Nick Ottens

At Wikistrat, we’re in the strategic planning phase of the North American Energy Export Boom simulation, drafting policy options for the different actors involved.

In the European Union section, two policy options stand out. One is timid and allows Europe to be reasonably sure of success if it plays it safe and seeks self-sufficiency. The other is more bold but it has the potential of establishing Europe as a leader in twenty-first century energy.

The objectives of the two options are the same — achieve energy independence (especially of Russia), reduce costs and protect the environment. The way to get there can be very different though.

Marinko Bobic, Lorenzo Nannetti and Ralph Schoellhammer were the main contributors to the “Play It Safe” option. They write that Europe should invest in clean energy sources and shale gas while implementing policies aimed at energy conservation. “Investing in environmentally friendly technology may provide a chance for countries such as Spain and Greece to grow out of their financial problems in the mid to long term,” they add.

It will be an expensive undertaking for governments though. “Benefits would only be felt in the long term.” If shale proves to be shallow, the continent has only proven green energy, including wind, at its disposal (environmentalists would oppose more nuclear) which is heavily subsidized. In the worst case, the authors point out, it would drive Europe back into Russia’s arms.

Gabor Bolgar and Daniel Kowalski, both Wikistrat researchers, have an alternative: “Playing Catch up.” They point out that Europe has shale gas reserves that are as large as America’s but that European fracking technology is outdated. “By attracting foreign capital and expertise, the European Union can speed up its learning curve,” they write. “Investors will be attracted by significantly higher gas prices in Europe, if EU regulations allow their operations.”

I’m instinctively drawn to this option because it relies on markets not government. Unfortunately, the majority of the European populace doesn’t share my enthusiasm for market forces so, “key for a European fracking boom is to convince the public that potential economic gains outweigh environmental concerns.” Good luck!

France has already banned fracking. Eastern European countries including Poland the Ukraine are leading the way which isn’t surprising given their reliance on Russian gas imports.

If Russia loses this critical wedge, “it may become more antagonistic toward Europe and turn to other means in order to stop it from becoming insignificant,” write Bolgar and Kowalski.

They’re also worried that because the process of harmonizing regulation across the European Union is so protracted, “investors might be hesitating given different regulations in different countries.” I’m not convinced. Regulatory competition between countries is a good thing. There’s a role for the EU if projects cross borders but national governments should be quite capable of keeping out of the way.