment is enormous. It is the single-largest PFI commitment since the Paris Agreement. Bear in mind that this policy was not adopted because they wanted to do it. They were compelled by an extremely effective campaign which was led in the first instance by Oil Change International and E3G. They were the two NGOs/CSOs that developed the technical argument as to why Paris Alignment was impossible under the EIB’s proposed lending policy on gas. This was then picked up by ClientEarth. So, this is not an example of the EIB being a benevolent actor. They were compelled to do it or they would have been taken to court where they almost certainly would have lost. KEPCO’s Covid-19 driven attempt to bail out Doosan Power in South Korea, the original equipment manufacturer which supplies coal infrastructure across the region, has also been challenged by similar processes. In the context of Covid-19 and ECA high-carbon investments a challenge has arisen in South Korea in relation to its leading OEM, Doosan Heavy Industries.26 On 26 March 2020, Korea Development Bank and Export-Import Bank of Korea (the Korean ECA) loaned KRW 1 trillion (c. USD 850 million) to Doosan Heavy Industries. Doosan has long faced serious financial challenges,27 and its serial engagement in coal fired power plant construction in Indonesia28 and Vietnam especially is interpreted as an effort to soak up its excess capacity. As a major beneficiary of the Korean post-Covid stimulus package, the loan has been characterised as inconsistent with the Korean state’s domestic and international climate obligations, and a “waste of valuable taxpayer money on an industry that is in obvious and irreversible decline.”29 Litigation efforts have been spearheaded by the NGO Solutions For Our Climate which has led a series of cases against the South Korean export credit agency supported coal

Basten Gokkon, “Green Groups”. Hyun-bin Kim, “Doosan Heavy Struggling to Stay Afloat,” The Korea Times, 15 March 2020, http://www.koreatimes.co.kr/www/nation/2020/03/515_286212.html. 28 i.e. Jawa 9 and 10 CFPP on the island of Java. 29 See letter of 8 April 2020 from a coalition of leading ENGOs to the Korean Government: Friends of the Earth et al., “Re: Concerns about Doosan Heavy Bailout,” https://drive.google.com/file/d/1 X5CiWkH3ZXuL8HgVGWDTdw-j9RPXH_Gy/view. 26 27

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developments in the region.30 These actions are being undertaken for a variety of reasons—to raise scrutiny within the organisations, to engage with board of directors of utilities and highlight shareholder liabilities, to demonstrate shareholder opinions by making stranded asset based complaints against boards,31 and to seek audit requests from the Government Audit Office.32 Outcomes have been significant, contributing to delays of six months (at the time of writing) to the Jawa 9, 10 project; Korea Electric Power Corporation has been unable to submit an investment decision to its board owing to the stranding risks which have been brought to the board’s attention.

9 Conclusions There is a need for genuinely transformative pathways to dramatically decarbonise through innovation, development and resilience, which alter the basis of existing technologies, infrastructure, supply chains and more. Avoiding 2C warming requires more than well-functioning markets and duly ‘nudged’ consumers. It is important to note that the extraterritorial impact of ECA financing, which is a function of the method of accounting within the climate regime, means that a purely regional approach to looking at the energy transition cannot provide the entire picture. There is a great deal that goes on within Europe in terms of the energy transition which has enormous consequences elsewhere. Typically, in the case of ECAs, consequences which undermine domestic action. We hear a great deal about the European Green Deal and activities which are taking place under that but they are undermined enormously by European ECAs financing high-carbon activities elsewhere. There is a clear case of remarkable policy misalignment. In terms of performance, the East Asian ECAs are the worst laggards and the European ECAs are generally weak although there are some flickers of hope. Generally, the larger the ECA the worse they are and SACE is certainly one of the worst. Legal climate interventions in these contexts which are seen as a driver of the energy transition are deeply transnational. Using climate litigation, they seek to drive the energy transition forward to force and compel governments and commercial actors in particular investment funds to transition to a low-carbon future which is Paris aligned. These are not British, Italian, or Australian NGOs sitting in London, Milan, or Sydney and gloriously unaware of each other’s presence. They work very 30 “For Our Climate – Highlight the Solutions,” Solutions for Our Climate, accessed 8 June 2020, http://www.forourclimate.org/. 31 Solutions for Our Climate, “Indonesians file petition against Korea’s public banks to block coal power project,” Eco-business, 3 September 2019, https://www.eco-business.com/press-releases/ indonesians-file-petition-against-koreas-public-banks-to-block-coal-power-project/. 32 Park Ki-Yong, “Supporting coal power generation Doosan Heavy Industries & Construction with public financing 2.4 trillion,” 06 May 2020, http://www.hani.co.kr/arti/society/environment/94380 9.html.

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closely together and their activities are deeply networked. Similarly, in East Asian jurisdictions, by which I mean South Korea, Japan, China, and Taiwan, states have their own history of conflicts and tensions, but also cooperation. A lot of cooperation is highly nuanced. For example, in the past months, they have all made net-zero commitments: China by 2060, the other two by 2050. I am deeply sceptical of all net-zero commitments, whoever makes them. I think they amount to very little and part of why is the extraterritorial issue that I alluded to above. If you can displace your emissions somewhere else, then you will do so. The UK has met all of its carbon emissions reduction targets with ease because of its ability to displace its emissions. These are not particularly demanding standards; these are not efforts which meet the requirements of the science. They might meet the requirements of the law, but science has a different standard.

References Cochrane I, Pauthier A (2019) A framework for alignment with the Paris Agreement: why, what and how for financial institutions? Institute for Climate Economics IPCC (2014) Climate Change 2014: impacts, adaptation, and vulnerability. Cambridge University Press, pp 1327–1370

Navraj Singh Ghaleigh Edinburgh Law School. Previously a barrister in London and Lecturer at King’s College London, I undertook my graduate work at the University of Cambridge, the European University Institute (Florence) and the University of California, Berkeley (Fulbright Scholar). Director Global Environment and Climate Change graduate LLM programme. Chair of Climate Strategies, a global network of climate researchers with offices in London and The Hague. [email protected]. Thanks to Chiara Arena for her invaluable assistance in preparing this text.

From Coal to Climate Change: An Australian Perspective on the Energy Transition Tina Soliman Hunter and Madeline Taylor

Abstract Australia is experiencing an unprecedented energy transition. As a fossil fuel exporting nation, transitioning to renewable energy, battery storage, and other low-carbon technologies is a crucial and complex endeavour in policymaking. Creating a resilient, effective, and sustainable National Electricity Market in Australia requires a major system restructure including comprehensive coordination of renewable energy and storage hubs coupled with decentralised transmission infrastructure. This chapter provides an analysis of the new horizons in energy for Australia. Following a survey of past energy policies until 2019, the chapter focuses on the shift in energy policy and provision from 2020. It argues Australia must craft a sustainable energy policy stance that embraces the need for diversified renewable energy and storage sources to ensure its future as a global renewable energy exporter. In doing so, it discusses three primary issues: the development of renewable energy sources, the need for and role of concomitant energy storage, and the place of hydrogen in Australia’s energy mix.

1 Introduction Since its inception as a fledgling prison colony, Australia’s fortunes have always been tied to primary resources. From the early colonial years, agricultural products in particular wool wheat, and meet, were the export commodities of choice. This reliance on agricultural commodities continued well into the twentieth century and was indeed instrumental in the federation of Australia. Although agricultural commodities continue to comprise an important component of Australia’s economy, since the second half of the twentieth century bulk commodities such as coal, iron ore, bauxite and gold have become paramount as the wealth upon which Australia has prospered. Of these bulk commodities perhaps the most critical has been coal. Although coal has been mined in Australia for well over a century, its export as both T. Soliman Hunter (✉) · M. Taylor Macquarie Law School, Sydney, NSW, Australia e-mail: [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_15

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thermal and coking coal in the last three decades has led to its position as the largest global exporter of metallurgical coal.1 According to Geoscience Australia, Australia holds the fourth largest global reserves of black coal and is the fourth largest producer of black coal.2 Understanding its historical context and economic importance, coal has been monumental in Australia’s economic development and important in its political standing, particularly within the Asia-Pacific region. Therefore, it is not surprising that Australia has had difficulties in transitioning from coal as both an energy source and as a commodity for export and wealth. Such an attraction to, and dependence on, coal was exhibited by Australia’s Prime Minister in 2017 when he brought a large chunk of black coal to the House of Representatives, declaring, ‘don’t be afraid, don’t be scared, it won’t hurt you, it’s coal’,3 in an attempt to ridicule the federal opposition’s commitment to renewable energy. Given Australia’s status as a coal-rich nation, where wealth and fortune have, to a large extent been dependent on the mining and export of coal, the last two decades has seen Australia reluctantly embrace other forms of energy, particularly renewable energy as part of its national energy mix. However, a series of events, including the catastrophic power failure in the state of South Australia in 2016 and resultant critical assessment of the National Electricity Market (NEM), the imminent retirement of most of Australia’s east coast coal-fired power stations, a critical shortage of gas in the east coast gas market, the devastating bushfires of 2019, and the impact of COVID-19 on Australia since early 2020 have all wrought changes in the perception of energy provision, and particularly renewable energy in Australia. These changes have seen a large-scale retreat from coal as the main energy source, an emphasis on renewable energy and concomitant energy storage, the redesign of the NEM, and the embracing of blue and green hydrogen as the future of energy in Australia. This chapter provides an analysis of the new horizons in energy in Australia. After a consideration of past energy policies until 2019, this paper focuses on the shift in energy policy and provision from 2020. In doing so, it focuses on three primary issues: the development of renewable energy sources, the need for and role of concomitant energy storage, and the place of hydrogen in Australia’s energy mix.

1

Australia is the largest metallurgical coal exporter, representing 52% of the global market in 2019 according to the IEA. International Energy Agency, Coal 2020 (2020) https://iea.blob.core.windows.net/assets/00abf3d2-4599-4353-977c-8f80e9085420/Coal_2020.pdf accessed 20 August 2022. 2 Geoscience Australia, Australia’s Identified Mineral Resources 2018 (2018), 23. 3 The Guardian, Scott Morrison brings a chunk of coal into parliament (2017) accessed 12 February 2021.

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2 An Inglorious Past: Energy Policy to 2019 Until recently, Australia has never really been convinced by the value and role of renewable energy. This is perhaps attributable to the vast expanse of the country, stretching over 3500 km north to south, and over 4000 km east to west. Australia is so vast that its NEM encompasses less than one third of the land mass, catering to the energy needs of the populous eastern and southern coastal areas, comprising Queensland, New South Wales (NSW), Victoria, Tasmania, and South Australia. Western Australia and the Northern Territory each have their own energy market and regulation. The focus of this chapter is the NEM, as well as federal energy policy. In 2001, a renewable energy target (RET) of 9500 GWh of generated electricity was established by the Australian Government, which sought to provide two per cent of Australia’s energy mix from renewables.4 In 2009, the RET was expanded to 41,000 gigawatt hours (‘GWh’).5 In 2011, the RET was further refined and split into large-scale and small-scale RET to incentivise both large-scale projects such as solar farms, wind farms, and hydro projects to deliver the bulk of the target, as well as small-scale targets to incentivise solar panels, heat source pumps and solar heaters on a micro level.6 However, in 2015 the federal Australian government reduced the RET to 33,000 GWh in response to the Warburton Review7 and the Climate Change Authority RET Review.8 Both reviews sought to decrease the RET, with then Prime Minister Tony Abbott believing that RET was ‘causing pretty significant price pressure in the system.’9 Under the Abbott government, the focus on RET waned, with Abbott reiterating that ‘our focus will always be how do we keep power prices down and how do we protect jobs. That’s got to be the focus – keeping power prices down and protecting jobs.’10 The 2014 RET Review11 also concluded that ‘whilst the RET arrangements are not perfect, they are effective in reducing emissions at reasonable cost in the centrally important electricity sector and are the only current

4

Australian Government Clean Energy Regulator, Renewable Energy Target: History of the Scheme (2016) accessed 26 May 2021. 5 Ibid. 6 Ibid. 7 Australian Government, Warburton Review (2014) accessed 12 July 2020. 8 Valentine (2020), p. 3668; Kent and Mercer (2006), p. 1046. 9 Anthony Abbot, Joint Press Conference, Canberra – Transcript, 18 December 2013 (2013) accessed 27 August 2022. 10 Ibid. 11 The second Renewable Energy Target review by the Australian Climate Authority, which was released on 22 December 2014.

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prospective policy instrument in the electricity supply that can be relied on to deliver sizeable volumes of emissions reductions.’12 The role of renewable energy input in the NEM has seen policy debates focus on the reliability, stability and capacity of the NEM. Such criticisms were realised in 2016 when a perfect storm of events coalesced, causing a cascading state-wide failure in South Australia,13 resulting in power outages of between four and twenty-four hours, depending on the location (‘The SA Black System event’) across the state.14 The event was originally blamed wholly on the role and impact of wind energy.15 Although the presence of wind energy contributed, ultimately the SA Black System event exposed flaws in the NEM, particularly in relation to storm damage to transmission infrastructure and grid stability, as three major 275 kV transmission lines were severely damaged due to storm activity.16 In addition, it also demonstrated the weakness of the existing System Start Ancillary Service (‘SSAS’), designed to restart the network in such a scenario. Both diesel generators

Australian Government Climate Change Authority, 2014 Renewable Energy Targets, accessed 27 August 2022. 13 Australian Energy Market Operator, Final Report SA Black System 28 September 2016 (2017) accessed 26 August 2022, 23–30. 14 Australian Energy Market Operator, Final Report SA Black System 28 September 2016 (2017) accessed 26 August 2022, 32–66. 15 In particular, the reduction in power as a protection feature was activated in the existing wind farms, causing a significant output in wind energy, this required a significant import of power across the Heywood Interconnector, ultimately reaching a level which activated a special protector and tripped the interconnector, causing it to go offline. Australian Energy Market Operator, Final Report SA Black System 28 September 2016 (2017) accessed 26 August 2022, 6. Since this time, the Australian Energy Regulator has taken legal action against AGL, Neoem, Pacific Hydro and Tilt Renewables, alleging that the companies failed to comply with performance requirements that require them to weather major disruptions and disturbances, thereby breaching the National electricity Rules. See Daniel Keane, ‘Energy Regulator launches legal action against wind farm operators over SA statewide blackout’ ABC News Online 7 August 2019 accessed 22 August 2022. 16 Australian Energy Regulator, The Black System Event Compliance Report (2018) accessed 12 April 2022. 12

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contracted by the Australian Energy Market Operator (AEMO) to restart in such a situation failed and were unable to restart the system.17 Although the events of the SA Black System event demonstrated weaknesses in the NEM infrastructure, grid capability and capacity, It also demonstrated the unreliability and intermittency of renewable energy in the system and the need for battery backup to create sustainable inertia, rather than reliance on a system restart. The resultant Australian Energy Market Operator (AEMO) report concluded that the wind turbines themselves successfully rode through the grid disturbances, and rather it was the control setting on the turbines responding to multiple disturbances, not the turbines themselves, that led to the Black System. Although little comfort to South Australia at the time, this finding exonerated the wind turbines, with the focus on NEM control systems. The SA Black System event also demonstrated the challenges in the shift in energy supply from traditional to renewable energy sources, and the need for fundamental transformation of the NEM network to minimise the variability and volatility of renewable energy.18 Part of that response and transformation of the NEM centres on the need for energy storage. With two forms of storage identified being shallow storage (1–2 h) in the development of the Hornsdale Power Reserve (HPR, or often known as SA’s ‘Big Battery’) and investment in developing deep storage (24–48 h) through pumped hydro energy storage (‘PHES’) on the east coast. Although the NEM reached its federal large-scale Renewable Energy Target of commissioning 33,000 GWh of renewable energy by September 2019, the issue of energy storage capacity was not addressed. This lack of a coordinated energy storage policy to support the uptake of renewable energy, and firm capacity to respond to peak electricity demand has compromised the resilience of the NEM. Indeed, Queensland experienced a significant power system event partially due to a lack of lack of battery storage in May 2021, as a fire at the 1.5 GW Callide C coal-fired power plant tripped multiple transmissions lines across the state due to a lack of grid stability. Since battery storage targets remained (and continues to remain) elusive at the federal level,19 AEMO has alternatively permitted mandatory ‘load shedding’ of PV solar energy to balance electricity supply and demand in South Australia, where rooftop solar represents 10% of generation.20 Such AEMO-instructed load shedding 17

Australian Energy Market Operator, Final Report SA Black System 28 September 2016 (2017) accessed 26 August 2022, 78–80. 18 Keck et al. (2019), p. 647. 19 Indeed, the Australian Energy Regulator is currently pursuing the operators of the wind farms associated in the Black System effect for allegedly breaching the National Electricity Rules. The court operators are AGL Energy, Neoen SA, Pacific Hydro Pty Ltd and Tilt Renewables Limited. See Australian Energy Regulator, South Australian wind farms in court over compliance issues during 2016 black out (2019) accessed 12 August 2022. 20 AEMO, South Australian Electricity Report (2019) accessed 10 August 2022.

