Cordula Schnuer: There is an energy crisis. Prices already started climbing last year. The war in Ukraine has exacerbated this. But to what extent is the crisis homemade?
Claude Turmes: We are now approaching what the Club of Rome analysed 50 years ago, which is one planet, 7 billion inhabitants, and these inhabitants using fossil energy to fuel their lives and economies. So, oil prices are high. They were already high before the war in Ukraine. Oil is a global market. And the prices were high because 7 billion inhabitants use oil.
There were some covid effects. In the first phase of covid lockdown, oil was almost at zero. And that, for example, led to the closure of shale oil drilling in the US, which diminished supply. And then, in the later phase of covid, we had stimulus programmes on a global scale, like we never had before. That fuelled a world oil demand.
Gas has long been a regional market, with the EU’s biggest importer being Russia. This horrible attack by Russia on Ukraine is destabilising the gas market even more than the oil market. Because some power plants are run by gas that drives the electricity price up.
We are in an energy crisis because we are approaching the end of oil or the end of resources. And in the same moment, we are in a climate crisis. De facto, we are using too much oil or fossil fuels in general. This is not compatible with our climate policy. The only answer to this is quitting oil and fossil fuels as quickly as possible.
You said in parliament that there is a plan to respond to this crisis, the National Energy and Climate Plan. This aims to help Luxembourg achieve its climate goals to reduce emissions by 55% by 2030 and be climate neutral by 2050. How can it help in the short term?
To reduce damage to the climate, you have to speed up your energy efficiency policy, which means you use less fossil and that you replace fossil with renewables. In that sense, our National Energy and Climate Plan--which is promoting solar and wind to replace gas power plants, heat pumps driven by green electricity to replace oil and gas heaters, replacing fossil cars with public transport or electric cars--goes into the right direction. The one thing which becomes even clearer now is that we need more speed. We need to be faster in rolling out this kind of mass green technology.
You mentioned electric vehicles, heat pumps, home renovations… There has been criticism that for many households, this is simply not affordable, even with all of the subsidies. What risk is there of poorer citizens being left behind in this transition?
In the framework of the tripartite, we decided to do what we call a top-up on the existing subsidy schemes for fuel switching, from gas and oil to heat pumps, but also for renovation. The households with the 10% to 20% least income will get up to a 100% subsidy for the replacement of an oil and gas heater for a renewable heater. And they will also get much more subsidies for renovation.
We had a problem, also because the ministry of the environment, which is paying for these schemes, does not have knowledge of who is rich and poor. For data protection reasons it’s not allowed to have that knowledge. We are now using criteria from the ministry of housing to close that gap. In addition, we will have more energy advisors also targeting low-income households.
Energy poverty is one thing. Energy shortages are a different problem. There is this spectre of potential shortages come next winter. How real is that threat?
This depends on how deep the cut with Russia is. A full embargo will mean that Europe will have to close down part of its industrial processes. We are not there yet. But we see events--the very sad and inhuman events in Bucha. We may approach a moment where we have to go for a full gas embargo. And if this is politically needed and decided, that will have consequences. We are trying to be as well prepared as possible. We have a load-shedding programme for Luxembourg. Creos, which runs the gas grid, knows exactly who to cut off, if needed.
In no area of our economy should we be more than 25% dependent on one supplier
We are less dependent on Russian gas because we are in a joint gas market with Belgium. Belgium has a pipeline from Norway. In Zeebrugge it has one of the world’s biggest terminals for liquefied natural gas. We are in a part of Europe that is the least affected by cuts from Russia. But we should not underestimate that if Germany will have to shut down large chunks of its industry, then that will have an impact, also on other countries.
During the 1970s oil crisis, there were initiatives like car-free Sundays, and cyclists roamed the motorways of Luxembourg. Are those kinds of measures still imaginable today?
Yes, and we are working on this at a level where it makes sense. The International Energy Agency took a decision that it will work on a 10-point plan on how to save gas in a hurry, how to save oil in a hurry. I’m working with the European Commission to see what measures would make sense for Europe as a whole.
