Climate and Energy Risks: A Transatlantic Comparison

On April 8, 2013 AGI and the Stiftung Wissenschaft und Politik (SWP) hosted an off-the-record conference on “Climate and Energy Risks: A Transatlantic Cooperation.” The conference was generously supported by the Transatlantik-Programm der Bundesregierung der Bundesrepublik Deutschland aus Mitteln des European Recovery Program (ERP) des Bundesministeriums für Wirtschaft und Technologie (BMWi). An interdisciplinary group of scholars and experts from Germany and the United States discussed the following topics on four different panels: energy security, the shale gas challenge, nuclear energy, and mitigating and adapting to climate risks. This conference was part of an ongoing project on “New Systemic Risks: Challenges and Opportunities for Transatlantic Cooperation,” which examines the impediments and opportunities for transatlantic risk management.

Panel 1: Energy Security

What is the impact of oil, renewable energies, and shale gas on energy security in the U.S. and Europe? A review of U.S. energy security revealed mixed results. On the one hand, the U.S. is experiencing a “shale gas revolution” and excess natural gas could be exported to help balance the budget and trade deficit. The U.S. also has enough coal to last for 250 years, increasing its potential energy independence. On the other hand, oil dependency remains problematic and is the primary challenge to U.S. energy security.

Europe has also received mixed reviews on energy security, though for different reasons.  Europe has aggressively and successfully pursued its renewable energy goals, now at 12 percent of its targeted 20 percent of energy generated by renewables by 2020. European, and more specifically German, insecurities stem from its dependency on gas from Russia, its primary natural gas supplier. The EU must also play a greater role in ensuring successful east-west transfers of energy, such as gas, within Europe. This could include a market-based approach by establishing a European regulatory agency. The lack of a common market and regulatory body in Europe means individual states have less incentive to harmonize energy across borders.

Although the U.S. and Europe face different issues at present, both the U.S. and Europe need to diversify their energy portfolios in order to reduce the risk of dependency on a single energy source. Each should exploit domestic energy resources while maintaining benefits of trade with neighboring countries, whether the U.S. and Canada or European countries.

Panel 2: The Shale Gas Challenge

The extraction of shale gas in Germany and the EU is a fairly new idea, and currently there is no production in this region. However, the U.S. has significant experience in this field and some analysts predict it could lead to U.S. energy independence by 2020. This panel discussed the risks and measurement of risks involved with extraction of shale gas, the need for an exchange of ideas across the Atlantic, and the impact of shale gas on foreign relations.

Due to the decentralized nature of environmental and energy policy in the U.S., there is not a single database that contains all incidents of shale gas extraction. The measurement of risks and what is defined as an incident differs by state. This makes it difficult to compare the U.S. experience with other countries. There are some organizations like Resources for the Future that aim to compare practices between American states and to measure public and expert opinion across the board. In the EU, shale gas extraction has not been pursued to the same degree. Some of the reasons are the higher costs of extraction (due to higher clay contact, denser population, and the need to drill deeper), stronger public opposition, decreasing demand as as coal costs decrease, and a more risk-adverse EU regulatory framework.

The reduction of need for foreign gas in the U.S. market could significantly alter foreign relations with Russia and the Middle East. The new challenge for Europe is to convince the U.S. that Europe is indispensable in this new balance of power, and the challenge for the U.S. is to use this leadership position with wisdom.

Panel 3: Nuclear Energy

As the U.S. and Europe begin integrating carbon-free options into their energy portfolios, they debate the risk of including nuclear energy as a viable alternative, particularly in the wake of the events in Fukushima, Japan in 2011.  The U.S. and France, for example, are pro-nuclear, while countries such as Germany have decided to phase out nuclear power. Understanding the distinction between “nuclear safety” (within a power plant) and “nuclear security” (plutonium development, terrorist attacks, etc.) is an important part of the general European discussion on the risks of nuclear energy, as outlined in the European Council assessment of nuclear energy in 2011.

Bipartisan political support and public opinion polls in favor of nuclear energy indicate that U.S. nuclear energy policy will not change in the near future. Despite widespread support, problems remain. New plants are extremely expensive to build and determining interim storage locations for nuclear waste has faced political challenges.  Some have offered creative nuclear alternatives instead of abandoning nuclear energy entirely. For example, rather than building an entire multi-billion dollar reactor on site, researchers and engineers have designed small modular reactors that can be made in factories and shipped to their final locations.  Generally, the U.S. pro-nuclear stance has remained constant.

Due to Germany’s population density, where to store nuclear waste has become a sensitive political issue, an issue which is of similar concern in the U.S. While risks surrounding nuclear power plants have not changed, overall German perceptions have shifted drastically over the past few years. Germany now envisions a post-nuclear era and plans to phase out nuclear energy by 2022.  The question is now not whether to abandon nuclear energy, but rather which energy source is its best replacement. Thus far, Germany has emphasized renewables as the best long-term solution.

Panel 4: Mitigating and Adapting to Climate Risks

Policymakers’ efforts at mitigating versus adapting to climate risks both in the U.S. and the EU depend mainly on public perception of the risks, which is judged through polls and level of coverage in the media. In order to take action, environmental risk must be made a priority, which is tied to economic and security risks. The media’s role is to make a personal connection, as exemplified after Hurricane Katrina. The communication of risk to American and European citizens is important, especially in order to gain awareness of environmental impacts on less industrialized countries and determine what can be done to reduce the global environmental threats.

On a positive note, greenhouse gas emissions are being reduced in the U.S. and Europe and both are getting closer to reaching the Kyoto Protocol goals. Clean energy jobs are lucrative and on the rise. Much progress has been made and it is important to continue to look at the mitigation of climate risk as the common goal of a variety of sectors using a combination of techniques.

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Kimberly Frank