Georgetown University President John J. DeGioia (Left) & European Commission President Barroso

SPEAKING WITH A COMMON VOICE: ENERGY POLICY IN THE 21ST CENTURY
José Manuel Durao Barroso
President of the European Commission

Honorary Degree Ceremony
Georgetown University
Washington, DC
February 9, 2006

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President DeGioia,
Your Excellencies,
Ladies and gentlemen,

It is indeed with a deep sense of honour that I receive this great University’s highest tribute – the degree of Doctor of Humane Letters. I thank Georgetown University from the bottom of my heart.

As Professor Mujal-Leon just mentioned, I spent 2 very happy years here with my family as a visiting professor in the late 1990s. But in fact my ties to Georgetown University go back even further. I also spent time here as a visiting scholar back in the early 1980s.

My academic interest then focused on the comparative politics of democratization: how the early seeds of democracy in Southern Europe might also transform Latin America. And I can here today confirm what we believed then, and I what I believe even more strongly today, that democracy spreads.

We know, of course, that the democratic transformation of Portugal, Spain and Greece brought these countries into the European Union. And after the collapse of the Soviet Union, others joined them from central and eastern Europe.

The Union today is a powerful tribute to the transformative power of democracy: 25 Member States - soon to be 27 - with a combined population of 450 million soon to be over 500 million people, coming together of their own free will as a Union.

And in the Union’s neighbourhood, along its eastern and southern borders, others are also taking steps of their own towards democratic transformation, inspired by the example and desirous of a shared future with the Union.

A few years after my first stint at Georgetown, I returned to teach European Union foreign policy.

Here too, we have come a long way. Of course, challenges still remain to delivering an effective and cohesive EU foreign policy. But let’s not forget that we are 25 countries. When judging how well the Union does in this area we should compare it to another group of 25 similar countries with equal ambition. But, beyond the quite unique European Union, none such grouping exists.

For the Union to forge ahead in its common foreign policy as in other areas, we need to have the will of the people and EU citizens have categorically supported an active European Union on the world stage, ready to take on the challenges of globalization and defend the interests of the Union.

One of the most rapidly evolving global issues is one that affects us all: energy.

I know how much this university is committed to studying and debating global issues - and there are few greater geopolitical challenges confronting us today than energy. So I would like to take this opportunity to share some of Europe’s ideas on the subject with you.

Like the US, the European Union has also been reflecting on energy issues, and in many areas we are drawing similar conclusions, as President Bush outlined in his State of the Union address last week.

After a long period of relative stability, a few recent incidents have reminded us of some uncomfortable home truths. We can no longer take secure and affordable energy supplies for granted. Global energy demand is rapidly increasing, not least because of rising prosperity in China and India. Meanwhile, mature hydrocarbon reserves in Europe and America are being exhausted. So it is uncertain how future demand will be met, and at what cost to our economies and the environment. This swiftly rising demand is also intensifying global competition for access to energy.

So Europe, like the US, is being exposed to increasingly intense competition for global energy resources from other parts of the world and is becoming ever more dependent on oil and gas imports from geopolitically uncertain regions.

But it is not just a question of supply and demand. Issues like access to transportation networks, and the security and safety of energy infrastructures and transportation routes, are becoming major strategic policy issues.

The role of nuclear power and renewable energy sources, the necessity of promoting energy efficiency and energy savings and the challenge of climate change have moved to the centre stage of international politics and business decisions.

These are issues the EU and US can ill-afford to ignore. The EU is already the largest importer and second largest consumer of energy in the world. We are currently dependent on external sources for 50% of our energy needs. Thanks to rising demand and falling domestic production, this could rise to 70% by 2030.

We have to do something about this, and we have to do it now. This is because lead times for investment in the energy industry are so long. It can take many years for changes in policy to filter down into results on the ground. The year 2030 may seem a long time away now, but it is the day after tomorrow in energy terms.

Thanks in part to the European Coal and Steel Community and Euratom, energy has always been an implicit motor for integration on our continent. That is continuing today, although there is more to do.

However, there have been diverging positions internally and externally on this issue. The EU’s Member States have often regarded energy policy as a domestic, not European issue; in their energy relations with Russia, for example. And there remain deep sensitivities. For example, while some Member States rely on nuclear power for the vast majority of their energy needs, others have dismantled their nuclear plants and banned the building of any new ones.

Recent events, however, have done a lot to focus minds, and a quiet revolution has been taking place: the development of broad support across Europe for the idea of a common energy policy.

National leaders and citizens in Europe can all see the benefit of such a policy. It is a perfect example of common sense driving integration.

The European Commission will lead the debate, by launching a public consultation paper on the subject next month.

This will outline the main strategic challenges which we share with all energy-consuming countries: our increasing reliance on imported energy; the need to promote transparency and predictability on world energy markets; the need to continue improving energy efficiency; making sure that new investments in oil and gas production, refining and transporting are made in good time; ensuring a diverse energy mix, with an increased share for indigenous, low-carbon and renewable energy sources; and the need to diversify our gas supply, in particular through the development of liquefied natural gas.

Our mantra throughout must be ensuring Europe’s competitiveness, safeguarding our environmental objectives and ensuring our security of supply.

Security of supply in particular has many facets. First and foremost, it depends on the commercial and legal environment for companies investing in energy production, transport and distribution. The recent and continuing accession of several big energy-producing countries to the World Trade Organisation will have a beneficial effect in this respect.

But energy security is also affected by possible disruptions caused by accidents, sabotage or terrorism. Protection of energy facilities and critical infrastructure is just as important as their safety.

