Rethinking the European Union’s energy strategy

The European energy market is struggling to ensure a sustainable price and supply of energy for consumers partially, though not exclusively, due to the Russian invasion of Ukraine.

Ursula von der Leyen, President of the European Commission, outlined her ambitions on 7 September 2022 for ensuring that European energy is free of reliance on Russian fossil fuel imports.

The European Union has already set out plans to ensure that reliance on Russian fossil fuels is reduced by twothirds in 2022 and phased out entirely by 2027, as part of the comprehensive sanctions against the Russian Federation as a backlash against Vladimir Putin’s invasion of Ukraine.

As a result, the EU has already vastly decreased its imports of fossil fuels from Russia, with Norway now already supplying more liquefied natural gas (LNG) to the EU than Russia, as well as increases in investments in homegrown renewables as part of the REPowerEU strategy and has increased its demand storage to 84 per cent, thus curtailing reliance on Russian fossil fuel imports. In a statement in September, von der Leyen outlined the Commission’s immediate measure to be adapted with the aim of protecting “vulnerable consumers and businesses and help[ing] them adapt”.

Caps on profits and energy use

Firstly, the Commission will propose a mandatory cap for reducing electricity use at peak hours, in what von der Leyen terms as ‘smart savings of electricity’. “What has changed is global supply is scarce. This calls for smart reduction in demand. We need a strategy to flatten the peaks which drive the price of electricity.”

The second proposal is for a cap on the revenues of companies who are producing low-cost electricity. “It is now time for customers to benefit from the low costs of low carbon energy sources, like renewables,” she states.

“From day one, Europe has stood at Ukraine's side, with weapons, with funds, with hospitality for refugees, and with the toughest sanctions the world has ever seen.”

“Low carbon energy sources are making unexpected revenues, which do not reflect their production costs. We will propose to re-channel these unexpected profits to support vulnerable people and companies to adapt.”

Von der Leyen similarly sets out plans to cap the “unexpected profits” of fossil fuel companies. “Oil and gas companies have also made massive profits. We will therefore propose a solidarity contribution for fossil fuel companies because all energy sources must help address this crisis.”

She continues: “Member states should invest these revenues to support vulnerable households and invest in clean, homegrown energy sources.”

Supporting utility companies to cope with the volatility of the energy market is seen as crucial to ensuring their survival and ability to provide their services. In the President of the European Commission’s speech, she rationalises that utility companies are “currently being requested to provide unexpectedly large amounts of funds, which threatens their capacity to trade and the stability of the future markets”.

To support them, von der Leyen states that the Commission will help to facilitate liquidity support for energy companies within member states and will additionally update the current temporary framework to enable state guarantees to be delivered rapidly.

Maximum economic pressure on Putin

von der Leyen made her State of the Union address one week after her address on energy, where she was accompanied by Olena Zelenska, the First Lady of Ukraine, to emphasise the EU’s support for Ukraine, and to reiterate the measures announced in her policy speech. Speaking on the Russian invasion of Ukraine, the Commission president stated that: “From day one, Europe has stood at Ukraine's side, with weapons, with funds, with hospitality for refugees, and with the toughest sanctions the world has ever seen.”

Emphasising the importance for the EU on imposing the maximum economic pressure on Russia, the fifth and final measure von der Leyen outlined in her energy speech was increasing the pressure on the Russian economy and ensuring that the European Union becomes free from the reliance and political capital which comes from its reliance on Russian fossil fuel imports.

This measure may exacerbate the ongoing price inflation for energy supplies, with the EU having a much smaller market to choose from, with the three largest oil producers in Europe – Russia, Norway, and the United Kingdom – all outside the EU.

Von der Leyen states that, since the imposition of the sanctions programme against the Russian Federation, that gas imports from Russia into the European Union have fallen from 40 per cent to 9 per cent, whilst the sanctions on Russia mean that all crude oil imports are to be banned from 2023.

Ireland only directly imports 5 per cent of its oil supply from Russia but is susceptible to price increases due to the solidarity measure to which it is bound through the EU, the reliance of Germany on Russian fossil fuel imports, as well as the consequences of the volatility of the market. The solidarity measure is designed to ensure that member states do not have a competitive advantage over one another and keeps the EU operating as a cohesive energy bloc.