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to increase grid security occurred twice in 2019 alone—shedding 75 MW and 100 MW in Victoria.21

3 The Shift—COVID-19, Climate Change and Consumer Sentiment A change in Prime Minister in 2017 started the liberal-coalition contemplation of the role and importance of RET in the Australian energy mix. Although the Morrison government famously declared its support for coal in 2017 with its antics in the House of Representatives, in 2019 the newly re-elected Prime Minister Scott Morrison announced investment in new and emerging technologies, declaring support for the next generation of renewable energy technologies whilst at the same time creating jobs, improving reliability and reduce emission.22 In announcing this bold shift, Morrison noted that ‘Australia is in the midst of a world-leading boom in renewable energy with over $30billion invested since 2017.’23 Furthermore, he set out the path for the development of a rapid shift in Australia’s energy policy in the coming years, noting that: the government will now focus its efforts on the next challenge: unlocking new technologies across the economy to help drive down costs, create jobs and reduce emissions. This will support our traditional industries – manufacturing, agriculture, transport, - while positioning our economy for the future.24

Effectively, the Morrison government signalled a shift from coal-fired generation to that of renewable and ‘clean’ energy, such as unconventional gas. In September 2020, the Australian federal government prioritised energy technologies within its Energy Technology Roadmap to transition to a low-carbon energy system.25 While the Technology Investment Roadmap does not represent a federal energy policy stance per se, nor does it set a net zero emissions by 2050 or energy storage target, it represents the first coordinated, whole-of-government

Australian Energy Regulator, State of the Energy Market (2020) accessed 13 August 2020, 12. 22 Scott Morrison, Media Release: Scott Morrison, Prime Minister and Minister for Energy and Emissions Reduction 17 August 2022 accessed 22 August 2022. 23 Ibid. 24 Ibid. 25 Australian Government, Technology Investment Roadmap Discussion Paper (2020) accessed 1 June 2020. 21

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approach to energy reform, including longer-duration medium energy storage. The Technology Investment Roadmap prioritises low-cost medium energy storage solutions, (six to eight hours storage capacity), coupled with the goal of energy storage dispatched at less than $100/MWh.26 Given that Australia is endowed with some of the world’s best renewable resources,27 increased levels of wind, hydro and solar electricity generation have been incorporated into the NEM, currently at 23.1%.28 However, flexible and reliable energy storage systems, which are an essential component in the integration of renewable energy into the energy market to attenuate fluctuations in inertia did not develop concomitantly. Indeed, the existing NEM was developed in the 1990s on the assumption of coal-fired generation, which inherently provide two benefits— stabilisation and modulation of NEM frequency, and energy storage. Therefore, the NEM dispatch process was based upon a single-price reverse auction method in which generators bid into the electricity spot market to match electricity supply with operational demand.29 The input of renewable energy into the NEM has meant there is somewhat less stability in the system, given the fluctuating nature of power generation. This is problematic since renewable energy without storage to provide inertia and system strength creates ‘erratic frequency shifts (and) voltage instability.’30 This, in turn, creates rising costs of procurement and system stability risks as renewable energy must ‘load shed’ during periods of high wind and sunshine exposure.31 As the SA Black System demonstrated, the NEM requires additional energy storage to augment the rapid increase of renewable energy generation within the NEM. Net zero emissions targets by 2050 and increasing renewable energy and battery targets of states and territories are important drivers in Australia’s transition to net-zero renewable energy. This need to transition to clean energy whilst at the same time ensuring grid stability in the wake of the SA Black System was considered

Australian Government, First Low Emissions Technology Statement (2020) accessed 23 August 2022. 27 Including the highest levels of solar radiation per square metre (1.6 MWh per m2 per annum). Blakers et al. (2017), p. 471, and one third of the nation is characterised by energy generating winds Geoscience Australia, Wind Energy (2015) accessed 12 September 2. 28 Australian Energy Regulator, Generation capacity and output by fuel source – NEM (2020) accessed 2 August 2022. 29 Soliman Hunter and Taylor (2020). 30 Australian Energy Regulator, State of the Energy Market (2020) accessed 2 August 2022, 11. 31 Australian Energy Market Operator, AEMO Observations: Operational and Market Challenges to Reliability and Security in the NEM (2018) accessed 12 August 2020. 26

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in depth by the 2017 Independent Review into the Future Security of the National Electricity Market (‘the Finkel Review’), which provides a blueprint for the security and reliability of the NEM. It sets out fifty recommendations to attain increased security and future reliability against the backdrop of an ‘orderly transition’ to renewable generation by prioritising ‘low emissions and affordable supply. . . delivered through a power system that is secure and reliable’.32 The existing NEM regulatory framework, policies and infrastructure were designed on the basis of controllable, constant, coal-fired generation. However, as these facilities are decommissioned, they will be replaced with variable renewable electricity (‘VRE’) generation which have variations in frequency, as well as intermittency. In general, the NEM operates on a frequency of around 50 Hertz (‘Hz’),33 however variations in generation from renewable sources can fluctuate widely around such Hz. Therefore, there is a need for new planning with regards to regulations and policies to create a ‘smart’, digitally communicating resilient electricity network that caters for variations in volume and frequency being feed into the system and the ability for prosumers to produce renewable energy, often by harnessing household solar photo voltaic systems.34 At present, there is much discussion in Australia regarding such changes, and whether a market-led or state interventionist approach is most appropriate for the redeveloping the NEM, establishing what is touted as ‘NEM 2.0’.35 Market-led policy encourages market efficiency, underscored by non-interventionalist policies shaped and led by private energy actors. This leads to a relationship of ‘shared responsibility between government, market institutions and energy business’36 whereby energy policy is set on the basis of market-based technological trends in response to industry-based solutions. The National Electricity Objective (NEO), as regulated and drafted by AMEC, enshrines this investment-centred market-based approach ‘to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity’.37 In line with the NEO, the federal government has created an investment aspiration of electricity from storage for firming reaching $100 per MWh,38 rather than a capacity-based energy storage target within its Technology Investment Roadmap. A government-led market response to the transition from hydrocarbons to 32 Alan Finkel, Independent Review into the Future Security of the National Electricity Market (2017) accessed 20 August 2020, 5. 33 Boston, Andy, Geoff Bongers and Steph Byrom, Snowy 2.0 and Beyond: The Value of LargeScale Energy Storage (2020) accessed 12 August 2020, 4. 34 Aghaei and Alizadeh (2013), p. 64; Kotilainen (2020). 35 Soliman Hunter and Taylor (2020). 36 Australian Government Department of the Environment and Energy, ‘Energy Security’ (2019) accessed 18 August 2022. 37 National Electricity (South Australia) Act 1996 (SA) s 7. 38 As previously discussed in the introductory section of this paper.

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low-carbon energy will affect electricity costs, grid capacity and constrains, reliability and sustainability, as well as encompassing flexibility in dispatch and pricing in order to address capacity constraint and intermittent supply.39 The development of NEM 2.0 is one of shared responsibility, where both the government and the market have a role, demonstrated by the need for 6–19 GWh of new, large-scale flexible battery energy storage systems in the NEM by 2040, incorporating, incorporating utility-scale PHES and distributed batteries.40 However, the future of renewables is not completely assured. The Morrison Government has touted a ‘Gas-Fired Recovery’ for Australia to ramp up the development of give gas basins, which provide resource royalties for the State, to be used for firming up grid capacity.41 This shift centres on gas-fired power infrastructure to address intermittency, and leading the energy transition, rather than investment in, and use of, energy storage.42 Such a view was supported by the Australian federal government’s decision to pin its energy policy on a Gas-Led COVID-19 economic recovery, comprising gas supply targets, the exploitation of new gas basins, the development of new gas pipelines and in a move not seen for decades, directly intervention in the market with a government-funded 750 MW gas-fired power plant new build in Kurri Kurri.43 Such a gas-led recovery will be firmly market-based with intervention only where the private market will not invest, as confirmed by Angus Taylor Minister for Energy and Emissions Reduction, who articulated that the Australian Government will not rely on ‘mandated targets or subsidies’.44 Thus, energy storage in a renewables-based electricity system under NEM 2.0 presents new and complex energy policy challenges. Australia’s energy transition requires planning and policies to establish and maintain shallow, medium and deep storage options.45 Although the federal government is strongly leading the shift to low carbon energy in electricity generation, and signalled the development of a reformed NEM 2.0, the Energy Technology Roadmap confirms Australia’s marketbased approach to the energy transition, highlighting technologies for private actors to invest in to grow the requisite energy transition. But this will not be easy. Such a shift requires a new approach to the NEM, and an urgent regulatory and policy shift

39

Soliman Hunter and Taylor (2020). AEMO, 2020 Integrated System Plan (2020) accessed 10 August 2022, 12. 41 National Covid-19 Coordination Commission Manufacturing Taskforce, Interim Report – Draft (2020) accessed 24 August 2022; Prime Minister of Australia, GasFired Recovery (2020)

accessed 17 August 2022. 42 Ibid. 43 Ibid. 44 Australian Government, Investment in New Energy Technologies (2020) accessed 18 August 2022. 45 Ibid. 40

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from an energy grid where large traditional generators are supported by transmission and distribution systems, to a focus on integrating energy storage into the NEM to support large-scale battery and hydro storage.

3.1

Energy Storage

The existing NEM is constructed on the basis of constantly available unwavering supply, augmented by rapid generation from hydropower, primarily from the Snowy Mountains Scheme (‘SMS’), to meet high demand. Similarly, infrastructure in the NEM is also established around that scenario, with transmission infrastructure originating from long-established traditional generators, often pre-dating the creation of the NEM. However, this era is rapidly coming to a close. In its place is a new NEM (NEM 2.0) comprising intermittent energy generation from distributed decentralised variable energy renewable sources—the complete opposite to the basis of the existing NEM.46 Such energy generation from VRE not only fundamentally changes the basis of the NEM, but also requires the establishment of energy storage to compensate for times of low energy generation due to lulls in wind or solar activity. Not only is there a need for energy storage, but also for differing types of energy storage. Essentially, there are three types of energy storage: shallow storage, providing enough storage for 1–2 h of generation; medium storage, comprising storage for around 6–8 h of generation; and deep storage, which can provide up to 12 h of generation.47 A reimaging of the NEM requires all three types of storage in order to address the shortfalls of energy generation, generation intermittency, and blackout periods due to low wind or nightfall for solar PV. The re-funding of both the Australian Renewable Energy Agency (‘ARENA’) and the Clean Energy Finance corporation (‘CFC)’ in September 2020, as well as the September 2020 federal government target of $100/kw for 6–8 h battery storage,48 demonstrates the necessity and acceptability of renewable energy and renewable energy targets, as well as the necessity for energy storage.49 The falling cost of batteries has seen a shift from small, household-scale batteries to an increased focus and investment in grid-scale batteries. Batteries are an increasingly important storage technology to reduce pressure on grid infrastructure, provide flexibility and reliabil-

46

Soliman Hunter and Taylor (2021). Koohi-Fayegh and Rosen (2020), p. 1. 48 Australian Government, First Low Emissions Technology Statement (2020) accessed 23 August 2022. 49 Moore and Shabani (2016), p. 674. 47

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ity for variable renewable energy and providing frequency control to maintain electricity supply during a period of fossil-fuel generators being phased out.50 For cost efficiency and, given the vast size of Australia’s wind generating and solar regions, there is a tendency to aggregate generating resources into farms and Renewable Energy Zones, particularly since cost of infrastructure to connect to the NEM is high. Such aggregation leaves these assets vulnerable to transmission interruption, and the NEM susceptible to capacity constraints and unreliability.51 Such unreliability can be addressed through the use of grid-scale utility batteries, with the increased need for grid-scale batteries highlighted by the fact that 63% of Australia’s coal fleet will be retired from the NEM by 2040.52 Consequently, in 2020 AEMO identified the need for an additional 6–19 GW of energy storage capacity to support NEM 2.0 and its transition to a renewable-based energy grid, with 90% renewable energy penetration likely by 2040. The first foray into grid-scale battery storage technology in Australia was the Tesla-led Hornsdale Power Reserve (HPR) in South Australia, initiated after the SA Black System event. The 2017 commissioning of the HPR also represented the first grid-scale battery installed in Australia. As South Australia has interconnection to other states in the NEM via the Heywood and Murray interconnectors, and a high penetration of renewable energy representing 52.1% of its electricity in 2019,53 the state is vulnerable to shortages and outages such as the Black System event of 201654 which highlighted the need for a lithium-ion battery initially with a capacity exceeding 100 MWh storage, and with a focus on increased inertia capacity to the grid.55 The HPR makes a significant contribution to energy and grid stability in the aftermath of the SA Black System event. Furthermore, due to its upgrade to 185 MWh, the HPR supports the South Australian electricity grid by providing frequency modulation, through Frequency Control and Ancillary Services (‘FCAC’), maintaining the NEM at 50 Hz,56 and short-term network security by responding to supply fluctuations through automatic rapid charging and discharging, Climate Council, Fully Charged: Renewables and Storage Powering Australia (2018) accessed 1 August 2020 2. 51 Soliman Hunter and Taylor (2020). 52 AEMO, 2020 Integrated System Plan (2020) accessed 10 August 2022, 12. 53 Clean Energy Council, Clean Energy Australia Report (2019) accessed 25 July 2020, 10. 54 Clean Energy Council, Clean Energy Australia Report (2019) accessed 25 July 2020, 10. 55 Giles Parkinson, Neoen completes expansion of Tesla big battery at Hornsdale (2020) accessed 10 August 2022. 56 Hornsdale Power Reserve, Learn (2020) accessed 10 August 2022. 50

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imitating existing fossil-fuel generators.57 In its first year of operation, the HPR was responsible for 55% of grid frequency control and ancillary services for the SA power grid.58 The AEMO recognises the valuable role of the HPR with its ‘rapid response and capacity for FCAC with accuracy and speed that of a conventional steam turbine.’59 However, what is less clear is whether the HPR will meet power outages greater than one hour, and this is the HPR’s greatest shortcoming. Furthermore, a lack of clear targets to support growth of storage technologies, coupled with the lack of a net zero by 2050 emissions reduction target, has led to uncertainty in battery investment in Australia.60

3.2

Pumped Hydro Energy Storage

Recognising this shortcoming of the HPR, in building NEM 2.0 there is a need for deeper storage to ensure longer stability and reliability in the NEM. Independently, two established hydropower enterprises (Snowy Hydro Ltd (‘SHL’) and Hydro Tasmania have recognised the capacity for extended energy storage capability in the form of pumped hydro energy storage (PHES),61 providing extended energy storage capability. Through the use of a closed system, PHES enables the generation of electricity at peak demand times by releasing water from the upper reservoir through a turbine.62 However, unlike conventional hydropower, rather than the water flowing downstream, it is stored in a lower reservoir until electricity is abundant and cheap. At this time, the water is then pumped to the upper reservoir again, available to generate electricity again in times of high demand.63 This system recovers around 80% of the stored energy.64 Importantly, PHES constitutes 97% of global electricity storage since it is cost effective as well as technologically mature compared to alternative sources, particularly batteries.65

57

Soliman Hunter and Taylor (2020). Lambert, Fred. ‘Tesla’s giant battery in Australia reduced grid service cost by 90% accessed 28 August 2022. 59 See Figure 1 and 2 in AEMO, Initial Operation of the Hornsdale Power Reserve Battery Storage System (2018) accessed 27 August 2022, 6. 60 Soliman Hunter and Taylor (2020). 61 Soliman Hunter and Taylor (2020). 62 Australian Renewable Energy Agency, Hydropower and Pumped Hydro Energy Storage (2019)

accessed 12 August 2022. 63 Ibid. 64 Blakers et al. (2017), pp. 471, 472. 65 Ibid. 58

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Hydro Tasmania sees the value in battery storage of around an hour, recognising that it provides a valued service in the NEM.66 However Hydro Tasmania also recognises that batteries cannot cost-effectively manage all the needs of the NEM,67 particularly during sustained periods of low wind output and no solar generation during the night where there is a need for energy storage of longer duration.68 Therefore, Hydro Tasmania sees the need for both medium (6–8 h) energy storage to manage load uncertainty and supply constraints, and deep storage with sustained capacity (in excess of 12 h) to manage the daily balancing of the solar cycle, large cloud bands interrupting solar reliance and successive days of minimal generation.69 It is recognised that there is a need for both medium storage to address load uncertainty and supply constraint and deep storage for disruptions to natural phenomena. Consequently, the remainder of this section will address medium storage through a consideration of the Snowy 2.0, and deep storage by analysing the proposed ‘Battery of the Nation’ project in Tasmania. To date, Australia has utilised PHES facilities primarily on its east coast, particularly at the Wivenhoe, Kangaroo Valley and Tumut 3 (SMS) hydropower facilities. There are also a number of off-river PHES systems that providing local energy storage, which have been identified by ARENA in their comprehensive report outlining the value of small-scale PHES.70 However, off-river PHES has significant constraints, including small reservoirs, small heads, and therefore less power.71 Yet one advantage of off-river PHES is that of lessened environmental impacts. In addition, off-river PHES has the capacity to provide localised energy storage for small communities in Australia such as those east of Australia’s Spencer Gulf.72 There is the capacity to increase PHES capability in Australia through the expansion of existing resources, as well as development of new PHES on existing hydro assets, yet the attractiveness of such development remains to be seen. Although the Snowy Mountains Hydro Power Scheme (SHS) has a total generation capacity of 5500 MWh,73 this power capacity is primarily utilised is to operate during peak demand working alongside base load generators to bring large amounts

66

Hydro Tasmania, How Battery of the Nation Can contribute to Victoria’s Energy Needs and Objectives (2019) accessed 27 August 2022, 19. 67 Ibid. 68 Ibid. 69 Ibid. 70 Australian Renewable Energy Agency, Hydropower and Pumped Hydro Energy Storage (2019)

accessed 12 August 2022. 71 Blakers et al. (2017), pp. 471, 473. 72 Ibid. 73 SnowyHydro, Snowy 2.0: Project and Business Case Overview (2019) accessed 21 August 2020, 7.

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of generated capacity online during peak demand in as little as five minutes,74 providing essential ‘gap filling’ when wind or solar output is low, or there is a base load generation outage.75 However, as generation capacity in the NEM is increasingly undertaken by VRE, the demands on the Snowy Mountains Scheme are not just for peak demand power but also for longer period energy.76 Should the existing SMS undertake the provision of longer term (6–8 h of energy) to meet demand in times of reduced outage from variable renewable energy, depletion of water resources from dams could result in much higher river flow output, causing disruption in agricultural and other activities inland, particularly in the Menindee Lakes region. Perhaps the greatest value of Snowy 2.0 is the capacity of the dams as an energy storage mechanism. During prolonged wind or solar droughts Snowy 2.0 will be able to deliver up to eight hours of dispatchable energy into the NEM. An analysis of the SMS demonstrates that the SMS’s existing generation capacity can be increased by 2000 MW through the development of PHES capacity.77 It will enable generation for up to 175 h at full capacity without the need for refill. Yet Snowy 2.0 has been critiqued by opponents for its high cost, which is projected to be from $3.8b to $4.5b.78 SHL notes that if it is not built the likely alternative to meet current and future market needs would be gas-fired generation plants paired with commercial scale batteries, which is likely to cost at least twice as much as that of the projected cost of Snowy 2.0.79 Such a shift to gas-fired generation is already evident in the $600 million publicly funded Kurri Kurri gas-fired power plant being operational by 2023. Snowy 2.0 has also been critiqued as not demonstrating the full price of the plan due to the need to build significant new grid infrastructure, in particular transmission lines and transformers. However, construction of any energy storage will entail such auxiliary costs, in order to provide connection to the NEM. Such costs in transmission and infrastructure are also a challenge for VRE facilities, which are often located in rural or remote areas. Therefore, the costing of any energy storage project will comprise not only of the main energy storage project itself, but

74

Ibid. Ibid. 76 Namoi Councils Water Working Group, Submission to the Murray Darling Basin Authority on the Proposed Basin Plan (2012) accessed 12 May 2021. 77 SnowyHydro, Snowy 2.0: Project and Business Case Overview (2019) accessed 21 August 2020, 9. 78 Steven Letts, ‘Snowy 2.0 Cost blows out to $5.1b’ ABC News 9 April 2019 accessed 12 August 2022. 79 SnowyHydro, Snowy 2.0: Project and Business Case Overview (2019) accessed 21 August 2020, 9. 75

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also the auxiliary infrastructure requires, especially transformers, transmission lines and other associated electrical hardware. Other PHES capacity has been identified in Tasmania, although the genesis of the idea arose in response to power outages in the BassLink interconnector between Tasmania and mainland Victoria. The concept of a second interconnector was first touted in 2016 in response to BassLink outages and hydro storage levels in Tasmania.80 A review was commissioned by the Tasmanian and Australian governments, investigating the feasibility of a second interconnector). In his report, Dr John Tamblyn (‘Tamblyn Report’) identified two key sources of benefits from the second Tasmania/mainland interconnector: variable cost savings in the NEM, and increased export of dispatchable renewable energy from Tasmania to Victoria during periods of high demand.81 Tamblyn also outlined a number of other benefits, including reliability support to Victoria during peak demand to Tasmania during periods of drought and low water storage level.82 Most importantly, Tamblyn argued that both states could benefit from an increased resilience to potential failures of BassLink by maintain a connection to the NEM,83 with such a view supported in the aftermath of the SA Black out. Tamblyn’s modelling concluded that a second interconnector would deliver significant economic benefits to the NEM in certain scenarios, although Tamblyn also acknowledged that other scenario modelling demonstrated that potential benefits would be unlikely to exceed the capital and operating costs.84 Tamblyn also concluded that the Tasmanian government should develop a business case for a second interconnector, consulting with Hydro Tasmania and TasNetwork to ensure that significant net market benefits occur under most scenarios should additional interconnection is constructed between South Australia and the Eastern States, and material reduction occurs in Tasmanian electricity demand.85 On the basis of Tamblyn’s conclusions, TasNetwork established Project Marinus, supporting a new Basslink connector, as well as releasing a concept study on Tasmanian PHES and its role in NEM 2.0.86 In this study, 2000 potential pumped hydro options were reduced to a selection of 14 most likely to meet project and sustainable development objectives based on a staged analysis. These 14 selected

80 John Tamblyn, Feasibility of a Second Tasmanian Interconnector (2017) accessed 26 August 2022. 81 Tamblyn, John, Feasibility of a Second Tasmanian Interconnector (2017) accessed 26 August 2022, vii. 82 Ibid. 83 Ibid. 84 Ibid viii. 85 Ibid xvi. 86 Hydro Tasmania, Battery of the Nation -Tasmanian Pumped Hydro in Australia’s Future Electricity Market: Concept Study Knowledge Sharing Report (2018) accessed 12 August 2022.

