Energetic for solutions

Current member of the European Parliament Arturs Krisjanis Karins participated last February in the conference ‘Energy politics and climate protection,’ organized by the Konrad Adenauer Foundation, in Riga. Karins at the event addressed the importance of energy independence for Latvia and Europe. In Brussels he pays special attention to discussions on energy issues. He acquired substantial knowledge and expertise in the politics of energy serving as Economics Minister of Latvia, from 2004-2006, and as a member of the Latvian Parliament. After the conference, Karins took time out to talk with The Baltic Times, not only about the enviromental framework of, and solutions for, energy independence in the Baltics, but also on questions of big economic interests of the region.

Finding a balance between affordable energy and environmental policy is one of the goals of this conference. What do you see as the best way to achieve this?
I think that when you look at energy costs, there are a lot of factors to take into consideration, one of which was discussed in the conference today, the amount that fossil fuels are actually subsidized versus renewable energy sources. But when we look in the future, we know that, with fossil fuel sources, that oil and gas will become ever more expensive because as it become scarcer, the technologies to get it from deeper in the Earth will become more expensive. At the same time, we know that the future cost of the wind is zero, and the future cost of the sun is zero. We have a cost of harnessing the energy, of balancing in the grid and transmitting it. But when you take a broader view of what the actual cost is, then renewables are not any more expensive than fossil. It’s more of an upfront cost. And there are certain parts of the world, if I am not mistaken, southern California is one, where renewable sun [energy] is already on parity in cost with coal in non-subsidies.

The action plan for 2007-2012 foresaw energy savings of 1.5 percent per year. Do you think that it would be need to be revised?
It’s not very clear. Politicians are arguing all the time as to what the goals should be. In the European Parliament, parliamentarians who represent the electorate directly, tend to think that we should have very courageous or big goals, and governments, who are often indirectly representing industry or big industry, are wanting less ambitious… ambitious, maybe not courageous, ambitious goals. What that parity will end up being is not clear. But certainly, from my point of view, I believe that we should have more ambitious goals to help to make the changeover more quickly because the energy sector investments are thirty and forty years ahead. So, the sooner companies and investors know the rules of the game, the quicker [we’ll see] investments.

In this case we can see how politics differ at the national level, or at European level. Is the individual interest of countries difficult to combine with a common energy policy in Brussels, for example?
Yes, it is often at cross-interests. So we now have the energy efficiency directive moving through Parliament and moving through Council. Parliament, it looks like we have finally reached a compromise that’s a version of legislation which will be very broadly supported, but the Council will be fighting this. The member states will be fighting this. Not all member states, but some of the larger member states, because governments don’t like to have the feeling of having their hands tied for certain goals, whereas the European Parliament, because it is not responsible for any one country, where as individuals responsible to our electors, we tend to be more consumer-oriented, what’s good for consumers. So yes, there is always this tension. The tension between member state interests and community interests. It is built into the system, it is not bad, and the fact of compromise is how it’s overcome.

There are other considerations. People see too often that big government or multinationals violate the measures of protection. What additional measures do you think we can take to prevent this?
I don’t have a fear of the multi-nationals, I don’t see that it’s some great evil. We have EU legislation, we have the third energy package making obligatory third party access to infrastructure as part of EU law. And this is the way to deal with the problem (I wouldn’t even call it a problem). But good legislation and proper regulation makes that not be an issue. Because the big multinationals are interested in making money. And if they can make money through having more renewable energy, or competing with one another, they will do this.

Yes, but big companies, they have a short outlook of the problem.
No, they don’t, in terms of investment they look about forty years ahead into the future. They have the difficulty or a challenge of shareholder expectations, so shareholders expect quarterly returns. That’s a connundrum of management, not only in the energy sector but in all sectors, that shareholders want their money now, but companies are looking for long term advantages. It’s a tension which will always exist, but it’s not one which is not ‘insurmountale.’ It is surmountable.

How can we preserve security on the energy market in the European Union after Russia failed to ratify the European Energy Charter in 2009?
I think that the key to European energy policy is not only we should focus on carbon reduction. But we should focus on security of supply. We are very and increasingly dependent upon Russian energy imports. I think we have to redouble our efforts to decrease our import dependency and there are two ways to do this: one is to increase our efforts on our own efficiency, so, use less, which means import less. And the second is to exploit more fully the renewable energy resources that we have in house in Europe. And the more we take care of ourselves, the less we are dependent upon whether a third country provider does or does not ratify, or changes, politically. We are more independent, and that should be our main goal. The main goal should be greater energy independence, or independence from external shocks.

Let’s talk about the Baltic countries. Some years ago the experts spoke about a ‘Baltic energy island.’ There has been much talk about solving this problem. What projects do you think are most important for Latvia (and the Baltics in general) in this regard?
Well, there are two. One is the LNG terminal which the three Baltic countries need to decide upon, so that we are no longer one hundred percent dependent upon Russian gas, we would have external gas coming from anywhere in the world that can liquify natural gas.
And the second are more electricity inter-connectors; we have one with Estonia-Finland, the second is in the process of being built. We also need the inter-connector with Sweden and the inter-connector with Poland. And if these two projects are realized we will no longer be an energy island.

As a former Economy Minister and member of the Special Committee of Economic Crisis in 2009, what is your opinion  on the current economic situation in Latvia?
Latvia took some very hard decisions starting three years ago. Tough austerity measures in order to regain our competitiveness. So, instead of devaluing our currency, we stayed locked to the euro and we made what we call an internal devaluation. We cut government expenditure drastically and, as a result, our economy is growing again, our exports are especially growing. We’ve not only stabilized, we are back on the path of growth. To me, there is a debate: Can austerity be a way to the future, to obtain growth? Well, I think that austerity measures bringing your budgetary deficit into balance is a prerequisite for stable growth in the future. So, we did that. And we are now starting to slowly reap the benefits of our decisions. We are being hampered by bad external circumstances. Our trading partners are doing a little bit worse than they should. We are still looking at 2012 as another year of growth, not a year of recession, whereas most of the eurozone, especially in the south of Europe, is looking at a very deep recession. We made the decisions, the tough decisions for growing, they have not made those decisions; they are not growing.

With the current problematic scenario in Europe, do you think that Latvia should still be trying to adopt the euro?
I think that we should maintain our course on bringing our budget into balance. Because regardless of whether we want to join or not to join the euro, we have regained what’s most important, the trust of the financial markets. We are able to borrow openly on the financial markets again. In 2014, I don’t think the euro will be heading into a big mess; we now have new legislation coming through which is going to be strengthening the economic governance in the eurozone. Even with the currency, I think we’ll be fine. But Latvia I think certainly needs to strengthen its ties with its direct neighbors. The countries around the Baltic sea are economically the most resilient in Europe right now. And one thing that all these countries have in common, we all have governments who understand you cannot, in the long term, spend more than you earn. And it works around the Baltic sea; this is the ethic that I think needs to have for the eurozone as such to hold together. What happens to the eurozone is not clear, but I think the currency’s future is sound and it will have to be based on the rules actually being followed.