Russia’s decision to make energy security one of the priorities of its G8 presidency this year offers an important opportunity. It has already tabled [brought to the table] some interesting ideas which, if implemented, would help avoid the kind of unfortunate dispute we witnessed earlier this year between Russia and Ukraine. More than a quarter of Europe’s oil and gas consumption is supplied by Russia, and this incident temporarily affected gas supplies to several EU Member States. It was an important wake-up call for Europe.

Let me stress that, as much as it is in the EU’s interest to have a steady supply of energy from Russia, so it is in Russia’s interest to have secure demand from a prosperous EU at its doorstep and European technology and know-how to help get the oil and gas out of the ground.

As the US has also recognized, investment in technology must also be a part of the mix. Europe has unique structures favouring low-carbon technologies, including our market-oriented mechanism of emissions trading - an idea inspired by the US Acid Rain Programme - which is a key component of our efforts to combat climate change.

So we have the potential to become a world leader in the potentially huge global market for clean, low-carbon, energy technology. And we must look at every possibility. That is why, yesterday, my Commission made proposals of biofuels. We need to advance our research in this area.

But new energy technology is only one part of the answer. We also need policies that encourage us to use energy much more efficiently, for example in the transport sector. This is an area where the EU and the US can and should work more closely together.

There should be an important external strand to Europe’s more integrated energy approach. When we depend increasingly on imports of energy, we cannot separate the external from the internal.

Europe must put its external instruments at the service of more secure and competitive energy.

Those instruments include our European Neighbourhood Policy, our contractual relations with our main producer and transit partners in central Asia and the Middle East, and our whole network of bilateral, multilateral and regional agreements and specific cooperation schemes.

We can also extend the benefits of the EU market to our neighbours. This is already happening in South East Europe, thanks to the Energy Community Treaty signed last October.

This creates a legal framework for an integrated energy market across the European Union and 9 partners of South East Europe.

We need to work on the extension of this model to the Caspian region, the Mediterranean and the Middle East. This will extend transparency, efficiency and certainty beyond the EU’s frontiers – crucial to helping the long-term investments necessary for our energy security.

Ladies and gentlemen,

Thirty years ago, when energy security last shot to the top of the international agenda, every country adopted its own strategy in a chaotic scramble to cope with new realities.

Even within the European Union, strategies varied from boosting exploration of indigenous oil and gas to building nuclear power stations or developing wind farms.

The only thing we all did together was to set up strategic stock systems for OECD members.

This system still serves some purpose, as we saw in the aftermath of Hurricane Katrina last year, when EU stocks came to the assistance of the United States. But it is totally inadequate to deal with the challenges we face today.

We must learn from this experience. Just as it is ridiculous to have 25 separate energy policies in the European Union, so it would fly in the face of common sense for the transatlantic partnership to pull in different directions in this critical area.
I know a lot is already being done. Energy issues have formed part of our relationship since the New Transatlantic Agenda was launched in 1995.

Our joint activities intensified at last summer’s Summit, with a declaration on "energy security, energy efficiency, renewables and economic development." This commits the EU and the US to work together to promote sound energy policies, improve energy security and foster economic growth and development.

But is this enough? In today’s world, if the energy security of either one of us is impaired, it affects the other. I believe this situation calls for a transformation in our co-operation on energy issues.

It is time to move things up a gear.

That is why I would like to call - today - for the setting up of a Strategic Energy Dialogue between the EU and the US.

Through this dialogue, we could increase our cooperation in worldwide strategic challenges such as:

• assisting, where possible, in the development of hydrocarbon resources that remain under-exploited because of political factors, in particular in the Caspian and Central Asia region;
• increasing the role of market rules in the energy sector, while assuring the necessary public interest safeguards;
• working multilaterally and bilaterally to tackle not just energy supply, but also energy demand. Of course we must diversify our sources of hydrocarbons and develop indigenous renewable energy sources. But we cannot change geological reality. Most of the world’s oil and gas will increasingly come from outside the EU and US. Improving energy efficiency would help us kill 2 birds with one stone: both reducing our strategic dependence on imported hydrocarbons and helping to fight climate change by curbing the growth in consumption.
• We have to do this in a way which does not reduce our competitiveness; and that will be one of our hardest, and most important, challenges.
• Finally, creating a permanent network of EU-US energy experts who could identify common policies and responses to energy crises.

This strategic energy dialogue would be over and above our political dialogues, which the EU has been developing with its main suppliers and other major consumers.

It would help us to start talking with a common voice. It would help us to pre-empt the crises of the future.

It would help us to shape the post-petroleum economy together.

And why stop there? Today I have chosen to dwell on just one of the shared challenges which have been raised by globalisation. But there are many others, including the pressing need to complete the Doha Development Round successfully so that international trade can flourish for the benefit of all. And threats, such as international terrorism, avian flu, climate change – no country, even the most powerful one, can deal with these issues effectively on its own.

With global challenges and threats come global responsibilities. The EU and the US, with their shared values and common interests, make natural partners to take a lead here.

This we must do even as we strive to further integrate our own economies – particularly seeking a common regulatory framework – in order to bring greater prosperity to all on both sides of the Atlantic Ocean.

The fact that the first trip of President Bush’s second mandate was to the EU’s headquarters in Brussels was also a powerful signal that, more than ever, Europe needs the US and the US needs Europe. When we speak with a common voice, no challenge is too great.

When we speak with a common voice, we are truly an indispensable partnership.

Thank you.