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options represent 4800 MW of cumulative installed capacity, with up to 1400 MWh of energy storage and commensurate capital cost estimate of $1.1 million per megawatt (m/MW) up to $2.3m/MW of installed capacity.87 A further report released by Hydro Tasmania in August 2019 demonstrated how the BoTN has the potential to contribute to Victoria’s energy needs,88 highlighting that the shift from brown coal to black coal in Victoria has seen a rise in electricity prices,89 affecting the balance of the energy trilemma in that state since affordability has been compromised.90 In addition, the SA Black System event demonstrated reliability in the existing NEM has been compromised. Therefore, there is a need to address these critical issues surrounding energy in Australia.91 Under the concept of the BoTN, HydroTasmania argues increased flexibility in capacity in NEM 2.0 resulting from pumped hydro energy storage combined with existing Tasmanian infrastructure and new developments to utilise Tasmania’s topography,92 delivering high efficiency energy storage which could provide sustained capacity from ‘two hours to two days—complementing the availability of sun and wind.’93 Furthermore, the establishment of the 2000 MW Marinus Link Connector from Tasmania to Victoria would enable Tasmania to provide reliable electricity into the upgraded NEM through a mix of conventional pumped hydro, PHES, and wind generation, a capacity input comparable to that of a small coal fired power station.94 Therefore, the value of the BoTN lies not only on developing existing hydro electricity generation sites for PHES, but also the construction of the Marinus Interconnector. Without the Connector there would be loss of capability to transmit to Victoria, and to feed into the NEM. It is critical to note that although both Snowy 2.0 and the BoTN are large-scale engineering projects and will clearly provide energy storage, they are comparatively small-scale when considered against the amount of energy storage that will be needed when VRE is extensively utilised throughout the NEM.95 Therefore,

87

Hydro Tasmania, Battery of the Nation -Tasmanian Pumped Hydro in Australia’s Future Electricity Market: Concept Study Knowledge Sharing Report (2018) accessed 12 August 2022, 5. 88 Hydro Tasmania, How Battery of the Nation Can contribute to Victoria’s Energy Needs and Objectives (2019) accessed 12 August 2020. 89 Ibid 9. 90 Ibid. 91 Ibid. 92 Ibid 8. 93 Ibid. 94 Ibid. 95 Boston, Andy, Geoff Bongers and Steph Byrom, Snowy 2.0 and Beyond: The Value of LargeScale Energy Storage (2020) accessed 12 August 2020, 3–4.

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although the Snowy 2.0 and BoTN represent valuable forays into energy storage there is a need for greater storage capacity in order for variable renewable energy to dominate in the NEM 2.0.96

3.3

Hydrogen

Hydrogen is seen as a potential solution to Australia’s fuel insecurity and dwindling petroleum supply to improve Australia’s resilience to supply disruption. As Australian petroleum basins continue to decline, questions over the long-term viability of its remaining three refineries continue to surface.97 The Liquid Fuel Security Interim Report98 expressly touts hydrogen as the key fuel to replaced oil-based fuels given the expected global oil demand peak during the 2030s, as well as the fuel of choice to maintain a stable energy supply.99 The Federal government’s 2019 Hydrogen Strategy builds upon CSIRO’s 2018 National Hydrogen Roadmap (‘2018 Hydrogen Roadmap’),100 which in turn builds on the 2008 Hydrogen Technology Roadmap. The 2018 Hydrogen Roadmap represents a blueprint for the development of a hydrogen industry, attracting private and public investment to create an economically viable hydrogen industry and inform the development of a national hydrogen strategy. The subsequent 2019 Hydrogen Strategy represented the first Federal hydrogen policy, which aims to build a clean, innovative, safe and competitive hydrogen industry for the benefit of all Australians, and to become a major exporter and global player by 2030.101 This strategy echoes the 2018 Hydrogen Roadmap’s aim to establish a hydrogen export industry as the impetus for increased renewable energy projects and, in turn, cheaper renewable electricity to drive down the price of hydrogen.102 Since the release of the

96

Soliman Hunter and Taylor (2020). Australian Government, Department of the Environment and Energy, Liquid Fuel Security Review Interim Report (2019) accessed 1 July 2020. 98 Ibid 4. 99 Ibid. 100 CSIRO, National Hydrogen Roadmap (2018) accessed 12 August 2022. 101 COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022, viii. 102 CSIRO, National Hydrogen Roadmap (2018) accessed 10 August 2020, 56. 97

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2019 Hydrogen Strategy, the Federal government, states and territories have established funding to support the development of a hydrogen.103 The 2019 Hydrogen Strategy seeks to establish and grow domestic, commercially viable hydrogen production capacity, with a view to creating cheap hydrogen for transport and electricity generation in areas where renewable energy is not available. Secondly, the Federal government seeks to replace current fossil fuel exports, particularly liquified natural gas, with hydrogen exports, with the aim of increasing Australian GDP to $11 billion per annum by 2050.104 These goals are not unrealistic, as according to the International Energy Agency and the World Energy Council, ‘Australia has the potential to be the world’s largest hydrogen producer’.105 To assist in achieving these goals, six work streams were established, including the Hydrogen in the Gas Networks Stream (‘the Gas Stream’). An initial project under the Gas Stream is the blending of domestic gas to contain up to 10% hydrogen (by volume) in the gas network, both for use in place of natural gas and also to provide at-scale storage for hydrogen.106 This goal of 10% hydrogen blending is in line with IEA recommendations to build on exiting gas infrastructure to ‘springboard’ hydrogen uptake, with blending up to 20% of hydrogen into gas grids requiring little modification to both the grid infrastructure or to appliances utilised by end-users.107 After a review of the modelling and an analysis of the technical risks and barriers regarding 10% hydrogen in the domestic gas network, GPA Engineering Group found that incorporating 10% hydrogen posed ‘no significant impacts or implications on gas quality, safety and risk aspects, materials, network capacity and blending (providing the mixture is homogeneous)’.108

103

The Renewable Hydrogen Deployment Funding rounds; The Advancing Hydrogen Fund; the Tasmanian Renewable Hydrogen Industry Development Funding Program; the Tasmanian Renewable Hydrogen Action Plan; the Queensland Hydrogen Industry Development Fund and the Renewable Hydrogen Fund. IEA, Australia (2020) accessed 14 July 2020. 104 COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022. 105 ARUP, Australian Hydrogen Hub Study: Technical Study (2020) accessed 2 December 2020. 106 GPA Engineering Hydrogen in the Gas Distribution Networks (2019) accessed 14 August 2020, 3. 107 IEA, Hydrogen (2020) accessed 4 August 2022. 108 GPA Engineering Hydrogen in the Gas Distribution Networks (2019) accessed 14 August 2020, 3.

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In 2020 the Australian government has announced a policy aim of creating clean hydrogen at $2 per kg (H2 under $2),109 to facilitate its ambition of becoming a major hydrogen user and exporter by 2030. Indeed, Australia has been labelled a potential ‘renewable hydrogen export champion’,110 being able to take advantage of its renewable energy resources and existing energy infrastructure. As previously noted within this chapter, Australia possesses some of the best and most abundant wind and solar resources in the world. Including 58 million petajoules of solar radiation per annum and average wind speeds above 7.5 m/s in coastal regions.111 Plentiful renewable energy potential, a thriving LNG Export market, and strategic location proximate to Asian energy markets are cited as key comparative advantages for Australia, making it well placed to be a leading hydrogen exporter.112 According to estimates from Geoscience Australia, about 11% of Australia’s landmass (872,000 km2) could be harnessed for renewable hydrogen production.113 Combined with this hydrogen potential is the existing gas production pipeline systems and infrastructure, which could readily be utilised for the production and distribution of hydrogen for domestic markets. To establish itself as a hydrogen powerhouse, national and state hydrogen policies have been developed to establish a commercially viable national and export hydrogen industry, replacing the use and export of coal and LNG. However, the ability for hydrogen to increase energy security, energy storage, energy reliability and effectiveness as a transportation fuel source lacks cost effectiveness at a commercial scale at present, with one kilogram of hydrogen created by grid-connected solar or wind-fed electrolysis currently costing an estimated A$11 to produce,114 not taking into account compression, transportation and storage costs, more than five times the aspirational target of $2/kg, as set by the Federal Government.

109

Australian Government, Technology Investment Roadmap: First Low Emissions Technology Statement – 2020 (2020) accessed 23 October 2020, 6. 110 Pflugmann and De Blasio (2020), p. 25. 111 Australian Government, Geoscience Australia, Wind Energy (2020) accessed 12 July 2020; Australian Government, Geoscience Australia, Solar Energy (2020) accessed 12 July 2020. 112 COAG Energy Council, National Hydrogen Strategy, Hydrogen in the Gas Network (2019) accessed 2 October 2020. 113 COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022, 10. 114 CSIRO, National Hydrogen Roadmap Executive Summary (2018) accessed 10 August 2020, 15.

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Consequently, the SCIRO Hydrogen Roadmap recognises that hydrogen is likely to only become competitive after 2030.115 Although hydrogen has huge benefits, including that of an energy source, a transportation fuel, produce new forms of methanol, as well as ammonia for feedstock in agricultural and industrial applications,116 its production may be carbon intensive, depending on whether it is produced via thermochemical reactions, without carbon capture and storage, or produced via electrolysis powered by renewable energy. To date, Australia’s policy focus has been on integrating hydrogen into existing Australian gas market infrastructure by blending hydrogen into existing gas networks, using hydrogen for long-distance heavy-duty transport, and utilising it for industrial feedstock and heating, as well as its vision to become one of the top three hydrogen exporters.117 Hydrogen also has the potential to replace Australia’s large natural gas and LNG export industry. ACIL Allen forecasts Australia’s hydrogen exports could be a $5.7 billion industry in 2040,118 thereby potentially becoming ‘East Asia region’s largest hydrogen exporting source, exporting 42% of regional supply by 2040’.119 This has led to the federal Australian government policy position of ‘50% of the hydrogen imports for Japan and Korea by 2030’.120 The Australian government has currently opted to not create mandatory national hydrogen targets for specific sectors, nor direct state regulatory intervention, preferring instead a market-based approach in which governance and policy mirrors industry development,121 as well as fostering ‘industry growth and competition, ensure community safety, protect the environment, provide broader benefits to Australians and support ongoing innovation for cost reductions and operational efficiencies’.122 However, given the Australian government intervention into gas policy, such a position may well change. In September 2020 Angus Taylor, the Federal Minister for Energy and Emissions Reduction, announced the federal Australian government’s first Low-Emissions

115

Ibid 25. European Commission, Hydrogen Strategy, 10. 117 COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022, xi. 118 ACIL Allen Consulting for ARENA, Opportunities for Australia from Hydrogen Exports (2018) . 119 COAG Energy Council, National Hydrogen Strategy, Developing a Hydrogen Export Industry (2019) accessed 2 October 2020, 2. 120 Ibid 4. 121 COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022, 33. 122 Ibid. 116

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Technology Statement (LET Statement).123 The LET Statement sets out five key economic stretch goals, which together form the basis of the current Australian emissions reduction policy within the Technology Investment Roadmap.124 These stretch goals include hydrogen at $2/kg, long-duration energy storage under $100 per megawatt hour (MWh), low-emissions steel under $900/tonne and low emissions aluminum under $2700/tonne, carbon capture transport and storage under $20/tonne, and soil carbon sequestration under $3/hectare/year.125 The establishment of a clean hydrogen industry is based on the stretch goal of clean hydrogen at $2 per kilogram (‘H2 under $2’), as set out in the LET Statement, is seen as the economic tipping point for hydrogen production for transportation and ammonia production to be cost-competitive, and for firming renewable energy produce electricity. At present, both ARENA and the CFC are supporting the development of hydrogen energy technologies, with the Australian government providing $1.62 billion for ARENA to invest in this area, along with new technologies for emissions reduction in agriculture, industry and transport. Coupled with this is the announcement of the creation of the Technology Co-investment Fund126 to support Australia’s first regional hydrogen export hub targeting Australia’s neighboring Asian markets. The hydrogen hub is set to be located approximately 220 km east of Port Hedland and 270 km southwest of Broome, in the northwest of Western Australia, on the traditional lands of the Nyangumarta People. Known as the Asian Renewable Energy Hub (AREH),127 it will contain renewable energy of up to 26-gigawatt (GW) wind and solar capacity. Of that capacity, at least 3 GW of generation will be reserved for Pilbara energy users, and the remaining generation (up to 23 GW) will be utilized for the production of green hydrogen and green ammonia.128 The energy generated for the Pilbara region will be utilized for mines and mineral processing, thus contributing to the target of lower emissions mining in Australia. However, the major use of the generated energy is for the production of green hydrogen and ammonia. Initially AREH was proposed for the generation of electricity for export to

Australian Government, First Low Emissions Technology Statement 2020 (2020) accessed 3 October 2020. 124 Ibid. 125 Ibid. 126 Angus Taylor, Keynote address at the Australian Hydrogen Conference (2020) accessed 30 November 2020. 127 A consortium of international energy companies including Intercontinental energy, CWP Energy Asia, Vestas, and Pathway Investments. 128 The Asian Renewable Energy Hub, About the Asian Renewable Energy Hub: Clean Energy for the Pilbara (2020) accessed 2 December 2020. 123

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Asia, however the focus now is on hydrogen and ammonia production.129 To date, the project has received approval from the Western Australian Environmental Protection Agency,130 as well as being granted major project status from the WA government and the Federal government,131 thereby ensuring a single-entry point for all approvals required by both the WA Government and federal government respectively. A number of Australian states and territories have also developed policies for hydrogen on the back of federal support. The Northern Territory’s (NT) Renewable Hydrogen Strategy (‘NT Hydrogen Strategy’) aims to create an international-scale hydrogen hub to replace its current LNG export industry and support downstream manufacturing,132 establishing ‘hydrogen hubs’ to increase supply and demand for hydrogen by establishing area with potential to aggregate the demand for hydrogen’.133 The policy was developed due to unique NT geographical attributes, including, including its high solar radiation 22 to 24 MJ per square metre per annum),134 proximity to Asian export markets, and socio-political factors such as a commitment to net-zero emissions by 2050 and established energy export industry, as key foundations for the establishment of an export-focussed hydrogen industry.135 Its policy includes a domestic-focused policy to replace diesel-power to remote and mining communities with green hydrogen rather than hydrogen from fossil fuels. However, the NT Hydrogen Strategy lacks targeted action to rapidly increase its renewable energy base to serve as feedstock for its renewable hydrogen plan, consistently lagging behind other states in renewable energy penetration, with just 7% of its electricity sourced from renewables. Whilst it touts its ‘abundant renewable

129

Ibid. Western Australia Environmental Protection Agency: Statement that a proposal may be implemented: Asian Renewable Energy Hub (2020) accessed 12 November 2020. 131 Granted October 2020. See Angus Taylor, Media Release: Job-creating energy hub given Major Status backing (2020) . 132 Northern Territory Government, Northern Territory Renewable Hydrogen Strategy (2020) accessed 24 August 2022. 133 COAG Energy Council Hydrogen Working Group, Australian Hydrogen Hubs Study (2019) accessed 10 August 2022, 7. 134 The Territory, Renewable Energy (2020) accessed 2 October 2020. 135 Northern Territory Government, Department of Trade, Business and Innovation, Northern Territory Renewable Hydrogen Strategy (2020) accessed 28 August 2020. 130

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resources’,136 even though it has abundant renewable energy sources.137 One reason for this is the focus of the NT energy economy on gas. For renewable energy-based hydrogen to be cost effective and commercially viable, producers must have access to cheap and reliable renewable energy. In order for the NT Hydrogen Strategy to be effective, at a minimum the proposed Sun Cable project near Tenant Creek, representing 10 GW of solar and 20–30 GWh of storage, must receive final regulatory approval, and a final investment decision made. Only then can the NT rapidly deploy the high volume of renewable energy required to create hydrogen and therefore fulfil its policy.138 The Sun Cable Project, awarded Major Project status by the Federal government in July 2020,139 has lodged a development application for the first phase of a manufacturing assembly hub for solar array in Darwin, and construction is expected to commence in late 2023 with exports to Singapore in 2027.140 Ambitious in its aims, it will be interesting to see whether the Sun. Cable project is indeed developed and constructed as planned or goes the way of the WA AREH. Seeking to produce ‘up to 23 GW of generation for production of green hydrogen and green ammonia’,141 the AREH has altered its plan from exporting electricity to exporting ammonia, with one of the consortia reasoning that this is to ensure that the project proposal will have more options to choose markets and the energy it produces.142 This switch to ammonia as a saleable commodity has two major advantages. Firstly, ammonia serves as a hydrogencarrying energy vector,143 since ammonia can be easily converted to hydrogen which is used for energy generation.144 Secondly, the international transport of ammonia via bulk tanker is much easier and safer than hydrogen, as well as providing both sellers and buyers with unprecedented flexibility depending on market demands and energy needs compared to that of generation of electricity alone. 136

Ibid. Clean Energy Council, Clean Energy Australia Report 2020 (2020) 30 accessed 19 October 2020. 138 Sun Cable, Home (2020) accessed 13 October 2020. 139 Angus Taylor, Media Release: $22B project to power the NT and Singapore given major Status boost accessed 2 December 2020. 140 Rick Hind, ‘World’s largest solar farm’ near tiny NT town could help power Singapore via 4,500km undersea cable’ accessed 14 October 2020. 141 The Asian Renewable Energy Hub, About the Asian Renewable Energy Hub: Clean Energy for the Pilbara (2020) accessed 2 December 2020. 142 Ben Collins and Vanessa Mills, ‘World’s largest renewable energy project proposed for northwest Australia ditches electricity in favour of ammonia exports’ (2020) ABC News 10 November 2020 accessed 4 December 2020. 143 Valera-Medina et al. (2018), p. 64. 144 Ibid 67. 137

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The aim to create nationally consistent hydrogen regulatory framework is in part to facilitate the production, trade and export hydrogen under a coordinated policy, as well as to provide a supportive policy environment for rapid hydrogen commercialisation.145 As hydrogen development grows against a backdrop of increasing urgency to transition to low or zero carbon energy sources, the reform and emergence of effective policies and regulation is fundamental to a successful hydrogen sector. Creating nationally consistent hydrogen regulation among the states and territories is a clear priority identified by the National Hydrogen Strategy.146 This is because the lack of a nationally consistent approach to regulation of hydrogen, demonstrated by the variation in the regulatory frameworks for safety, production, transportation and storage of hydrogen in Australian states and territories is viewed as a barrier to market activation to offset high cost of hydrogen production and infrastructure. In its 2020 Integrated System Plan, AEMO recognises the impact of inconsistent regulation, noting that in order to reduce current high costs and to build the necessary infrastructure, strong policy support is needed, otherwise uncertainties will be created within the market.147

4 Conclusion Australia is a resource and energy rich nation, poised to rapidly transition to an energy mix comprising VRE and energy storage. Creating a resilient, effective, and sustainable NEM 2.0 system requires a major system restructure, coupled with comprehensive coordination of renewable energy and storage hubs and decentralised transmission infrastructure. This chapter has surveyed the Australia’s contemporary energy policy landscape, highlighting the fundamentally market-based lens to resolving energy supply gaps, energy insecurity and distributional challenges. A reframing of energy policy and an urgent ushering in of renewable energy with corresponding energy storage is needed to shape the NEM 2.0. Investment in and implementation of green hydrogen is also needed to urgently replace conventional energy fuel stocks. However, mandatory targets and structured implementation of large-scale renewable energy and storage remains notably elusive. In its place state intervention in energy provision to establish new a new gas-fired power plant, in a stance not seen for more than four decades, has signalled deep decarbonisation in Australia that will continue to lag against comparative energy-exporting nations. Australia should arguably endeavour to craft a sustainable energy policy stance COAG Energy Council, Australia’s National Hydrogen Strategy (2019) accessed 12 August 2022. 146 Ibid xvi. 147 AEMO, 2020 Integrated System Plan 22 accessed 3 August 2022. 145

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which embraces the need for diversified renewable energy and storage sources to ensure its future as a global renewable energy exporter.