It’s not very useful to introduce a speed limit in Luxembourg, or weekends without cars, because that will not have any relevant impact on the world oil price. However, if Europe does this, and if Europe is then joined by the US, Japan, South Korea, Australia and Canada, then we will be able to reduce the world’s oil demand. And that is probably the only way to get oil prices down these next months.
Speaking of the EU, under the REPowerEU programme, the bloc wants to become independent of Russian fossil fuels before 2030, unless there is a prior embargo. You’re always smarter in hindsight, but shouldn’t these plans have already been written before this war?
We probably have been too naive on Russia. One of the lessons we should learn from this situation is that in no area of our economy should we be more than 25% dependent on one supplier. That should be a new golden rule. But the damage is done.
The only thing we can do now, first, is solidarity with Ukraine. Second, we need solidarity with those in our societies who have low incomes and suffer most from the high energy prices. That’s exactly what we did at the tripartite. We are continuing our automatic indexation of salaries, plus the one index which we will postpone. There will be a targeted compensation for low-income households, largely for the higher energy prices. And, of course, we do the same targeted measures for those parts of industry and small- and medium-sized enterprises, which are most hurt by the crisis today.
The second part of the story is accelerating the move out of fossil. We have our already up-and-running programmes--replacing gas and oil heaters with heat pumps, premiums for electromobility, free public transport. On the other hand, we have newly introduced several programmes, especially for consumers in industry; for example, what we call a contract for difference. So if you replace fossil hydrogen with green hydrogen, you get paid for the difference. If you sign a long-term contract on renewable energy, we will create the de-risking instrument to favour these kinds of contracts.
And we will speed up electrification and zero-carbon vehicles in our logistics sector. Logistics is a very important economic sector in Luxembourg. We will have a specific programme to support the move from fossil lorries to zero-carbon lorries, be it electric or be it hydrogen. We will massively support this.
The National Energy and Climate Plan plus the new measures from the tripartite are really a single, very broad plan to decarbonise Luxembourg.
What are the risks for Luxembourg industry coming out of this?
The first risk is, of course, whether we are able to sustain them for the next two or three years. That is why we now have a dedicated targeted instrument to help those companies that are in difficulties. The second difficulty would be to be too late vis-à-vis competitors and, therefore, we are speeding up our instruments to help the industry move from fossil to renewables.
Belgium, France and Germany are negotiating with Qatar on importing liquefied natural gas. In how far is that simply shifting the dependency from one autocracy to another?
We are in an emergency situation. If you want to replace 30% to 35% of gas from Russia, you need to go to others. We also have the new offer from the US from president Biden. But we have to understand that the story isn’t quitting Russian fossil fuels. The story is quitting fossil fuels, full stop.
What we have now decided is an EU common coordinated purchase mechanism. The EU Commission plus member states will sit together and we will see what kinds of contracts we can do short-term. And then, of course, we must pay attention that we are not engaging in long-term contracts that will make the 1.5°C scenario, which comes with a carbon budget that has its limits, impossible.
We saw during the pandemic that there was more of a push for health policy to come out of Brussels. Could this crisis have a long-term effect on how energy policy is coordinated, as it is a shared competence between the commission and member states?
The positive outcome was so clear at the last ministers of energy meeting. Renewable energy was largely a Western European plus Spain, Portugal, the Baltic states and Nordic states story. And, for the first time, I heard Slovak, Czech, Romanian and Bulgarian ministers of energy saying clearly that renewables are the solution, that efficiency is the solution, and that we have to go faster.
It is so clear now that the solution is efficiency and renewables, plus having solidarity via the grids, which is mainly the electricity grid. And as long as we have fossil gas, we have pipelines and gas storage, which we will use together. And then we will see a new grid emerging, which is green hydrogen infrastructure.
There are six EU governments where Green parties are in government. Do those form natural alliances for you?
Yes. I have a WhatsApp group with the Green energy ministers, which I coordinate. Be sure that we will not miss that opportunity.
The energy crisis has renewed interest in nuclear power. Belgium--where the Ecolo are in power--said that it would delay its exit from nuclear energy. But how will Luxembourg phase out the remaining 10% of nuclear power that are in its electricity grid?