New EU Directive for working parents

Having been ratified in 2019, the EU’s Directive on Work-life Balance officially entered into the EU’s official journal in July 2022.

That Directive, which strengthens the rights of parents to paternity leave, parental leave, flexible working arrangements for parents, and carers’ leave, must be implemented by the Government within the next three years.

On parental leave, the Directive states that two months’ parental leave will be made transferable from one parent to another, with a level of compensation to be mandated by individual member states. The Irish Government does not currently mandate an employer to pay parental leave, with parents entitled to up to 26 weeks’ unpaid parental leave, with the onus falling on the employer as to whether they will be paid or not. The Directive will allow parents to be flexible in how they take their leave, including piecemeal or part-time.

With regard to paternity leave, the legislation in place in the State – the Paternity Leave and Benefit Act 2016 –has guaranteed a right to paternity leave for new parents but fell short of obliging employers to pay their workers availing of paternity leave, with the Government subsidising the leave through paternity benefit.

The Directive will ensure that workers on paternity leave will earn a level of pay which at least matches statutory sick pay, currently €203 per week, for the duration of their leave.

The Directive also aims to strengthen flexible working arrangements for working parents, by extending the right to request to all working parents who have children aged eight and younger.

Workers who have a relative or person living in the same household who requires care will be entitled to at least five working days’ paid leave. There is currently no state support for full-time carers who are in full-time employment, with a cap on payments of €224 per week for carers who are below the pension age, although they can only receive this amount if they have no income from any other source. Full-time carers are currently not permitted to receive state support if they are working more than 18.5 hours per week.

The Directive further states that member states’ governments should protect the right of workers to return to the same or an equivalent post after taking any of these leaves and retain entitlement to relevant rights already acquired, or in the process of being acquired, until the end of such leave.

Four changes to Ireland’s CAP Strategic Plan

After an initial submission was first rejected in March 2022, the European Commission has approved Ireland’s Common Agricultural Policy (CAP) Strategic Plan for 2023 to 2027, estimated to come to a cost of around €10 billion.

The initial plan has to be redesigned owing to Ireland’s solidarity commitments as the European Union aims to end reliance on Russian fossil fuels, with the Commission further stating that Ireland needed to display “more ambition” with climate action, biodiversity, and environmental commitments.

The main changes to Ireland CAP Strategic Plan are:

1. Redesigning the Dairy Beef Welfare

Scheme to support the use of high dairy beef index sires in dairy herds.

This will now focus on improving the beef traits of calves to facilitate retention of calves on the island and better integration into local production systems. This replaces the weighing action previously proposed. The rate per calf will remain at €20/head.

2. Payment per eligible hectare was amended to allow an increased percentage of beneficial features within a parcel giving farmers additional flexibility to protect these features without penalty. Beneficial features within a parcel can now account for up to 50 per cent of the area of the parcel without any deduction in the eligible area.

3. Good Agricultural and Environmental

Condition (GAEC) seven was amended to ensure crop rotation requirements are implemented (as well as crop diversification), with rotation of either primary or with secondary crops (catch crops) on a four-year cycle at parcel and holding level. Crop diversification (two- and three-crop rules) continues as per initial proposal. Certain exemptions/exceptions apply to these requirements.

4. To align with the regulatory framework changes were made to

GAEC eight (non-productive areas). The requirement for holdings to have 4 per cent non-productive areas under GAEC eight remains but commonage, Natura 2000, forestry, GAEC two, and GAEC nine lands will not have an area weighting factor, as originally proposed but will, in most cases, be effectively exempt from this requirement. Rock is now included as a non-productive beneficial feature. The hedgerow removals text was amended to specify that removals are to be permitted in exceptional cases only and the replanting obligation must take place as close as possible to the removed hedgerow.

Upon approval of the plan, Minister for Agriculture, Food and the Marine Charlie McConalogue TD said: “I am confident that we have presented a robust plan, which aims to meet the twin objectives of ensuring the continued viability of family farms and maximising the environmental and social sustainability of the sector.”