References Aghaei J, Alizadeh M-I (2013) Demand response in smart electricity grids equipped with renewable energy sources: a review. Renew Sustain Energy Rev 18:64 Blakers A, Lu B, Stocks M (2017) 100% renewable electricity in Australia. Energy 133 Keck F, Lenzen M, Vassallo A, Li M (2019) The impact of battery energy storage for renewable energy power grids in Australia. Energy 173:647 Kent A, Mercer D (2006) Australia’s mandatory renewable energy target (MRET): an assessment. Energy Policy 34(9):1046 Koohi-Fayegh S, Rosen MA (2020) A review of energy storage types, applications and recent developments. J Energy Storage 27:1 Kotilainen K (2020) Energy prosumers’ role in the sustainable energy system. In: Filho L et al (eds) Encyclopaedia of the UN sustainable development goals: affordable and clean energy. Springer Moore J, Shabani B (2016) A critical study of stationary energy storage policies in Australia in an international context: the role of hydrogen and battery technologies. Energies 9:674 Pflugmann F, De Blasio N (2020) The geopolitics of renewable hydrogen in low-carbon energy markets. Geopolit Hist Int Rel 12(1):9 Soliman Hunter T, Taylor M (2020) The National Electricity Market 2.0: the role of energy storage in managing Australia’s energy trilemma. Oil Gas Energy Law J (Online) 18(6) Soliman Hunter T, Taylor M (2021) The hydrogen hope? Challenges and opportunities for an Australian hydrogen industry. Oil Gas Energy Law J (Online) 19(1) Valentine S (2020) Braking wind in Australia: a critical evaluation of the renewable energy target. Energy Policy 38(7):3668 Valera-Medina A, Xiao H, Owen-Jones M, David W, Brown P (2018) Ammonia for power. Prog Energy Combust Sci 69:63–102

Tina Soliman Hunter is a Professor of Constitutional, Energy, and Natural Resources Law at Macquarie University. She is also the Director of the Centre for Energy and Natural Resources Innovation and Transformation at Macquarie University. Her research interests include hydrocarbon law and regulation, carbon capture and storage, energy security, and the energy transition in resource rich countries. Director, Centre for Energy and Natural Resources Innovation and Transformation and Professor of Energy and Resources Law | Macquarie Law School Professor, Biological Research Institute, Tomsk State University, Russian Federation | Visiting Professor, University of Eastern Finland | Visiting Professor, University of East London. Madeline Taylor is a Senior Lecturer at Macquarie University, Deputy Director of the Centre for Energy and Natural Resources Innovation and Transformation (CENRIT) at Macquarie University, Honorary Associate at the Sydney Environment Institute, and Climate Councillor for the Climate Council. Her research advances a novel examination of transitioning energy regulation and energy policy from a comparative and socio-legal perspective, including the strategic governance of energy and the fragmentation of ownership rights between the state, corporations, and landholders and the protection of sensitive land uses. She has published widely examining issues of energy and natural resources regulation, including her co-authored manuscript, Agricultural Land Use and Natural Gas Extraction Conflicts: A Global Socio-Legal Perspective (Routledge, 2019), examining the socioregulatory dimensions between agricultural and onshore unconventional gas land uses in the jurisdictions with the highest concentration of proven unconventional gas reserves.

A Comparative Analysis of Electricity Access Initiatives in Sub-Saharan Africa Elias Zigah and Anna Creti

Abstract Access to electricity is essential to achieve economic development and improve welfare. Yet, according to the International Energy Agency (IEA 2017), 1.1 billion people in the developing world lack access to electricity. Of these 1.1 billion people, 80% are located in rural areas of Sub-Saharan Africa (SSA). Given the poor state of electricity access in SSA, this paper conducts a comparative case study of electrification policies implemented by eight SSA countries to expand electricity access. Our goal is to benchmark best practices that have delivered results in the individual countries to inform policy recommendations. We observe the following. First, coordinating electrification programmes into a centralised planning process, adopting decentralised electrification approaches such as mini-grids and off-grid and using a geospatial information system to inform rural electrification planning and investment decisions were among some of the policies Kenya and Tanzania implemented to significantly increase their electricity access rates in less than a decade. Second, we also observed that designing and implementing specific regulatory policies and financial support schemes for the mini-grid industry facilitate private sector participation in rural electrification programmes. However, we noticed that the inability of rural households to pay for the cost of power consumed is a significant barrier to the private sector-led mini-grid electrification programmes.

1 Introduction Attaining universal access to electricity is essential for achieving the United Nation’s sustainable development goals, especially for improving livelihood, gender and education. Some studies associate increase in electricity access with socio-economic development, higher youth literacy rates and improvements in health facilities (Cook E. Zigah (✉) Florence School of Regulation, EUI, Florence, Italy A. Creti Paris Dauphine University, PLS, Paris, France e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_16

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2011; Kanagawa and Nakata 2008). Also, Dinkelman (2011) finds improvements in employment opportunities with an increase in electricity access. Despite the importance of electrification on socio-economic development, there are about 840 million people in the world who still lack access to electricity, and more than half of them are in Sub-Saharan Africa (SSA) (IEA et al. 2019). Compared with other developing countries such as South and Central Asia, SSA has the lowest electrification rate in the world. According to the World Bank’s 2020 household electrification survey 2016 household electrification survey, only 48.4% of the general population in SSA has access to electricity. Access to electricity in SSA is a significant challenge. The electricity infrastructure in the region is underdeveloped, and the supply is unreliable throughout the region. Although there are ongoing interventions by the various governments, with support from multilateral and bilateral donor organizations these efforts are not keeping pace with the region’s rapidly growing population. Hence, the absolute number of people without access to electricity keeps rising, as displayed in Fig. 6 (in Appendix). Based on the International Energy Agency’s (IEA) projection, providing universal electricity access in SSA by 2030 would require a total annual investment amount of $27 billion with 65% focusing on decentralized renewable solutions. However, the current level of commitments and the investments in electrification projects in SSA is less than 50% of the investment required to attain universal access to electricity by 2030. Thus, there is an investment gap of $16 billion per annum (Corfee-Morlot et al. 2019). Therefore, if actions are not taken to address the electrification investment gap in the region, by 2030, a little over 600 million people in Sub-Saharan Africa will still lack access to electricity of which 90% will be rural residents (IEA 2017). Figure 7 (in Appendix) shows the electricity access rates in eight selected countries in SSA. It also demonstrates the high discrepancy between urban and rural electricity access rates in the selected countries. Given the significance of the electrification funding gap in the region, many authors (Eberhard and Shkaratan 2012; Trotter 2019; IEA et al. 2019) have argued for the need of active private sector participation in the delivery of the universal electrification project in the region. However, the organization of the power sector in SSA, regulatory uncertainties and high investment risks in most of the countries continue to act as significant barriers to attracting private sector participation in the electricity sector. Universal electrification programs in SSA has been featured in several academic publications (Bekker et al. 2008; Eberhard and Shkaratan 2012; Eberhard et al. 2016; Dinkelman 2011; Kanagawa and Nakata 2008; Kirubi et al. 2009; Trotter 2016; Trotter et al. 2017; Arowolo et al. 2019). Most of these authors have explored various subjects on the electrification program in SSA, including electrification planning and market reforms. The predominant conclusion from these studies reveals that SSA countries appear not to be implementing the right policy, regulatory framework and investment incentives to attract the participation of the private sector. Nevertheless, a few countries such as Ghana and South Africa have performed remarkably well and are on track to attaining universal access by 2030. Additionally, other countries such as Tanzania, Zambia and Kenya have also performed quite well by more than doubling their electrification rates within a decade. The progress

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achieved in these countries may signal the implementation of a workable electrification policy or initiative that may be worth emulating by other countries. Therefore, there is a need for a comparative case study analysis to assess the electrification policy strategies and the investment incentives implemented by the individual countries in SSA to expand electricity access, especially in rural communities. To the best of our knowledge, there is not much work done in this regard. Therefore, in this study, we attempt to answer the question: What lessons can be learned from the electrification polices and initiatives adopted by individual countries in SSA to scale-up electricity access, especially to rural communities? Our goal is to benchmark best practices that have delivered results in the individual countries to inform policy recommendation. We assess electrification policies and investment incentives implemented by eight SSA countries to expand electricity access, especially to rural communities. We found that coordinating electrification programmes into a centralised planning process and using a geospatial information system to inform rural electrification planning and investment decisions, as demonstrated by both Kenya and Tanzania, has the potential to significantly reduced pre-site preparation costs and redundancies in the electrification programmes. Also, all countries have embraced decentralised approaches such as the use of mini-grids and off-grids as alternative solutions to costly and inefficient grid expansion to extend electricity access to rural communities. However, only a few of them have designed and implemented specific regulatory policies and financial support schemes for the mini-grid industry. Besides, the ability to pay for power consumed by poor rural households and the productive use of power were identified as significant barriers to private sector-led mini-grid systems. Tanzania and Zambia are resolving these challenges by empowering rural community consumers with economic activities and human capital development programmes to enable rural households earn sufficient income to pay for the electricity they consumed. For, these two countries are assisting rural communities with income generating machines or equipment such as cornmill, agricultural irrigation projects, etcetera to ensure productive use of power and also provide the beneficiaries with decent income. The rest of the paper is structured as follows: Sect. 2 presents our methodology and the source of data. Section 3 presents a comparative case study of the sampled countries. Section 4 discusses and compare the performances of the sampled countries and section concludes with some recommendations.

2 Methodology We rely on qualitative research methodological approach using a comparative casestudy to answer the research question. We selected two countries from each sub-region in Sub Saharan Africa. Ghana and Nigeria from West Africa; Kenya and Tanzania from East Africa; Democratic Republic of Congo (DRC) and

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Cameroon from Central Africa; and South Africa and Zambia from Southern Africa. Our motivation for selecting these countries is largely due to the availability of data on the various counties. The framework for our analysis is based on two factors: 1. Electricity access interventions or strategy adopted by the sampled countries and, 2. The barriers to scaling-up electricity access in the respective countries. The following indicators are used to discuss the performances of the sampled countries. Firstly, we use the Electrification Policy and Regulatory Framework Scores which is based on the Policy Dimension for Electricity Access by the Regulatory Indicator for Sustainable Energy (RISE 2018) and the Ease of Doing Business rating by the World Bank. The Policy Dimension for Electricity Access is estimated based on eight policy indicators while the Ease of Doing Business is calculated based on ten regulatory indicators. (RISE 2018). The eight indicators include: 1. 2. 3. 4. 5. 6. 7. 8.

Electrification planning; Scope of electrification planning; Grid electrification framework; Framework for mini-grids; Framework for standalone systems; Consumer affordability; Utility transparency and monitoring; and Utility creditworthiness.

The Ease of Doing Business indicators (World Bank 2019a) are composed by the following aspects: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Starting a Business; Dealing with Construction Permits; Getting Electricity; Registering Property; Getting Credit; Protecting Minority Investors; Paying Taxes; Trading across Borders; Enforcing Contracts; Resolving Insolvency

Secondly, we access the infrastructure investments in the energy sector throughout two decades to understand the commitments of the various countries to expanding electricity access in their respective countries. Thirdly, we estimate the percentage increase in national, urban, and rural electrification rates over one decade to assess how each country has performed relative to the regional performance in recent years.

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Data Sources

More than half of the data points used (electricity access rates, infrastructure investments, microeconomic and macroeconomic indicators, electricity consumption rates and poverty lifeline) are taken from the World Bank. Other data is obtained from the Climatescope project by Bloomberg New Energy Finance and the UK Department for International Development (DFID). Climatescope is a comprehensive index and reports accessing the environment for low-carbon investments in emerging markets, including Africa. The data on country background and statistics are taken from USAID’s Power Africa Initiative reports. We triangulated most of the data with other sources such as some selected academic literature, yearly reports by multilateral and bilateral development institution, and Government data sources (Central Bank’s monthly and yearly financial reports and Energy legislations).

3 Comparative Case Study Analysis This section discusses the electrification policies and the potential barriers to the universal electrification programmes in the sampled countries heighted on the Africa map below (see Fig. 1).

3.1

Ghana

Ghana is one of the fastest-growing economies in SSA with an estimated population of 29.6 million, 13.3% of which are under the World Bank’s poverty line of $1.90 a day (USAID 2018a). Ghana’s power sector has a total installed generation capacity of 2.4 GW out of which hydroelectric accounts for 1580 MW, thermal generation— 2796 MW and other renewables have a capacity of 22.5 MW. Electricity access rate by population is 83%, 91% urban and 50% rural (USAID 2018a). According to the Africa Development Bank (AfDB), as of 2016, 5.84 million people in Ghana do not have access to electricity, 4.27 million of these people lives in rural communities while the remaining 1.57 million are in the urban communities (AfDB 2016a).

3.1.1

Electricity Access Interventions

Ghana’s electricity access rate of 84.3% has been primarily influenced by the Government’s commitments made under the 1989 national electrification scheme to attain universal electrification by 2020. Under the scheme, an electricity master plan was developed to extend electricity access to all district capitals in the country (Kapika and Eberhard 2013). The policy strategies adopted at the time were as

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Fig. 1 Map of Africa. The case of Cameroon, Democratic Republic of Congo, Ghana, Kenya, Nigeria, Tanzania, South Africa, and Zambia. Source: created from Mapchart.net

follows: 1. To prioritize the delivery of network connection to communities with active commercial market centres, the potential for industrial and tourism activities and historical importance. 2. Establishment of national electrification fund with funding sources from 1% electrification levy on electricity sales, Government’s contribution and funding from international donors. 3. Subsidized connection charges. 3. Self-helped electrification program (SHEP). SHEP is a fast-track network connection program. It was introduced in the early 1990s to incentivize communities to participate in the electrification projects through some communal initiative. To qualify SHEP, a community provide low-voltage poles for local distributions. Also, the community must be within 20 km reach of the national grid. Despite attaining one of the highest electrification rates in SSA, Ghana is unable to achieve its universal electricity access target by 2020. In recent years, the Government has to revise its universal access target to 2025. The Government has also planned to attract investments from the private sector to develop the country’s renewable energy resources to bridge the energy access gap in the country. In this regard, the Government has established the Renewable Energy Act—Act 832 in 2011 to provide both financial incentives and regulatory framework to encourage private sector participation in the development of renewable energy technologies in the country (Irena 2015). Some of the initiatives provided by the Act include Feed-in Tariffs, Renewable Energy Purchase Obligations, Net Metering, Off-grid

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Electrification for Isolated Communities, Research and Development, Renewable Energy Fund, and Renewable Energy Authority. Besides, the Government has also recently launched its renewable energy development master plan 2019–2030 as a strategic policy document to guide the implementation of the overall objective of the Renewable Energy Act. As part of the master plan, the Government aims to increase the proportion of renewable energy in the national energy generation mix from 42.5 MW in 2015 to 1363.63 MW (with grid-connected systems totalling 1094.63 MW) by 2030. Also, the government intends to use renewable energy-based decentralized electrification solutions such as mini-grid and off-grid to provide electricity access to 1000 remote communities by 2030. It will cost the Government an estimated investment amount of $5.6 billion for the full implementation of the REMP by 2030. However, the government intends to attract 80% of the investment amount from the private sector (REMP 2019).

3.1.2

Barriers

The followings are the significant barriers that impede Ghana’s progress to attaining universal access by 2020. Low Private Sector Participation Although the Government has initiated policies aimed at attracting private sector investment in the electricity sector, weak implementation of the investments incentives initiated by the Government is an entry barrier to the private sector participation in the energy sector. For instance, four years after the implementation of the feed-in-tariffs in Ghana, no private sector-led renewable energy projects have benefited from the feed-in-tariff scheme (Pueyo 2018). Besides, the lack of reliable and transparent regulatory precedents to drive competition in the energy sector also disincentivise private investment in the sector. High Network Expansion Cost The high cost of grid expansion is a significant barrier to the universal electrification program in Ghana and most SSA countries (Eberhard and Shkaratan 2012). Most rural settlements in Ghana and other SSA countries are decentralized; therefore, it is more costly to extend national grid connections to disperse communities. In addition, weak coordination and poor planning of electrification programs have led to over-contracting of new plants, excess generation capacity in the short-term, and a high cost of electricity production in Ghana (Energy Commission of Ghana 2015). Microeconomic Risks Energy projects are capital intensive, especially projects based on renewable energy resources require high upfront capital investments. However, according to the International Financial Corporation (IFC), access to finance in Ghana is a significant challenge (IFC 2013a). The average lending rate in Ghana by the end of the year 2016 was approximately 32% (Bank of Ghana 2017); however, renewable energy projects such are commercial wind and solar systems in Ghana are expected to yield a nominal rate of return of about 14% and 9% respectively (Pueyo et al. 2016). Also, electricity tariffs in Ghana are not cost-

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reflective due to socio-political pressure to keep tariffs low (Pueyo 2018). The above factors constrain private investments in the energy sector in Ghana and also cause high debt distress to the main off-taker (Energy Commission of Ghana 2015). Macroeconomic Risks Power Purchase Agreements (PPAs) in Ghana are denominated in the local currency (Ghana Cedis), however, in recent years, the economy of Ghana has experienced high currency depreciation of about 65% to the US Dollar between 2011 to 2015 (Pueyo 2018). The economy also experienced a high inflation rate of approximately 18% in 2016 (Bank of Ghana 2017). Quoting PPAs in local currency in the face of high local currency risk is a clear barrier to private investment in the country. Moreover, the Government of Ghana is not willing to undertake a sovereign guarantee to aid investor confidence in the energy sector.