Belgium will close five reactors, two will remain. And this is a discussion which is not finalised. Of course, we are not happy that the Greens in the Belgian government had to make this probably very difficult compromise.
As Luxembourg, our policy is to be a champion on energy efficiency. We have the highest target of all EU countries. We have, for example, the strictest norms in all of Europe when it comes to new buildings. We have very sophisticated instruments to help industry go efficient. We are one of the frontrunners on electromobility and an electric car is three to five times more efficient than a diesel or gasoline car. We are promoting public transport. We are trying to do a new generation of spatial planning, reducing mobility needs by bringing people together.
In 2021 we built 10 times more solar than the 2014 to 2018 average
The good news is that in 2021 we built 10 times more solar [infrastructure] than the 2014 to 2018 average. On wind, we are ahead of our national plans. With all efficiency and renewable policies, we will be able to have something like 30% to 40% of our energy produced in Luxembourg. Today we are 100% importing oil, 100% gas and 85% of our electricity.
We will massively reduce our oil and gas imports and we will also lower our electricity imports. We will always import electricity because we have more economic activities on our territory than Germany or France, compared in relative terms. We have a lot of huge industrials who produce for export markets, plus an economy that brings 200,000 commuters in. Our demand is extraordinarily high.
We will not be able to produce all renewables in Luxembourg. Therefore, I have started a proactive policy, for example, to work together with Denmark on their Apollo project, which is an artificial energy island with 12,000MW of offshore wind. There will be energy islands in Germany, the Netherlands and Belgium. Maybe we will also look at Spain and Portugal for solar. We know that we have to replace our electricity, which is produced by coal and nuclear and gas, mainly from Germany, with renewable electricity, and we are proactively working on that.
Do you have a deadline when you want there to be no nuclear electricity in Luxembourg?
The citizens are already almost at zero. We have some industrialists who, for price reasons, stand by nuclear. I cannot forbid this because that would not be compatible with EU law. However, the new programme that we decided in the tripartite, this de-risking financial instrument, I think will be so attractive that these companies will go off nuclear contracts and into renewable contracts. Going to zero nuclear could happen very fast as soon as these long-term renewable power purchase agreements will be up and running.
Luxembourg has taken issue with the EU taxonomy, which includes not only nuclear but also gas as a sustainable source of fuel. EU countries are looking to invest in gas infrastructure as they get away from Russia, for example in LNG terminals and floating storage and regasification units. Could the taxonomy in its current shape incentivise these investments?
This isn’t Putin’s first gas war. There was already a gas war against Ukraine in 2008 and 2009. In reaction to that, Europe did two things. One was developing LNG terminals and the other was investing into what we call gas reverse flows, which allows us to pump gas from west to east. This was not possible before.
There is no need to build a lot of LNG terminals because we already have LNG terminals. EU gas consumption is already diminishing today and will continue to diminish. We don’t need a lot of investment into gas. What we need is a lot of investment into efficiency, electric mobility and green hydrogen and fuel. One of the reasons why we are opposing the taxonomy is that we want to flag and direct the investments where they are really needed, which is solar, wind and electricity infrastructure.
Looking at green targets more generally, at COP26 last year, countries pledged to phase out coal. We’re now seeing some nations, also in Europe, looking at firing up old coal plants. In agriculture, there are calls to suspend rules on sustainable land use to allow for more food production as wheat imports are jeopardised. How can the EU avoid backtracking on its targets in response to this crisis?
This is a crucial question. Every policymaker and every leader in society should read the latest IPCC reports. We have only five years to stay within the 1.5°C target. Those who think and hope that now we can slow down the green energy transition, I consider them highly irresponsible. The only way out--reducing our geopolitical dependence as Europeans, reducing our social hardship because of fossil fuel prices, which risk being extremely volatile and extremely high in the next years, and because of the urgency on climate change--the only answer is ‘go, go, go’ for efficiency, renewables, electrification, electromobility grids, green hydrogen.
It’s still a while away, but what hopes do you have of COP27 later this year?
We are in a unique moment. Social hardship because of the crisis, the war in Ukraine and the climate emergency--all this is now converging. If we don’t understand that it is now or never, it will be too late.
This article first appeared in the May 2022 edition of Delano magazine.