3.2

Nigeria

Nigeria is the largest economy in Sub-Saharan Africa, with a population of 188.69 million people and a GDP of $376.36 billion, which grows on average 1.6% per annum (BloombergNEF 2018b). The low GDP growth rate is attributed to the insufficient and unreliable power supply in the country (USAID 2018b). Nigeria has an installed electricity generation capacity of 13.4 GW, of which thermal generation constitutes 84.4%, and hydro generation accounts for the remaining 15.6%. Out of the 13.4 GW installed capacity, only 7.5 GW is available. However, on average, only 4 GW is available through the day (BloombergNEF 2018b). Electricity access rate by population in Nigeria is 59.3%, 86% urban, and 41.1% rural. According to the AfDB, 75.7 million Nigerians are without access to electricity. 63.04 million people lives in rural areas, and the remaining 12.66 million are in the urban areas (AfDB 2016b). The reduced power supply situation in Nigeria compels most industries and affluent households to rely on back-up diesel generators for power. Households and businesses in Nigeria spend about $22 billion annually to fuel backup diesel and gasoline generators (Arowolo and Yannick 2017). For instance, in 2016 alone, it cost Nigerians $16 billion to fuel back-up generators (BloombergNEF 2018b).

3.2.1

Electricity Access Interventions

Nigeria’s primary strategy for expanding electricity access across the country is through a combination of a Centralized and Decentralized approach. The Centralized approach focuses on national grid extension to unserved areas in the country while the Decentralized approach employs the use of renewable mini-grid and off-grid technology, Solar Home Systems, and Stand-alone Systems to provide electricity access to remote communities with dispersing population. In 2006, following the recommendation of the 2005 power sector reform in Nigeria, the government

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established the Rural Electrification Authority (REA) to coordinate rural electrification projects in the Country. The Federal Government has also developed the Rural Electrification Strategy and Implementation Plan (RESIP) which emphasized the use of mini-grids and off-grid renewable energy solutions to expand electricity access across the country, especially in rural communities. The REA operates a specific fund—Rural Electrification Fund instituted by the Federal Government to fund the implementation of universal electrification projects in the country through grid extension, solar home systems (SHS), mini-grid and off-grid renewable solutions. As part of the RSIP, the Federal Government has planned to increase the total installed generation capacity in the country to 30 GW by 2030, of which 9 GW is expected to come from renewable energy technologies. According to Nigeria’s energy target policy dubbed vision 30-30-30, 5.3 GW of mini-grids and 2.8 GW of solar home systems are also expected to be installed and fully operational by the year 2030. The Government has, therefore, implemented the following investment incentives to encourage private sector investment in renewable energy development in Nigeria: the introduction of a feed-in tariff scheme to guarantee the purchase of electricity generated from renewable sources; the government-guaranteed power purchase agreements between developers and the Nigerian Bulk Electricity Trading company based on auction and tenders; tax incentives such as import tariff and VAT reduction on renewable energy technologies. Also, the National Electricity Regulatory Commission (NERC) has implemented specific policies to regulate the development and operation of mini-grids and off-grid in the country. The policy also provides clarity on the tariff scheme for mini-grid developers and ensure that the tariffs are acceptable to consumers as well as providing a reasonable return to an investor (Corfee-Morlot et al. 2019). The regulator also categorized the developers of mini-grids into two distinct groups. One group consists of mini-grid developers who operate between 0 and 100 KW capacity of mini-grids while the other group consists of developers who operate between 100 KW and 1 MW capacity of mini-grid. In the event of the arrival of a low-cost national grid in the operational area of mini-grid developers, registered developers with less than 100 KW distribution capacity are required to decommission their assets within two months without compensation. However, licensed developers with more than 100 KW distribution capacity but less than 1 MW are entitled to compensation for loss of their investments. Moreover, the Federal Government with support from the World Bank, Africa Development Bank (AfDB), GIZ, the US and the UK’s Department for International Development (DFID) has instituted flexible financing schemes to support developers of mini-grid and off-grid solutions. Consumers also benefit from subsidies and flexible payment terms using microfinance schemes such as “pay-as-you go”, which is a medium-term credit (18 to 36 months) used to buy Solar Home Systems and paid by using mobile banking.

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Barriers

The RESIP has identified the following as some of the potential barriers to expanding electricity access across Nigeria: Central Planning and Coordination Nigeria have several policy documents and agencies both at the Federal, State and Local Government level playing similar roles regarding electrification and renewable energy targets. The absence of central planning and coordination of various programs under the universal electrification program has the potential to create gaps and overlaps of responsibilities which could undermine the electrification target set by the Federal Government. Demand Rural consumer are used to highly subsidised infrastructure services such as electricity tariffs and hold the view that it is the responsibility of the Government to provide them with such services. Therefore, while there are efforts to expand electricity access to rural pollution through private sector-led decentralised solutions such mini-grids and off-grids, it is not clear that their demand and willingness and ability to pay for the cost of the power as envisioned will be forthcoming. For instance, a typical renewable energy based mini-grid system has higher cost relative to the consumers’ willingness and ability to pay. This is a primary concern for developers in Nigeria and other SSA countries. Supply Decentralised approaches to rural electrification are relatively capital intensive (high initial capital investments), therefore, the supply of these solutions will depend on the interest of investors. They will invest if they find the decentralised solutions financially viable and attractive. However, given the high investment risks associated with most decentralised solutions, most developers are unable to build a strong financial model to attract private investors. Besides, limited Government’s financial incentives such as subsidies, grants for mini-grid projects and lack of creditworthiness of state utilities further constrain investments in the power sector. Additionally, the absence of a well-developed geospatial database mapping out unconnected rural communities and the unavailability of a nation-wide plan identifying the least cost technologies for electrifying unconnected areas, make electrification planning and feasibility studies for mini-grid development in Nigeria very cumbersome.

3.3

Tanzania

Tanzania is the sixth more populous country in Sub-Saharan Africa with 57.31 million people. During the past decade, Tanzania has experienced a stable political economy with a GDP of $51.76 billion and an average growth rate of 7%. Also, there were notable improvements in the social well-being (education, health, nutrition and employment) of Tanzanians. However, widespread poverty in Tanzania is still a

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significant challenge. About 28% of Tanzanians are below the poverty line of $1.90 a day. Access to electricity is another major challenge in Tanzania. According to the World Bank (2016) household survey, only 32.8% of Tanzanians have access to the grid electricity connection, and of this proportion, 16.9% are in the rural areas, and 65.3% are in the urban areas. Thus, it implies that 37.34 million Tanzanians are without electricity, and 31.11 million of these people live in rural communities. Given the country’s fast-growing economy and an annual population growth rate of 2.9%, the energy demand in Tanzania is expected to grow at the rate of 6.6% per annum till 2040 (Brandt and Media 2014). Meanwhile, the current installed generation capacity in Tanzania is not adequate to meet the growing energy demand of the country. Thus, there is a need for urgent investment in the Tanzanian power sector.

3.3.1

Energy Access Interventions

Early 2017, the Government of Tanzania has out doored its updated Power System Master Plan 2016 which aims to utilize the country’s resources in coal, natural gas and hydroelectric to meet the growing energy demand and to expand electricity access across the country. In this regard, the Tanzanian Government is receiving funding supports from both bilateral and multilateral donors, including the World Bank, African Development Bank (AfDB) and the Japan-Africa Energy Initiative (JAEI). Through the JAEI, the Government of Japan is actively supporting the development of gas-fired plants in Tanzania to help meet its energy needs (Aly et al. 2019). Also, the Government taking advantage of renewable mini-grid and off-grid solutions to provide electricity access to decentralized communities. The Government has, therefore implemented the following initiatives to facilitate investments in the development of renewable mini-grids in the country. Firstly, the Electricity and Water Utilities Regulatory Commission (EWURA) introduced a specific regulatory policy to regulate the operations of Small Power Producers (SPPs). The policy addressed challenges with the size and technology-neutral tariff scheme for mini-grid developers with the introduction of the technology-specific feed-in-tariffs scheme for lower generation capacity and competitive price bidding for higher generation capacities (Odarno et al. 2017). Secondly, the Government, recognizing the unique financing challenge with mini-grids and off-grid development in SSA, has introduced the Smart Subsidies and the Credit-line Facility financial support schemes for mini-grid developers. The Smart Subsidies includes the Marching Grant and the Performance Grant. Through the Marching Grant, the government provides developers with 100,000 US dollars for a feasibility study, project design and business plan development. With the Performance Grant, the Government provides a grant of 500 US dollars for each household connected. Similarly, through the Credit-line Facility, the Government makes available 23 million US dollars long-term loan facility for mini-grid developers. Thirdly, the Government also developed an energy portal information system that provides minigrid developers with comprehensive information regarding mini-grid development,

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licensing and regulations in Tanzania. The energy portal also uses a geospatial information system to provide mini-grid developers with information regarding unelectrified communities and the energy intensity of those communities. This platform is particularly useful for mini-grid developers because it offers them an opportunity to identify the most suitable technology to deploy in a community depending on their energy needs and the energy resources available. Lastly, the Government, with support from bilateral and multilateral donors, provides capacitybuilding programs and economic development projects for rural communities in Tanzania. The capacity building program provides the beneficiaries with the opportunity to acquire technology transfer regarding mini-grids development while the economic development programs aimed at addressing challenges with the productive use of power and the ability to pay for the power used.

3.3.2

Barriers

We have identified the following barriers to achieving universal electrification in Tanzania. Poor Policy Implementation Inconsistent implementation of Government’s policies, weak regulatory enforcement with frequent political interference impedes investments in the power sector in Tanzania (Aly et al. 2019). Weak Financial Performance Low retail electricity rates, poor financial performance, high indebtedness and high off-taker risks associated with the state-owned power distribution company make investments in the power sector in Tanzania unattractive to the private sector (BloombergNEF 2018c). Land Acquisition challenges: Difficulties with land acquisition coupled with opposition to access to protected areas are some of the barriers to hydroelectric mini-grid development in Tanzania (Ahlborg and Hammar 2012). Financial Challenges Most mini-grid projects are capital intensive and require cost-reflective tariffs to be economically viable and attractive to private investors, however, given the low tariff scheme in Tanzania, accessing funding from the traditional financial market has been very challenging for local developers. Although the Government has some financial support schemes available for local developers, it accounts for only 30% of the total investment cost of mini-grid projects (Ahlborg and Hammar 2012).

3.4

Kenya

Kenya is an East Africa country which is currently the fourth largest economies in SSA, with a population of 49.7 million people and an estimated GDP of $70 billion in 2018. During the past decade, Kenya has made significant strides in economic,

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social and human development, and aspires to attain a middle-income country status by 2030. Similarly, the Kenyan power sector has also experienced substantial improvements during the past decade with increased private sector participation and increased penetration of renewable energy. Kenya has taken advantage of its renewable energy resources to expand electricity access across the country. For instance, the country has emerged as the global leader in geothermal energy development due to increased investment in the geothermal energy generation. The country has a total installed generation capacity of 2.3 GW. Hydroelectric constitutes 36%, thermal:33%, geothermal: 29% and Other Renewables: 2%. According to the World Bank’s household electricity survey, Kenya has the highest electrification rates in East Africa. The electricity access rate is 75%, 89.5% by the urban population and 67.6% by the rural population. Total electricity generation has also increased from 9817 GWh in 2016 to 10,205 GWh in 2017 due to growth in consumption (Republic of Kenya 2018a).

3.4.1

Energy Access Interventions

The Government of Kenya has developed the National Electrification Strategy (KNES) which outlines the Government’s strategies to achieve universal electricity access for all by 2022. The fundamental principles underpinning KNES are: first, balancing grid expansion with mini- grid: under this principle, the authorities set a ceiling for grid connection cost and accelerate grid connection to communities below the ceiling. For poor income households in decentralized communities, suitable off-grid solutions are identified and provided at a reasonable cost. Second, integrating planning processes: this principle integrates and coordinates the electrification planning process of both Rural Electrification Authority and the Kenya Power and Lighting Company Limited (KPLC) in a systematically way reflecting the Government’s objectives and timelines. Third, developing a geospatial platform to focus investment on equitable expansion of access. Scaling-up of off-grid solutions to rural communities with the use of pay-as-you-go financing schemes (Republic of Kenya 2018a). According to KNES, the total investment cost required to attain universal electrification by 2022 amount to approximately $2.75 billion. The Government is expected to fund the investment cost of $2.3 billion for the grid and mini-grid expansion with donor financial supports while the private sector finances the off-grid (Solar Home System) investment cost of $458 million. The World Bank is actively supporting the electrification strategy of the country by financing the Kenyan Electrification Modernization Program (KEMP) and the Kenyan Off-grid Solar Access Project (KOSAP) (World Bank 2018). KEMP aims to provide 235,000 households with modern access to electricity while KOSAP primary objective is to expand electricity access to 1.3 million beneficiaries with Solar Home Systems. In addition to KNES, the Kenyan government has also launched the Electricity Sector Investment Prospectus, which outlined the $14.8 billion investment opportunities in the power sector over the next five years. Peak electricity demand in Kenya

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increases at an average of 7%; however, the current generation capacity is unable to generate enough electricity to meet the growing peak demand. Therefore, the investment prospectus initiative seeks to attract more investments into the power sector to meet the growing electricity demand in the country. Furthermore, to guarantee the security of electricity supply in Kenya and to increase electricity access across the country, General Electric (GE), a US-based electricity company is currently establishing an 1150 MW clean coal-fired plant in Kenya. According to the economic impact assessment of the coal power project, the plant has the potential to power 3.32 million households depended on biomass. The Government and GE officials have both justified the investment in the coal-fired power plant in the wake of climate concerns. The Kenyan Least Cost Power Development Plan (LCPDP) has identified hydroelectric as the least cost of power generation followed by coal (Republic of Kenya 2018b). However, generation from hydro sources is unreliable due to frequent drought. Thus, one of the reasons for the investment in the clean coal-fired plant with minimum emission.

3.4.2

Barriers to Universal Access to Electricity in Kenya

The critical barrier to attaining universal access to electricity in Kenya by 2022 is high connection cost, especially to rural and pre-urban communities. Higher marginal cost of extending national grid network to disperse communities are more costly compared to the urban communities (Herbst 2000). The effect it has on both the consumers and the Government is that, it increases higher connection fees for poor rural households and also increases the Government’s budget for rural electrification. Also, costly administrative procedures, rent seeking from public officials and difficulties with obtaining land access are significant barriers that disincentivise private investment in the energy sector.

3.5

South Africa

South Africa, with a total population of 56.52 million, is one of the biggest economies in Sub-Saharan Africa with a well-developed service sector that accounts for 67% in 2015. Its dynamic economy boasts of GDP of $349.3 billion that has slowly grown an average of 1.3% over the past years. It is also an upper-middleincome economy with a GDP per capita (PPP) of $13,500. The ease of doing business in South Africa is estimated at 66% (World Bank 2019b). South Africa has the most developed electricity infrastructure in SSA. The total installed generation capacity of South Africa is 51.3 GW–46,776 MW of thermal, 661 MW of Hydropower, and 3872 MW of other renewables. According to World Bank data, South Africa has one of the highest electricity access rates in Sub-Saharan Africa. The national electricity access by population is 86%, out which 96% in urban areas and 66% in rural areas.

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Electricity Access Initiatives in South Africa

From 1991 to 2000, the electricity industry in South Africa funds the electrification projects in the country. In 2001, the Government took over the management of electrification programs and made funding available through the national treasury. The Department of Energy (DoE) established the Integrated National Electrification Program (INEP) to drive the universal electrification agenda in the country. Under the INEP, the national treasury funded both Eskom and Municipalities to provide grid extension and connections across the country. Off-grid renewable solutions for remote communities were given under concessions to both concessionaires and some municipalities with funding support from the donor community. Since the inception of INEP, about 5.7 million households in South Africa were connected to the national grid network. Likewise, from 2002 to 2014, 65,929 households were supplied with off-grid solar solutions. Despite the success of the INEP, challenges including escalating cost of electrification (high connection and infrastructure costs) and high population growth rate were a severe threat to expanding electricity access to 92% households by 2014. Therefore, in May 2012, the DoE designed a new strategy to attain universal electrification by 2025, which does not differ much from the earlier one. The new strategy includes the following action plans. Firstly, the Treasury allocates annual funding amount of R4 billion ($268.6 million) to INEP to provide electricity access to poor communities (IFC 2013b). Secondly, INEP works closely with Eskom, Municipalities and Concessionaires to budget proposed electrification projects for the year and monitor their implementation. In case of excess electrification cost, the treasury provides 80% to 100% of the capital cost of grid connection and the Municipalities fund the rest. Thirdly, the Government exempted poor households from connection fees. Also, the poor households receive basic electricity subsidy to cover the first 50 kWh. Fourthly, INEP provides 80% subsidy for the capital cost of off-grid solar home solutions while the concessionaires front the remaining 20%. Lastly, remote communities connected with off-grid solutions receive a monthly allowance of R50 ($3.3) from the municipalities to supplement their costs. The municipalities transfer this cost back to the concessionaires. Despite the improved electricity infrastructure and high electricity access rate attained under the new electrification strategy, about 9 million of its citizens still do not have access to electricity as of 2016. A little over 6 million people who lack access to electricity are in rural communities. Kerosene and paraffin remain their daily fuel source. However, the use of kerosene by poor households in South Africa poses a serious threat to life and property. Over 200,000 people in South Africa are either injured or lose proper due to kerosene related fires. Due to some challenges under the new strategy, the International Financial Corporation (IFC) projects, South Africa may fail to achieve its new target of universal access by 2025 by ten years.

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Barriers to Universal Electrification in South Africa

Some of the barriers to achieving universal electrification in South Africa are as follows. Excessive Connection Cost The cost of extending electricity access to isolated rural settlements in South Africa increases at the rate of approximately 25% per year (IFC 2013b). Lack of technical skills and knowhow among rural municipal administrators and lack of geospatial-based electrification planning, largely account for the increasing cost. Unsustainable Funding Sources South Africa must connect about 350,000 households per year to meet the 2025 universal access to electricity target. This will require additional $60 million funding per year. However, according to the South Africa Department of Energy, there is currently an annual funding gap of R600 million or $40.3 million, which suggests that South Africa does not have a more reliable and broader sources of funding its electrification projects. Eskom—the national utility company and a major actor in the national electrification project, is in high financial distress. Newbery and Eberhard (2008) attributes non-cost recoverable tariffs to the poor financial health of Eskom. Unsustainable and Unprofitable Off-grid Solution Model Low cost of electricity and delayed payment of subsidies make off-grid electrification projects in South Africa unprofitable. This has caused some service providers to file for bankruptcy and also disincentivise other private investors from participating in the sector (IFC 2013b). Besides, lack of clear policy plans on which areas implement off-grid projects and grid expansion projects is a barrier to the large -scale deployment of off-grid projects in South Africa.

3.6

Zambia

Zambia, a middle-income country is richly endowed with natural resources, including both energy and mineral resources. Its economy currently boasts of the secondlargest copper production in Africa. The country attained a middle-come economy status in 2011 following a decade of impressive economic performance with an annual average growth rate of 7.4%. However, due to high inequality in Zambia, the economic growth benefited only a small proportion of the urban population. The GDP of Zambia is $25.7 billion, with a declining growth rate of 3% in 2016. The country currently has a population of 17.24 million people and a GDP per capita (PPP) of $3900. Zambia has an installed electricity generation capacity of 2.8 GW of which renewable energy (hydroelectric) constitutes 85%, and fossil fuel sources (coal and crude oil) are responsible for the rest 15% of generation. The national electricity access rate is 31% with a breakdown of 67% urban and 4% rural. It implies that about 12.08 million people in Zambia do not have access to electricity.

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Electricity Access Interventions

In 1996, the Government of Zambia set a target to reach universal electrification by 2030 and has declared its commitments to developing and maintaining electricity infrastructure to provide access to electricity to all Zambians. Seven years after, there was not much progress towards the Government’s ambitious electrification target. Therefore, between 2003 and 2008, the government revised its universal electrification target to 90% urban and 51% rural electrification by 2030. Besides, the Government establishes the rural electrification authority and fund; developed a new implementation strategy plan. The objectives of the new implementation plan are: Increase electricity access to rural and pre-urban households; enhance the quality of power supply to support productive community use and increase private sector participation in Off-grid systems. The development of renewable mini-grid and off-grid solution are the core action plan of the Government’s electrification strategy. The Japan International Corporation Agency (JICA) evaluated the electrification strategy of Zambia in 2008 and found two loopholes: The Rural Electrification Fund was unable to meet the required project cost for the implementation of the electrification program. Electrifying rural communities required a little over $1 billion, which translates to annual investment cost of approximately $50 million from 2008 to 2030. Moreover, the network connection fees for rural households were higher than their average monthly income.

3.6.2

Barriers

Regulatory Framework Mini-grids presents a considerable potential for accelerated use of renewable energy to close the electricity access gap in Zambia; however, lack of workable regulatory frameworks to attract private developers continue to hamper the progress of mini-grid projects. Inadequate Financial Incentives Additionally, the lack of financial support mechanisms to enable project developers to access sufficient funding for mini-grid projects. Besides, some private generators are unable to generate sufficient revenue due to non-cost recoverable tariffs. Lack of Sufficient Technical Capacities Policymakers lack sufficient capacity to promote mainstream mini-grid projects. Similarly, there is a general lack of technical ability to install, operate and maintain mini-grid projects in Tanzania.

3.7

Democratic Republic of Congo

Democratic Republic of Congo (DRC) is the second-largest country in Africa with an estimated population of 86.65. DRC is also home to most of the world’s natural

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resources, including renewable energy resources such as wind, solar and big hydro resources with an estimated 100 GW hydroelectric potential. River Congo, one of the world’s largest hydroelectric resource, has the potential to produce 50 GW of electricity; however, only about 2.4% of its potential is currently being utilized. Despite being home to most of the world’s untapped energy resources, DRC remains one of the poorest countries in the world in terms of electricity access. In addition to having one of the lowest electricity consumption rates in the world, DRC also suffers a substantial unmet electricity demand. According to the AfDB’s data on energy access, DRC has an electricity access rate 15.5%, 44.8% by the urban population and 0.4% by the rural population. The installed generation capacity n DRC is approximately 2677 MW; however, only about 1300 MW were available for dispatch in 2014 (USAID 2017).

3.7.1

Electricity Access Interventions in DRC

DRC’s primary strategy to expanding electricity access across the country is through the use of decentralized mini-grid systems from renewable energy sources. To get the private sector involved in the development of mini-grid projects in the country, the Government of DRC has embarked on reform in 2014 to liberalize the power sector. The electricity sector reform was supported with the passing of a new Electricity Act in 2014. The liberalisation of the electricity sector has attracted some private sector-led mini-grids projects across the country. Also, through the Essor Access to Electricity Program, the Government has developed a technical program to guide private mini-grid developers to build a viable financial system for mini-grid projects in DRC (AfDB 2018). The technical program is based on an optimized and standardized mini-grid system with mobile prepayment and smart metering technology to prevent non-technical loss.

3.7.2

Barriers

The followings are the significant barriers to expanding electricity access in DRC. Uncertain Business Environment the business environment in DRC is characterised with high investment risks, lack of commercial financing and risk mitigation mechanisms, which are significant barriers to private investment in the energy sector. Fiscal Barriers Lack of investment incentives and high tax levies on renewable energy technologies and products such as solar home systems and solar lamps constrain investments in renewable energy technologies in DRC. Poor Financial Performances of Utilities The state-owned utility—SNEL suffers from poor governance, and operational and technical inefficiencies. For example, the electricity tariffs are set at non-cost recoverable rates; low billing collection rates

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from high revenue customers, lack of investments in the maintenance and expansion of the network infrastructure result in high generation and distribution losses. The utility service is therefore, in high financial distress and unable to expand its service beyond the 16% of the population with access to electricity. High Risk of Ability to Pay and Productive Use of Power About 76% of the population if DRC are below the World Bank’s poverty line of $2 per day. The high prevalence of poverty in DRC in addition to low electricity consumption are reasons for high risk of ability of customers to pay for cost-reflective tariffs as well as the risk of productive use of electricity, which are significant entry barriers to private sector investments in the power sector.

3.8

Cameroon

Like other SSA countries, Cameroon is endowed with enormous energy resources, including renewable energy resource. Its hydroelectric potential of 20 GW is secondlargest in Africa. The average solar radiation in the country ranges from 4.5 kWh/m2/ day to 5.7 kWh/m2/day. Most of the energy resources in Cameroon are less developed. For instance, only 5% of the hydroelectric resource is currently being exploited. Despite having abundant energy resources reserve, Cameroon still struggles to generate enough electricity to meet its increasing demand. The electricity access rate of 62.1% in Cameroon is relatively moderate compared to its neighbours. However, there is a vast disparity between the urban access rate of 95.9% and rural access rate of 19.5%. Only a few rural public facilities such as schools and clinics have electricity access since grid extensions remain the primary means of expanding electricity access in Cameroon. The high inequality in electricity access rate between the urban and the rural communities in Cameroon has compelled most semi-urban and rural residents to rely on self-generation with the use of lead-acid battery and diesel generators to meet their daily energy demand (Ndongsok and Ruppel 2017).

3.8.1

Electricity Access Interventions

The Government of Cameroon has embarked on some initiatives, including the development of vision 2035 to address the country’s growing energy needs and to scale up electricity access in rural communities. The Government’s objective is to double the country’s current energy production capacity of 1.5 GW by 2035 and to increase the energy consumption per capita from 27.7% of GDP to 45% of GDP (Ndongsok and Ruppel 2017). Also, the Government has updated the Electricity Sector Development Plan (PDSE) and the Rural Electrification Master Plan to serve as the strategic document for expanding electricity access across the country. In addition to national grid extension programmes, the Government has also embarked on the use of renewable mini-grids and off-grid systems to provide electricity access

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to decentralized communities. As part of the electrification strategy, the Government has implemented the renewable energy purchase obligation, and value-added tax exemptions on renewable energy systems to attract active private sector participation in its electrification target of one million household connections by 2035.

3.8.2

Barriers

We have identified the following barriers to access. High Grid Network Extension Cost Extending grid connection to decentralised communities in Cameroon are neither cost-effective nor efficient. The grid expansion programmes are often characterised high extension cost, high connection fees and cumbersome administrative process. Decentralised electrification approaches such as mini-grids and off-grids are regarded as a more cost-effective alternatives for extending electricity access to dispersed rural communities in Cameroon. However, mini-grids are given low priority as high-cost grid extension programmes remain the preferred choice for corrupt Government officials because it creates the avenue for corruption (Muh et al. 2018). Absence of Fiscal Incentives In Cameroon, the energy sector lacks policies, fiscal incentives and subsides for the uptake of renewable energy technologies. Besides, import tariffs on renewable energy technologies are high (17% import duty) compared to other countries. Additionally, the business and institutional environment does not encourage private investments in the energy sector due to tedious administration procedure, high tax requirement, and inadequate investment regulations. Poor Power Sector Governance A significant entry barrier to private sector participation in the power sector in Cameroon is the extent of concession awarded to ENEO - the leading power supplier, which limits production from other utility companies in a given area (BloombergNEF 2018a).

4 Discussion In this section, we discuss the similarities and the differences that exist in the approach adopted by the various countries to expand electricity access to all citizens. We also compare the performance of the various countries in terms of the dimensions of the various policies and regulatory frameworks and the percentage increase in electricity access by the national, urban and rural population for one decade. Similarly, we also assess the commitments of the sampled countries to expanding electricity access by comparing their investments in energy projects (both traditional and small-scale renewable energy) and the role adopted by the private sector over two decades.

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Similarities Use of Decentralized Mini-grids and Off-grid Solution

Using mini-grids and off-grids either a hybrid technology consisting of both thermal and renewable generations or solely from renewable energy sources have been widely embraced by most SSA countries to meet the electrification needs of the various countries, especially in rural communities. In this regard, some countries have implemented specific policies and introduced financial incentives in hopes to attract the participation of the private sector in the development of renewable energybased mini-grids and off-grid. In Table 1, we present some of the incentives adopted by the various countries to facilitate private investment in the development of renewable energy-based mini-grids and off-grid projects. Table 1 also shows the level of commitments from the various Governments to the implementation of initiatives such as tax waivers on renewable energy technologies, feed-in tariffs, power purchase agreements and financial support mechanisms for project developers. It is evidenced in table one that although some of the countries have put in place the above measures and policies to drive private sector investments in the power sector, only a few countries have demonstrated firm commitments to enforcing the full implementation of such initiatives. Therefore, we use somewhat to denote policies that were partially implemented (examples are: enforcement of tax waivers and power purchase agreements). We acknowledge the efforts of the various governments in that regard. However, attracting private sector participation in rural electrification goes beyond the partial implementation of financial incentives, as mentioned above. It requires reforms in various countries to make them attractive to the private sector. The various governments must guarantee legal security, provide sound policies and regulations and ensure political and economic stability. Also, for mini-grid projects to be financially viable, they require cost-reflective remuneration, implying that local customers pay cost-reflective tariffs. However, as is seen in many studies, including Creti et al. (2021), that is not feasible. People in rural areas cannot cover the cost of providing electrification there. Therefore, there is a need for public support. However, public financing in rural electrification has the problem of a lack of synchrony between the money needed now and the money collected from tariffs. Moreover, in addition to attracting private-sector participation, we also observed that all the countries are relying almost entirely on development partners and other financial institutions to fund the development of the mini-grids and off-grid projects. The problem with this approach is that often, there is a significant gap between the amount of money the development partners and financial institutions are willing to provide for electrification and the amount required. Moreover, the limited resources are further spread over several years. For instance, based on an analysis by a renowned power sector expert - Prof Perez-Arriaga, in Uganda (East Africa Country), the total money required for universal electrification by 2030 is about USD 6 billion. However, according to the Minister of Energy - Ms Ruth Nankabirwathe, the World Bank has committed to providing a loan of USD 600 million. Another

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Table 1 Renewable energy investment incentives

Countries Nigeria Ghana Kenya Tanzania Cameroon Congo DR South Africa Zambia

RE purchase obligation Somewhat Somewhat Somewhat No Yes No Somewhat No

PPA of sufficient duration Yes Yes Yes Yes Yes No Yes Yes

Feedintariffs Yes Yes Yes Yes No No No Yes

Tax exemptions No Somewhat Yes Somewhat Somewhat No No No

RE auction scheme Yes No No Yes No No Yes Yes

RE fund No Yes Yes No No No No Yes

RE & climate act No Yes Yes No No No No No

Source: Bloomberg New Energy Finance (2019) Note: “Somewhat” in Table 1 means partial implementation

case of interest is Malawi, a Southern African country with approximately 3.7 million households – 78% of the population – and 47% of public facilities, including schools and hospitals, lack access to electricity service. According to GEAP (2022), the lowest cost plan for Malawi to electrify the nation through the grid, mini-grid, and solar home systems will require USD 3.6 billion in investment. Out of that amount, GEAPP has approved USD 27.6 million worth of support. Thus, the two cases cited above show that a large volume of the investment in electrification in SSA has to come from the private sector. We believe that the role of public financing is to provide pilot projects that work to show the way and provide investor confidence in the private sector. These analyses show a need to rethink the electrification strategy in Sub-Saharan Africa.

4.1.2

Establishment of Rural Electrification Agency and Fund

There are significant discrepancies between urban electrification rates and rural electrification rates in most SSA countries. In most cases, the inequality in electricity access rate between the urban and rural regions is due to the high cost of extending grid network to decentralized rural communities. To address this challenge, most countries in SSA have adopted the rural electrification strategy by establishing rural electrification agencies and funds to respond to the specific electricity needs of rural communities. This strategy is supported by legal provisions enshrined in the energy legislation of the countries surveyed. Although some countries like Kenya are doing quite well in that regard, according to some power sector experts, almost universally, they need more vision of a comprehensive approach to achieving rural electrification. In addition, they also have limited resources and, in some cases, minimal resources; therefore, they tend to focus on non-sustainable projects, especially in the long run, with the limited funds they get, but not a comprehensive electrification strategy.

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293

Legislations on Energy Efficiency

Energy efficiency is a critical factor in achieving universal energy for all by 2030. The efficiency standard of the appliances people use has the potential to reduce the investment cost of delivering electricity access using off-grid and mini-grid solutions by 30% (IEA et al. 2019). Therefore, energy efficiency has the potential to significantly impact both the economics of delivering electricity access and its reliability in SSA. Besides, energy-efficient appliances are very costly, and most SSA rural households are unable to afford them due to the high poverty level in the region. About half the population of SSA lives below the World Bank’s poverty line of $2 per day. Thus, most of the energy appliances used in SSA are second-hand products which have low-efficiency standards; thereby, posing a severe threat to the universal access to electricity in the region. In this regard, most countries in SSA have included specific legislation and regulations on energy efficiency standards in the various acts governing the energy sector. However, implementing efficiency standards and regulations alone are not enough. Given the poverty level in the region, there is a need for a more flexible financing scheme such as the mobile micro-finance scheme to encourage and empower poor household to patronise energy-efficient appliances.

4.1.4

Financial Support Schemes

Using decentralized off-grid systems based on renewable energy sources require high initial capital investment. In most cases, local developers are unable to secure funding from the traditional financial market, due to the challenge of building a viable financial system for mini-grid projects based on the tariff system in SSA. In response to this challenge, almost all the countries have implemented some form of financial support schemes to ease the financial burden on private investors, especially local mini-grid developers. However, the extent of financial support varies across individual countries. For example, Tanzania has demonstrated firm commitment to support private developers by implementing the credit line facility and the smart subsidies to facilitate local private investment in the rural electrification projects.

4.1.5

Active Private Sector Participation

As discussed earlier, there is a significant electrification financing gap of $16 per annum in SSA. To close the financing gap, almost all the countries have designed and implemented necessary incentives to foster the role of private-sector participation in the electrification programmes. However, there are some gaps between the design, implementation and enforcement of the various incentives. For instance, as indicated in Table 1 below, some of the countries have implemented a policy to

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make the purchase of power supply from renewable sources obligatory, however, its only Cameroon that shows commitments to full implementation of such policy. In Ghana, Kenya, Nigeria, and South Africa, off-takers do not always comply with the renewable energy purchase obligation. Instead, they choose at their own will when to purchase power supply from renewable energy generators (BloombergNEF 2018b). DRC, Zambia and Tanzania have not implemented the renewable energy purchase obligatory policy (BloombergNEF 2018b). Also, Kenya is the only country in the sample list that has implemented both Value Added Tax (VAT) and import duties exemption on renewable energy technologies. The rest of the countries except for South Africa which has no tax exemption, have either VAT exemption or import duty exemption. Additionally, most of the countries have introduced the renewable energy feed-in-tariff scheme to create market certainty and simplify procurement processes in order to incentivise private sector participation in the innovation and production of renewable energy; yet only a few countries such as Kenya and Tanzania are actually implementing such policy. In Ghana and Nigeria, the feedin-tariff policy only exist on paper still awaiting implementation after several years of its introduction (Arowolo 2019; Pueyo 2018). We have summarized our main findings (see Table 1). Also, initiating financial incentives to attract private sector participation must go hand-in-hand with improving the microeconomic and macroeconomic performance of the individual countries to boost investor confidence in the economy. However, in most of the countries studied, weak economic indicators are identified as significant barriers to private investment in the energy sector. Macroeconomic Barriers Firstly, most investors are attracted to stable economies especially with consistent low inflation rates and low cost of capital. However, some of the macroeconomic indicators of most of the sampled countries, especially Ghana and Nigeria, do not suggest an economic stability in recent years. In most cases, the economies are characterised with a high cost of capital and high currency depreciation, which create investment risks for investors. Besides, Cameroon has managed to keep relatively low inflation rates with minor fluctuations over a decade compared with the other countries which exhibit high inflation rates with major fluctuations in the rates. The inflation rate in Cameroon is 1.1% compared to the regional average of 3.7%. Nigeria (12.1%) and Ghana (9.8%) have the highest inflation rates among the surveyed countries in 2018. Moreover, the cost of debt in the sampled countries ranging from 29% in Ghana to 10% in South Africa are relatively high compared with developed countries such as the United Kingdom and the United States of America, where the cost of debts is 0.6% and 3.8% respectively. Details of the fluctuations in the inflation rates and the lending rates from 2007 to 2018 are presented in Figs. 8 and 9 (in Appendix). Microeconomic Barriers Low demand for electricity is a significant constraint to private investment in rural electronification programmes in SSA. Electricity consumption in the region is generally low with an average consumption per capita of 486 kWh compared with other regions such as Europe and Central Asia (excluding high-income countries) and East Asia and Pacific (excluding high-income countries)

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which have an average consumption per capita of 4253 kWh and 3048 kWh respectively in 2014 (World Bank 2014). In all the eight counties surveyed, the consumption per capita in Nigeria, Kenya, Tanzania, DRC and Cameroon are lower than half of the regional average consumption. The consumption rate in Ghana is about two-thirds of the regional rate. South Africa and Zambia are the only countries in the sample list with consumption rates higher than the average regional rate. Table 2 exhibits the electricity consumption per capita in the sampled countries relative to the regional average during the period 2004 to 2014. The low consumption per capita signals the risks of low demand and less productive use of power. Additionally, high poverty levels in rural communities may impact the consumers’ ability to pay for the electricity consumed. According to the World Bank Data on poverty level, as of 2015, about 41% of the total population in SSA are under the World Bank’s poverty ratio of $2 per day. Among the countries sampled, on the one hand, DRC (76.6% in 2012) and Zambia (57.5% in 2015) have the highest percentage of their population living below $2 per day. On the other hand, Ghana (13.3% in 2016) and South Africa (18.9% in 2014) have the smallest percentage of their population below the poverty line of $2 per day. Apart from the low electricity consumption per capita in SSA, electricity tariffs are generally not cost-reflective of generation and supply, except in a few isolated cases such as Kenya. For example, in Nigeria, the non-cost reflective tariffs have caused high debt distress for off-takers to the extent that the Government had to establish the Power Sector Recovery Plan to rescue the sector (PSRP). Besides, from 2017 to 2018, the Government has to support distribution companies with a $2.3 billion loan facility to pay part of their debts owed to generators (Arowolo 2019). The PSRP estimates that, until the electricity sector attain full costreflective tariffs, for the next five years, the electricity sector in Nigeria will require the total financial support of $7.5 billion to enable off-takers honour their financial obligation to generators (Federal Republic of Nigeria 2018). The non-cost reflective tariffs and the inability to pay for power, especially by rural consumers puts most Table 2 Electricity consumption per capita and poverty level Country Cameroon Congo, Dem. Rep. Ghana Kenya Nigeria Tanzania South Africa Zambia Sub-Saharan Africa

Consumption per capita kWh (2014) 275 109

Percentage of population below poverty line of $2 per day 23.8% (2014) 76.7% (2012)

351 164 145 104 4198 717 486

13.3 (2016) 36.8% (2015) 53.5% (2009) 49.1% (2011) 18.9% (2015) 57.5% (2015) 41% (2015)

Source: World Bank (2016)

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national utility companies in high debt distress, which creates high off-taker risks for private investors. More information on the electricity consumption per capita and the percentage of population below the poverty line (see Table 2).

4.2

Different Approaches

The table below outlines some unique approaches adopted by the individual countries included in this study to facilitate increased electricity access, especially in rural communities in their respective countries. Nigeria

Ghana

Kenya

Tanzania

DR Congo Cameroon South Africa

Zambia

Specific policy on what happens to various categories of mini-grid operators in the event of the arrival of the national grid. The implementation of the national renewable energy and energy efficiency policy Establishment of the Renewable Energy Act and Renewable Energy Master Plan to promote and support the use of mini-grid systems from renewable energy sources to the electrification needs in decentralized communities. Self-helped electrification project by getting individuals and communities supports and involved in the electrification project. Decisive Government’s commitment to improve investment incentives to attract the participation of the private sector such as cost-reflective tariffs. Use of geospatial technology to inform investment decision and electrification planning. Kenya Developed an integrated electrification plan with a clear strategy, timelines and funding sources. The establishment of an energy portal, a comprehensive energy information system where developers and investors can access geospatial based data and other relevant information regarding energy projects. Providing capacity building programs and economic development projects for rural communities in Tanzania. Introducing technology-specific and technology size-specific feed-in tariffs to attract private mini-grid developers. Debt and grant support mechanism for the private sector-based expansion program. The use of geospatial technology to develop a Least Cost Power Development Plan Exemption of poor household from grid connection fees. Free basic electricity subsidies and a monthly allowance for the poor household grid and off-grid consumers to pay for the electricity consumed. The establishment of a renewable energy fund to provide financial support for renewable energy-based mini-grid projects. Empowering rural community people with economic activities to ensure the productive use of power and the ability to pay for the power consumed

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297

Performance

In this section, we discuss and compare the performance of the various countries in terms of the investments made in energy projects over two decades and the percentage change in electricity access rate over one decade. Among other factors, these performance indicators may reveal whether the policies designed and implemented by the various countries have yielded significant improvements in the electricity sector of the various countries.

4.3.1

The Dimension of Electrification Policy and Regulatory Framework

Although there are similarities in the electrification policies implemented by the various countries, the approach towards the development of such policies is different for most of the countries. All the countries have adopted what RISE refer to as the “Traditional Approach”, where the development, the approval and the implementation of the national electrification plan are done first before considering the development of a specific framework for various technologies. However, with the emergence of decentralised mini-grid and off-grid technologies, only a few of the countries: Tanzania, Kenya and Nigeria have advanced to the second stage of developing specific policies for various technologies to enable them to take advantage of mini-grids solutions to scale-up electricity access. To assess the strength of the electrification policy in the surveyed countries, we use RISE’s policy dimension for electricity access score together with the World Bank’s Ease of Doing Business score. The policy dimension for electricity access score is calculated based on eight national policy indicators while the Ease of Doing Business is calculated based on ten regulatory framework indicators as mentioned earlier. The scores for both the electricity policy dimension and regulatory framework are presented below (see Fig. 2). In terms of the policy dimension for electricity access, Kenya, Tanzania and South Africa are considered to have the most effective electrification policies in place to accelerate electricity access in their respective countries. They are then followed by Cameroon, Ghana and Zambia respectively. Nigeria and DRC appeared to have the least effective electrification policies. With regards to the ease of doing, as noted earlier, one of the primary electrification strategies adopted by all the countries is the engagement of active private-sector participation in the energy sector. However, only Kenya, South Africa and Zambia are demonstrating firm commitments to creating a more business-friendly environment for private sector investments to thrive. According to the World Bank data on the Ease of Doing Business, Kenya is seen as the most business-friendly environment in Africa. As a result, Kenya has seen increased participation of the private sector in the energy sector relative to the other countries and is perceived by donors and investors as the most preferred investment destination in Africa (Pueyo et al. 2016).

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CAMEROO N

54

37

35

40

48

53

59

61

65

66

67

69

70

75

76

76

E. Access Policy Dimension

DRC

GHANA

KENYA

NIGERIA

TANZANIA SOUTH AFRICA

ZAMBIA

Fig. 2 Electrification policy and regulatory framework scores. Data source: World Bank Data (2019)

4.3.2

Investments in Energy Infrastructure

Most of the surveyed countries have outlined and, in some cases, implemented strategic policies to facilitate both public and private sector investments in the energy sector. In this regard, based on World Bank data, we assess the commitment of the various countries to invest in energy projects by exploring the investment patterns in energy infrastructure with private sector support during the past two decades. We looked at the integrated amount of investments in energy projects such as electricity generation, transmissions and distributions excluding small-scaled projects (renewable energy-based mini-grids and). Firstly, we noticed an irregular pattern in the investment patterns by the individual countries during the period: 2007 to 2017. For example, in Tanzania and Zambia, for five years, there have not been any significant investments in the energy infrastructure. However, during those periods, both countries were investing in renewable energy technologies (see Fig. 3). South Africa emerged as the country with the highest commitment to investing in the energy infrastructure expansion with a total investment of $19.95 billion followed by Ghana with a total investment of $4.99 billion. Tanzania appeared as the country with the least commitment to investing in energy infrastructure expansion, with a total investment of $510 million during the period. DR Congo was not included in this assessment due to the unavailability of data on investments in energy projects. Figure 3 demonstrates the investment pattern in the various country; however, South Africa is not included in the graph due to the big difference in the investment figures compared with the other countries.

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Investment Paern in Energy Projects in $M (2007 -2017)

3000

2500

2000

1500

1000

500

0 99-'03

04-'08 Cameroon

Ghana

09-'13 Kenya

Nigeria

Tanzania

14-'18 Zambia

Fig. 3 Investment pattern in energy projects. Source: World Bank Data (2017)

Besides, based on a data derived from Bloomberg New Energy Finance, we also looked at the specific investments in renewable energy projects by the various countries with private sector participation. Again, South Africa appeared as the highest investor with a total investment of $17.86 billion during the period of 2006 to 2017, followed by Kenya, with a total investment amount of $5.5 billion. In terms of investment in renewable energy infrastructure, Ghana demonstrated the least commitment with a total investment of $63.3 million during the period. Figure 4 provides more information on the investment pattern in renewable energy by various countries, excluding South Africa and Kenya due to high investment figures. Comparing the investment pattern in both traditional energy project and renewable energy projects, we have observed that, in most of the countries, the investments in the traditional energy systems (thermal generation) were much higher than the investments in clean energy technologies. For instance, the total clean energy investment in Ghana between 2007 and 2017 was $63.3 million, while the investments in the traditional energy infrastructure amount to approximately $5 billion. Similarly, as discussed earlier, Kenya, South Africa, Cameroon and Tanzania are all investing a lot in coal and gas power plants to guarantee the security of power supply. Bellos (2018), attributes this trend to conflict between energy security and energy transition.

4.3.3

Percentage Change in Electrification Rates

During the past decade (2007–2017), Tanzania, Kenya and Zambia, have more than doubled their electricity access rate and have also made remarkable progress in

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600.00 500.00 400.00 300.00 200.00 100.00 0.00 2006

2007

2008 Ghana

2009

2010

Nigeria

2011 Tanzania

2012

2013

Cameroon

2014 Zambia

2015

2016 2017

Congo DR

Fig. 4 Renewable energy investment pattern. Source: Bloomberg New Energy Finance Data (2017)

expanding electricity access to rural communities relative to the regional performance as illustrated in the Fig. 5 below. The progress made in these countries were as a result of firm commitments from the various Governments to create a businessfriendly environment to leverage donor and private investments in the power sector. However, Nigeria, South Africa and DR Congo have not made much progress in terms of percentage increase in electricity access rate during the past decade. The percentage change in both their urban and rural access rates have declined during the period. Their overall performance in terms of the percentage change in electricity access over ten years was far below the regional performance of 36%. The percentage decrease in these countries may be due to the unattractiveness of the power sector to private investments to expand the utility infrastructure to serve the rapidly growing population. The performances of Ghana and Cameroon were relatively moderate, although their respective overall performances were slightly below the regional performance. Figure 5 illustrates the percentage increase in national, rural and urban electrification rate by the various countries during the period: 2007 to 2017 (see Fig. 5).

5 Conclusion The analysis of the electrification policies in the various countries reveal the followings. Firstly, we observed that there are some similarities in the approaches adopted by the various countries to expand electricity access. The similarities in the various policy initiatives include: the establishment of rural electrification fund and agency to coordinate rural electrification projects; the use of renewable energy-based mini-

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% Change Electricity Access Rate 100% 80% 60% 40% 20% 0% Cameroon Congo, Dem. Rep.

Ghana

Kenya

Nigeria

Tanzania South Africa

Zambia

SSA

20% 40% % Change in Nat. Access Rate

% Change in Rural Access Rate

% Change in Urban Access rate

Fig. 5 Percentage change in electricity access rate. Source: World Bank Data (2018)

grids and off-grid to provide electricity access to decentralised communities; implementing financial support schemes to provide financial assistance to local mini-grid developers; initiating policies and incentives to attract active private sector participation in electrification projects. Based on the above, there appears to be a regional approach to dealing with the electricity access deficit in the region. However, the implementation of the various approaches differs from country to country. From the discussion above, relative to the other countries, it appears Kenya has demonstrated more commitments to attracting active private sector participation in the energy sector, which has yielded significant private investments in its energy sector. Similarly, we have also noticed some differences in the electrification approach of the various countries. Countries such as Tanzania, Kenya, and Nigeria have all established specific policies to regulate the development and the operation of a mini-grid system that may be worth emulating by other SSA countries. Most minigrid developers are concerned about the fate of their business when a low-cost grid arrives in their operational area. Nigeria has addressed this challenge by specifying the standards of mini-grid projects in the country and how each category of mini-grid developers is threated in the event of the arrival of the main grid. Also, the establishment of a comprehensive energy information system and the implementation of specific financial support scheme for private mini-grid developers by the Tanzania Government may be worth emulating by other countries. Energy system developers in SSA faces challenges with information asymmetry. Therefore, providing a platform where developers and investors can access a geospatial based data and other relevant information regarding energy projects such as information on tariff scheme, standard technology specifications, policies and regulations for specific technologies may be very attractive to the private sector investors. Accessing information through such a platform could save developers a significant amount of

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money during the feasibility and planning phase of their projects. Besides, we have also observed that integrating the electrification planning process into a centralised coordination body as implemented by both Kenya and South Africa reduces gaps and overlaps in responsibilities which may undermine the electrification program. Secondly, it is evidenced in this study that designing public policies and incentives alone are not enough to incentivise private investments in the energy sector; however, there must be an absolute Government commitment and the political will to implement and enforce such policies. Besides, the design and implementations of such policies must be accompanied by building strong microeconomic and macroeconomic fundamentals to boost investor confidence in the economy. Thirdly, rural electrification must also be accompanied by human capital and economic development projects as being implemented by Tanzania and Zambia. Empowering rural citizen with economic activities may lessen the risk of willingness and ability to pay for power consumed and the risk of productive use of power. Lastly, SSA Governments must also go beyond the legislation of energy efficiency standard to its implementations, and also devise flexible payment plans or microfinance schemes for poor households to enable them to afford high energyefficient appliances. The discussion above highlighted some of the lessons drawn from the electrification policies, strategies and challenges of the various countries studied that may be worth considering by various national policymakers and donors to better target the support and policy designs for universal electrification in Sub-Saharan Africa.

Appendix

Access Deficit, 2017

Access Deficit, 1990 Eastern and South East Asia 17%

Rest of the World 11%

Southern and Central Asia 45%

Sub-Saharan Africa 27%

Fig. 6 Electricity access deficit. Source: IEA et al. (2019)

Eastern and South East Asia 6%

Rest of the World 5%

Sub-Saharan Africa 68%

Southern and Central Asia 21%

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ELECTRICITY ACCESS RATE Rural

97

Urban

84.3

84

84

69

68

62.1 19

1

7

9

17

19

32

33

40

60

65

67

75

80

84

90

96

National

CONGO DR

ZAMBIA

TANZANIA

NIGERIA

C AMEROON

KENYA

SOUTH AFRICA

GHANA

Fig. 7 Electricity access rate. Source: World Bank Data (2017)

Inflation Rates 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2007

2008

Cameroon

2010

2011

Congo, Dem. Rep.

2009

Ghana

2012 Kenya

2013 Nigeria

2014

2015

Tanzania

2016 South Africa

2017

2018

Zambia

Fig. 8 Fluctuations in the inflation rates of the sampled countries. Source: World Bank (2018)

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70 60 50 40 30 20 10 0 2007

2008

2009

Congo, Dem. Rep.

2010 Ghana

2011 Kenya

2012 Nigeria

2013 Tanzania

2014

2015

South Africa

2016

2017

Zambia

Fig. 9 Lending rates. Source: World Bank (2017)

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Creti A, Barry M, Zigah E (2021, March 11) Are mini-grid projects in tanzania financially sustainable? - climate economics chair | our economic choices in the face of climate change. https://www.chaireeconomieduclimat.org/publications/14191/?highlight=financial sustainabil ity of mini-grids. Accessed 26 Oct 2022 Dinkelman T (2011) The effects of rural electrification on employment: new evidence from South Africa. Am Econ Rev 101(7):3078–3108. https://doi.org/10.1257/aer.101.7.3078 Eberhard A, Shkaratan M (2012) Powering Africa: meeting the financing and reform challenges $. Energy Policy 42:9–18. https://doi.org/10.1016/j.enpol.2011.10.033 Eberhard A, Gratwick K, Morella E, Antmann P (2016) Independent power projects in Sub-Saharan Africa: lessons from five key countries. The World Bank. https://doi.org/10.1596/978-1-46480800-5 Energy Commission of Ghana (2015) 2015 Energy Supply and Demand Outlook for Ghana. (April), 1–51 Federal Republic of Nigeria (2018) Federal Republic of Nigeria Power Sector Recovery Programme: 2017-2021 Herbst JI (2000) States and power in Africa: comparative lessons in authority and control IEA (2017) WEO-2017 Special Report: Energy Access Outlook IEA; IRENA; UNSD; WB; WHO (2019) Tracking SDG 7: The Energy Progress Report 2019 IFC (2013a) Enterprise Surveys: Ghana Country Profile 2013 IFC (2013b) Toward Universal Energy Access: Designing a New Household Electrification Strategy for South Africa Irena (2015) Ghana Renewables Readiness Assessment Kanagawa M, Nakata T (2008) Assessment of access to electricity and the socio-economic impacts in rural areas of developing countries. Energy Policy 36(6):2016–2029. https://doi.org/10.1016/ J.ENPOL.2008.01.041 Kapika J, Eberhard A (2013) Power sector reform and regulation in Africa. HSRC Press, Cape town Kirubi C, Jacobson A, Kammen DM, Mills A (2009) Community-based electric micro-grids can contribute to rural development: evidence from Kenya. World Dev 37(7):1208–1221. https:// doi.org/10.1016/J.WORLDDEV.2008.11.005 Muh E, Amara S, Tabet F (2018) Sustainable energy policies in Cameroon: a holistic overview. Renew Sustain Energy Rev 82:3420–3429. https://doi.org/10.1016/j.rser.2017.10.049 Ndongsok D, Ruppel O (2017) State of Electricity Production and Distribution in Cameroon Newbery D, Eberhard A (2008) South African Network Infrastructure Review: Updated 2008 A paper written for National Treasury and the Department of Public Enterprises Government of South Africa Odarno L, Sawe E, Swai M, Katyega MJJ, Lee A (2017) Accelerating Mini- Grid Deployment in Sub-Saharan Africa. 102 Pueyo A (2018) What constrains renewable energy investment in Sub-Saharan Africa? A comparison of Kenya and Ghana. World Dev 109:85–100. https://doi.org/10.1016/j.worlddev.2018. 04.008 Pueyo A, Bawakyillenuo S, Osiolo H (2016) DS Evidence Report No 190 Cost and Returns of Renewable Energy in Sub-Saharan Africa: A Comparison of Kenya and Ghana REMP (2019) Ghana Renewable Energy Master Plan Republic of Kenya (2018a) Kenya National Electrification Strategy: Key Highlights 2018 Republic of Kenya (2018b) Updated Least cost power development plan 2017-2037 RISE (2018) Policy matters regulatory indicators for sustainable energy Trotter PA (2016) Rural electrification, electrification inequality and democratic institutions in sub-Saharan Africa. Energy Sustain Dev 34:111–129. https://doi.org/10.1016/j.esd.2016. 07.008 Trotter PA (2019) Ambitions versus policy design: addressing issues of the Power Africa initiative’s quantitative targets. Energy Policy 128:900–906. https://doi.org/10.1016/j.enpol.2019.01.035

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Trotter PA, McManus MC, Maconachie R (2017) Electricity planning and implementation in sub-Saharan Africa: a systematic review. Renew Sustain Energy Rev 74:1189–1209. https:// doi.org/10.1016/j.rser.2017.03.001 USAID (2017) USAID - DRC Report_FINAL_03-28-2017.pdf USAID (2018a) Ghana Energy Sector Overview USAID (2018b) Power Africa’s Engagement in Nigeria World Bank (2014) Electric power consumption (kWh per capita) | Data World Bank (2016) Access to electricity, rural (% of rural population) | Data World Bank (2018) Kenya Charts Path to Achieving Universal Access to Electricity World Bank (2019a) Doing Business 2019 - Training for Reform World Bank (2019b) Doing Business 2019 (Training for Reform)

Elias Zigah is a Research Associate at the Florence School of Regulation with research interests in energy transition, power sector regulation and market design. He was a former researcher at the Climate Economics Chair in Paris, an organisation which researches the economics of climate change to inform the actions of policy makers, industry, academia and the public. Elias holds Master of Development Economics from Clermont Auvergne University in France and Master of Science in International Energy Studies from the University of Dundee in the United Kingdom. Anna Creti Full Professor of Economics at Paris Dauphine University and Director of Climate Economics Chair (Chaire Economie du Climat). Senior Research Fellow, Department of Economics, Ecole Polytechnique. Visiting Research Fellow, University of California at Berkeley, Energy Institute. PhD in Economics, with “mention très honorable with les félicitations du jury”, Université de Toulouse I, 1998, “Networks, Telecommunications and Growth” Advisor: Patrick Rey.

Conclusion: What Does the Future Hold for the Energy Sector? Katarzyna Gromek-Broc

Abstract The concluding remarks provide a brief assessment of the volume, bringing to the reader’s attention a few themes, not covered here, that merited to be included in this book. The main focus is however, on the energy crisis, the consequences of the war on Ukraine and the future of the energy sector in the global context. These final observations look at the research topics that will interest scientists, scholars and politicians in the coming years such as storage of radioactive waste, storage of renewable energy or inexhaustible clean energy sources. In addition, some solutions to the energy crisis and a number of recommendations on how to accelerate the energy transition are also considered. It is suggested to strengthen the international cooperation, to enhance climate and energy diplomacy and to build the new partnerships. It is also recommended to give some further thoughts to decentralised energy models, invest in technological progress and renewable energy production, favouring for now mix sources and flexibility.

The contributions presented in this volume cover the most pressing issues the energy transition raises in Europe and globally. Nonetheless, many more themes merited consideration and other topics could have been included. For example, the concerns of the energy sector in the Arab Gulf Countries, India and the US, missing here, would have been a great addition to this book. At the conference in December 2020, Francis Botchway, presented a paper on “Old energy in a post-fossil fuel World: Quo Vadis the Middle East?” that alas does not appear in this book. Even if, these topics were included here, new subject areas are constantly emerging. At the time of writing, there are important developments in the energy sector stemming from the consequences of the Russia’s invasion of Ukraine on the energy supply; the efforts to diminish the energy dependence from Russia, the energy shortage and the new

K. Gromek-Broc (✉) Department of Political and Social Sciences, University of Pavia, Pavia, Italy Autorità di Regolazione per Energia Reti e Ambiente (ARERA)/Regulatory Authority for Energy, Networks and Environment, Milan, Italy e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 K. Gromek-Broc (ed.), Regional Approaches to the Energy Transition, https://doi.org/10.1007/978-3-031-19358-3_17

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strategies for the energy production and saving. Russia was a mayor key player in energy production World widely and a number one on the coal market, thereby the Ukrainian war affects energy market at the global scale and shapes the future global energy trends.1 In these times of turmoil in the energy sector, the book on ‘Regional Approaches to the Energy Transition: A Multi-Disciplinary Perspective’ feeds into the current political debate. Its multidisciplinary approach places the energy transition in a wider context and explores the interaction between the disciplines. This is one of the strong points of this volume. The interplay between science, politics and the law is fundamental to bring some specifically tailored responses and durable solutions to the energy problems. We need political will, financial support, a circular economy and the law that would facilitate the implementation of sometimes very ambitious agendas. We need the regions to engage with the innovation and initiatives. The book is a comprehensive study analysing the energy transition in the regions but also providing fertile ground for further academic research and reflection. It is argued that the regional approach is needed to accelerate the transition since the region-specific solutions will increase efficiency of actions and encourage the progress. The contributions are very diverse, connected together through the leading themes such as the energy transition, environmental protection, climate change and sustainable development. The energy transition lies at the heart of the debate on climate change, being a sine qua non condition for achieving the climate targets; a vehicle to meet the environmental goals set up in the 2015 UN Global Agenda. Apart from the regional examples, the strategies and good practice, the book provides a valuable discussion bringing to the reader’s attention some important issues arising from the transition. To this extent, the book considered growing importance of environmental protection and the role of environmental principles in contemporary constitutionalism as well as the Human Rights concerns that the energy transition inevitably triggers. It also stressed the importance of an inclusive transition and social justice. A sociolegal perspective is explored by Heffron and Pepe who examined energy justice as a crucial component of ‘a just transition’. Social aspects of the transition are a subject for further studies since the transition will inevitably trigger social disparities and the additional efforts are needed to ensure that the process is ‘socially just2 and fair”.3 The book, ‘Regional Approaches to the Energy Transition: A Multi-Disciplinary Perspective’, starts with the European Perspective. In fact, the EU is leading at the

Birol F in Marchant N, Davos 2022: We are in the middle of the first global energy crisis. Here’s how we can fix it at https://www.weforum.org/agenda/2022/05/first-global-energy-crisis-how-tofix-davos-2022/. 2 Joint Communication to the European Parliament, the Council, the European Economic And Social Committee and the Committee of The Regions, EU external energy engagement in a changing world {SWD(2022) 152 final}, Brussels, 18.5.2022, JOIN(2022) 23 final at https://eurlex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52022JC0023. 3 Pellerin-Carlin et al. (2019). 1

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international arena in the fight against climate change and has potential to become “the prototype of a successful global transition to a climate neutral economy”, spreading its schemes and good practice across the World.4 In comparison to the rest of the World, the EU seems to be well-equipped in the fight against climate change, having appropriate investment,5 support of civil society, workers and entrepreneurs.6 Nonetheless, prior to the EGD, the pace was judged too slow to make a significant difference.7 Bresso, in her contribution, succinctly unravelled a road map for the EU in the post-Covid era, looking at the Next Generation EU Fund—an instrument facilitating the transformation towards the greener EU economy and assisting the initiatives to combat climate change. She also stressed the need to boost the renewable energy production in the EU. The adoption by the Von der Leyen’s Commission of the European Green Deal as a top priority, is an important step towards greener and more sustainable EU. In brief, there are three major challenges in this area that the EU is facing: to reduce greenhouse gas emissions, to develop renewable energy and to improve energy efficiency.8 At the conference in December 2020, Ilaria Galimberti addressed the topic on ‘The energy transition - The Italian approach and the EGD’, regrettably not included in this volume. Nevertheless, the implications of the EGD for various policy areas will certainly attract in future further analysis and scholarly reflection. Apart from the EU Initiatives, this volume also includes two chapters analysing countries having a strategic role in the energy transition: one considers the tendencies in regulation of renewables in Russia, and another the greenification of oil and gas sector in Norway. Furthermore, at the global level, the book provides insights into the energy transition on other continents considering China, Sub-Saharan Africa, Australia, Latin America, that could possibly be linked together by the thread—a reflection on ‘Ineluctable Transnationalism’, stemming from one of the contributions to this volume. Future scholarship will inevitably consider how to enhance renewable energy deployment, strengthen the energy laws and influence consumer behaviour in order to diverse the options towards the green options for eco-friendly and wiser use of energy.9 The future of energy policies lies with ‘understanding the interdependencies of opportunities’.10

4

Ibid, [3]. Rubio (2019). 6 Ibid, [3], Pellerin-Carlin. 7 Ibid, [3]. 8 Ibid., [3]. 9 Ibid, [1] Marchant N, Davos 2022. 10 Berahab R (2020) Global trends in the energy sector and their implication on energy security in NATO’s southern neighbourhood, Blog, https://www.realinstitutoelcano.org/en/analyses/globaltrends-in-the-energy-sector-and-their-implication-on-energy-security-in-natos-southernneighbourhood/. 5

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Certainly, the new books on energy will explore further the current global trends in the energy sector. In Europe, the EU is taking dynamic steps to handle the energy crisis. In May 2022, the European Commission adopted a plan aiming at making the EU independent from Russian fossil fuels gas supplies that is supposed to accelerate the transition towards renewable gases and to reduce demand for Russian gas by two thirds before by the end of 2022.11 Likewise, at the global level, global energy crisis is affecting, economies, businesses, industries and the energy users. Habeck talks about the interwoven problems linking high inflation, energy crisis, food poverty and climate change.12 Thus, the solutions to these mingled problems should not prioritise any of these ‘emergencies’ since they are intrinsically linked. Yet, the solutions to current energy crisis cannot favour energy production and supply at all cost putting in the second place the emergency of climate change. The right investment should foster the integrated approach.13 Whereas, the Growth of Energy investments need to be steered by “renewables and decarbonisation technologies”.14 MacGregor points out that accelerating the renewable energy transition is vital to fight the energy crisis. She hopes that this crisis might ‘do a favour to the nature’ in making renewable energy acceptable to those who oppose wind farms and solar plants, and will convince them that renewables represent a way forward since they will reinforce European energy independence.15 The strategies to combat the crisis focus on a combination of different factors. The most important ones are associated with the transition and stress the importance of decarbonisation, energy efficiency and conservation, energy access and security throughout the technological innovation leading to digital transformation, access to finance, while observing environmental principles and sustainability.16 In these concluding remarks we might ask what the future holds? What are the future challenges? What else could be done to accelerate the transition? Without doubt, the International cooperation is needed to support the transition and to prevent uneven progress and disparities between the countries. This would mean in practice, the right investment, congruent strategies, agreed priorities and timeframes. International cooperation should enhance energy security and environmental protection and lead to the improvement of the energy efficiency and the promotion of the technological progress.17 International cooperation could also assist with the new infrastructure indispensable to accelerate the transition, such as “large power generation facilities, oil and gas pipelines, electricity transmission systems” and at a smaller-scale “infrastructures including gas and electricity

11 REPowerEU: A plan to rapidly reduce dependence on Russian fossil fuels and fast forward the green transition, 18 May 2022. 12 Habeck R, in [1]. 13 Birol in [1]. 14 Tryggestad et al. (2022). 15 Ibid., [1]. 16 Ibid., Berahab R, [10]. 17 Pingkuo and Zhaohui (2022), pp. 2601–2616.

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distribution systems, energy storage facilities, off-grid power generation, and a variety of ‘smart’ infrastructures that create new dynamics of energy management”.18 The EU also aims at strengthening its climate and energy diplomacy, fostering Trade Agreements and their implementation, building new partnerships and reinforcing the existing ones, working with international organisations such as the OECD, the IEA and IRENA on supply chains and technology transfers.19 Even though, the merits of a regional approach to the energy transition have been widely acknowledged throughout this book, a few points, relevant to the current energy crisis, need to be emphasised in the conclusion. Some EU examples of decentralised energy models show that they develop fast and create energy networks, mainly in the electricity sector.20 They also concentrate on local energy resources, local storage and direct consumption being key factors in achieving the energy transformation.21 In the end, costs for the grid connection can potentially be reduced, lowering in that way the price of electricity.22 More importantly, it is expected that a decentralised energy model would eventually lead to “new energy autonomy.”23 It also needs to be said that a decentralised energy model brings more profound changes in the energy sector, altering not only the perception of energy but bringing to the fore the new questions regarding bioenergy villages, energy cooperatives, and municipal utilities, building development, integrated planning and the use of technology.24 All of them require further assistance and financial support. Furthermore, engaging with technological progress and innovation is fundamental and it applies to all choices, alternatives and stages of transition. Emerging technologies hold promise. Better battery technology, better nuclear waste storage, or wave power. The US researchers claim that using the technology they could increase renewable energy storage capacity by as much as 3000% by 2050.25 The market of EV charging is expanding, publicly available EV charging points increased by almost 40% in 2022, however a wider access to services will be facilitated in future.26 But, we need to accept that current technologies have drawbacks e.g. windpower creates waste that is difficult to recycle27 and the lifecycle of

18

Bridge et al. (2018), pp. 1–11. Ibid, [2] Joint Communication, EU external energy engagement in a changing world. 20 Energy liberation: decentralised energy systems coming our way? (2022), Trends at https:// leonard.vinci.com/en/the-energy-liberation-decentralised-energy-systems-coming-our-way/. 21 Göhler et al. (2021), p. 6874. 22 Timme, M.; Kocarev, L.; Witthaut, D. (2015) Focus on networks, energy and the economy, 17, 110201 in Göhler, G et al. 23 Ibid, [20] Energy liberation: decentralised energy systems coming our way? 24 Burger and Weinmann (2014), pp. 49–73 in Göhler G et al. [20]. 25 3 emerging technologies that will give renewable energy storage a boost (2021) at https://www. weforum.org/agenda/2021/08/3-technologies-to-improve-renewable-energy-storage-capacity. 26 Trends in charging infrastructure, Global EV Outlook 2022 at https://www.iea.org/reports/globalev-outlook-2022/trends-in-charging-infrastructure. 27 Martin (2020). 19

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wind turbines is not very long.28 Efficiency of solar panels is low.29 However, inefficiencies of current technologies should not be an excuse for a delay since there is no time to waste. Instead, we need to foster research for which public investment is essential. Further consideration needs to be given to socio-economic consequences of transition in particular, to support and protect the population from its adverse impact. The policies must acknowledge that the transition is a joint effort, and ensure that excessive profits are not generated without compensation for the society and the public investment. Renewable energy production is central for the successful transition and as a subject will fascinate researchers and scientists for the years to come.30 Demand for renewable energy is in a constant rise estimated to “to increase globally by 64% between 2018 and 2030”.31 Renewable energy exploitation served mainly the electricity sector being the fastest growing area expecting to reach 37% in 2030, compared with 26% in 2018, whereas the use of renewables in transport and heatingcooling sectors is behind.32 But, the use of renewables in future is going to improve dramatically, in transport is expected to double, mostly relying on biofuels and renewable electricity.33 It will also rise in heating depending on ‘modern biomass, renewable electricity and solar thermal’.34 In the long run, fossil fuel has no future as an energy source. Nonetheless, it is not realistic to believe that it will be not relied upon in the years to come. Berahab warns that developing regions are more likely to rely on fossil fuel in the near future and CO2 emissions in these countries are likely to rise.35 He argues that industrialisation, urbanisation and economic development will drive higher energy demand mostly met by fossil fuels.36 It is important to acknowledge that the energy transition is a journey, a process, we should not allow any delays but accept that there are not immediate short-term solutions. In relation to energy sources, there is a generally agreed opinion that mix sources and grid flexibility represent at this stage an optimal solution. Renewable energy generation requires right planning and storage. Generation of renewables is unreliable, depending on atmospheric conditions such as wind and solar power

28 How Long Do Wind Turbines Last? Can their Lifetime Be Extended? at https://www.twi-global. com/technical-knowledge/faqs/how-long-do-wind-turbines-last. 29 Why Are Solar Panels Inefficient? 2022, https://greentumble.com/why-are-solar-panelsinefficient/#:~:text=When%20the%20layer%20is%20too,thickness%20of%20the%20ice%20 layer. 30 Ibid, Berahab R, [10]. 31 Ibid, [10]. 32 Ibid, [10]. 33 Ibid, [10]. 34 Ibid, [10]. 35 Ibid, [10]. 36 Ibid, [10].

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and it needs to be managed in a way to satisfy the demand and ensure a constant supply.37 Flexibility allows to maintain the balance between power supply and demand while maintaining operating reserve in a response to the variability within the power system.38 The solution for the uncertainty of renewables lies with storage and smart charging of EVs and EV infrastructure that will be a cheaper solution and will provide flexibility to deal with variable renewables. Even if the quality of batteries is improving, they can only be used in short-term renewable energy storage and we still need a long term storage solution. The ultimate goal is to store unlimited quantity for an indefinite time.39 Recently, nuclear energy has been at the heart of vibrant controversy at the EU forum.40 The EU eventually recognised it as green energy source, backing investments in gas and nuclear power plants. In fact, it is free from CO2 emissions but produces radioactive waste.41 Future research and technology might find a solution to it. Finland for example, is the first country that is developing a permanent storage for radioactive waste.42 If it proves secure and viable, it would be a decisive step towards a greener Planet. For the time being, nuclear power plants are expensive to build and they need to be “dispatchable on-demand power sources”.43 In the long term we would need to substitute fossil fuels and research is ongoing in this direction. Possible substitutes to be considered are synthetic fuels—a combination of Hydrogen obtained from water hydrolysis or recovered CO,44 but, we are still in the embryonic phase of research. Hydrogen and ammonia might replace the batteries and be used for running heavy equipment.45 In addition, researchers are looking at battery alternatives for renewable energy storage, for example, concentrated solar power plants may use mirrors to concentrate sunlight heating up salt.46 The process is costly but the researchers consider to replacing salt by sand that might lower the cost of the process.47 Research is also on the way to produce hydrogen and

37

Challenges and solutions enabling the energy transition (2022) EATON at https://www.eaton. com/pt/en-gb/company/news-insights/energy-transition/challenges-and-eaton-solutions.html. 38 Lee et al. (2021), p. 709. 39 Ibid, [25]. 40 https://www.reuters.com/business/sustainable-business/eu-parliament-vote-green-gas-nuclearrules-2022-07-06. 41 Abnett K, EU Parliament backs labelling gas and nuclear investments as green https://www. reuters.com/business/sustainable-business/eu-parliament-vote-green-gas-nuclear-rules-2022-07-0 6/. 42 The world’s first permanent nuclear-waste repository | DW News 10th August 2022, https://www. youtube.com/watch?v=gc1r-ARQK0s. 43 Ibid [37]. 44 Ibid, [37]. 45 Ibid [25]. 46 Ibid. [25]. 47 Ibid [25].

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other fuels using renewable electricity,48 aiming eventually to produce efficiently and at low cost inexhaustible, fully renewable, clean energy. The new energy sources of the future, clean and unlimited, may not yet be a viable solution (nuclear fusion, hydrogen) but every day science brings a new advancement in this domain. We need to be optimistic and believe in science. For example, fusion, the nuclear reaction that powers the sun and the stars, could be a potential source, carbon free, safe and unlimited.49 Concluding, future is full of promise, energy provides us with an intriguing scenario for the years to come and will certainly trigger other research, scientific debate and analysis.

References Bridge G, Özkaynak B, Turhan E (2018) Energy infrastructure and the fate of the nation: introduction to special issue. Energy Res Soc Sci 41:1–11. https://doi.org/10.1016/j.erss.2018.04.029 Burger C, Weinmann J (2014) Germany’s decentralized energy revolution. Revolution in distributed generation and its implications for the utility industry (ch. 3), pp 49–73. https://doi.org/10. 1016/B978-0-12-800240-7.00003-5 Göhler G, Klingler A-L, Klausmann F, Spath D (2021) Integrated modelling of decentralised energy supply in combination with electric vehicle charging in a real-life case study. Energies 14:6874. https://doi.org/10.3390/en14216874 Lee D, Lee D, Jang H, Joo S-K (2021) Backup capacity planning considering short-term variability of renewable energy resources in a power system. Electronics 10:709. https://doi.org/10.3390/ electronics10060709 Martin C (2020) Wind turbine blades can’t be recycled, so they’re piling up in landfills. Green Energy & Science. https://www.bloomberg.com/news/features/2020-02-05/wind-turbineblades-can-t-be-recycled-so-they-re-piling-up-in-landfills Pellerin-Carlin T, Magdalinowski E, Vinois J-A (2019) New beginnings, the European green deal starts with the energy transition, 2019. Jacques Delors Institutes, Berlin & Paris. https:// institutdelors.eu/wp-content/uploads/2020/08/1-ENERGY-Pellerin-Carlin2.pdf Pingkuo L, Zhaohui H (2022) Strategic analysis and framework design on international cooperation for energy transition: a perspective from China. Energy Reports 8:2601–2616. https://doi.org/ 10.1016/j.egyr.2022.01.173 Rubio E (2019) “An EU budget in support of the next commission’s agenda”, New beginnings. Jacques Delors Institutes in Paris & Berlin, September 2019. https://institutdelors.eu/wpcontent/uploads/2019/09/9-BUDGET-Rubio-1.pdf Tryggestad et al (2022) Global Energy Perspective 2022, April 2022. McKinsey’s Company. https://www.mckinsey.com/industries/oil-and-gas/our-insights/global-energy-perspective-2022

Katarzyna Gromek-Broc is a Professor in EU Law at the Department of Political and Social Sciences, University of Pavia. Jean Monnet Module Bid Winner in 2020 and, in 2021, as a Team Member (EUA Africa-Connect). She was awarded a prestigious VLOEBERGHS CHAIR in Law, at the VUB (Vrije Universiteit Brussel), Brussels in 2019. She is also a Member of Brussels Diplomatic Academy. Currently, she has been working on a number of projects involving the EU

48 49

Ibid [25]. Unlimited energy, https://www.iter.org/ accessed August, 2022.

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and Latin America on Energy and Food Security. She taught and researched widely in Europe, Asia, Australia and South America namely at the Institute of European Studies of Macau, Golden Gate University, San Francisco, Stetson College of Law, Florida and many others. Her research attracted numerous awards and funding: the AHRB Award, the British Academy Award; won Strategic Fund Competition, more recently secured some funding for two projects: one on Energy Transition, and another on Law and Technologies. She collaborates with a number of International Organisations, recently, with NATO on Stability Policing. After her PhD at the EUI in Florence, she worked at the University of Hull, later at the University of York, UK, being a founding member of the York Law School.