Ukraine and the geopolitics of the energy transition

The worst scenario of an ‘unjust transition’ has hoved into view with the Russian invasion of Ukraine. But another Europe is possible.

War is the least ecological activity in which humans can engage. This not just because of its obvious ‘externalities’ for the environment. The idea of the domination of nature by man ‘stems from the very real domination of human by human’—the essence of war.

Beyond the drama the people of Ukraine and Russian dissidents are living through, this war comes with shattering consequences for vulnerable workers and households all over Europe and further afield. Due to the uncertainty of energy supply associated with the enduring dependence on Russian oil and natural gas, many European Union countries are experiencing an escalation of energy prices, exacerbating post-pandemic inflation. This is causing a series of economic effects—erosion of the standard of living of poor families and uncertainties about investment in production consequently depressing the EU economy, worsening unemployment and further disempowering labour.

Watershed for Europe

This is a watershed for Europe. It not only marks the end of decades of postwar and post-1989 stability, based on a rules-based international order—albeit with the important exception of former Yugoslavia. The new geopolitical constellation also highlights the vulnerability resulting from an insufficiently ambitious energy transition.

In 2011 the EU was first in the world in renewable-energy investment. From 2013 onwards, however, investment collapsed to flatline at around half of the 2011 level and the EU was overtaken by the United States and by China in particular. The resulting fossil-fuel dependence was exacerbated by naïve reliance on Russian oil and gas imports, fed by unfounded trust in the stabilising effect of trade relations (the German geo-economic doctrine of Wandel durch Handel).

The tragedy of Ukraine is a game-changer. The EU was shocked into the realisation that only acceleration of the energy transformation offered a solution. While this is not in doubt over the medium and long term, the short-term effects of the energy crisis are more complex and ambiguous. 

These risk jeopardising, or at least derailing, the transition away from fossil fuels. Since most EU countries are unable to offset with renewables the sudden inflation in gas, coal has regained some competitiveness, along with mining activities to extract oil and natural gas. Nuclear power is once again at the centre of political debate, even in countries which had firmly opposed this option, including Germany. On the other hand, the geopolitical and energy crises demonstrate the need to hasten the clean-energy transition and investment in green infrastructure.

At a crossroads

The EU is therefore at a crossroads. Its decarbonisation goes hand in hand with emancipation from the Russian (and indeed American) economic and geopolitical stronghold.

Since 2014, the union has progressively imposed sanctions against Russia, in response to its illegal annexation of Crimea and non-compliance with the Minsk agreements intended to bring an end to war in the Donbas region of Ukraine. More restrictive measures were adopted in March 2022 to respond to Russia’s invasion. Yet the EU has refrained from more incisive actions, out of fear of their possibly disruptive social and economic consequences, in particular in those member states most dependent on Russian fossil-energy imports.

On March 8th the European Commission published a communication, ‘REPowerEU: joint European action for more affordable, secure and sustainable energy’, setting out new actions to ramp up the production of green energy, diversify supplies and reduce demand focused primarily on gas. This plan integrates the communication on tackling rising energy prices launched last October and explicitly aims to make Europe independent of Moscow, by reducing EU demand for Russian gas by two-thirds before the end of the year.

This objective is welcome but its feasibility raises questions. Replacing two-thirds of Russian gas imports needs additional investment and this requires additional resources. In publishing REPowerEU the commission president, Ursula von der Leyen, was clear that the EU could no longer rely on a supplier which explicitly threatened its existence. Commissioners emphasised the need to act now to mitigate the impact of rising energy prices, along with the importance of diversifying EU gas supplies for next winter.

Short-term measures

A further communication was released on March 23rd, presenting the benefits and drawbacks of exceptional short-term measures to temper price spikes. These include income support, temporary state aid, reduced taxation, capping the electricity price and so on, the main hurdles identified being fiscal costs, distortion of competition and supply disruption.

Although phasing out fossil-fuel subsidies was included in last year’s COP26 Glasgow Climate Pact, and International Monetary Fund researchers have pointed to their inefficiency, in the current situation some direct subsidies seem unavoidable. These must however be temporary and targeted: it sends a wrong message to provide subsidy to all. We do not need to subsidise fuel for sport-utility vehicles, nor gas to heat swimming pools.

To stem energy bills and the erosion of real wages, the EU and member states should reinforce incentives for energy efficiency and savings. The principle of energy efficiency first is more relevant than ever and should be applied across all sectors and policies, with demand-response measures complementing those on the supply side.

This will all require significant state aid. Further to the commission guidelines on state aid for climate, environmental protection and energy adopted in January, also on March 23rd the commission launched a Temporary Crisis Framework to enable member states to use the flexibility foreseen under state-aid rules to support the economy in the context of the Russian invasion.

The new framework will enable member states to grant amounts of up to €2 million to beneficiaries affected by the crisis or by the related sanctions and counter-measures and up to €50 million for companies in specified energy-intensive sectors. It will ensure that sufficient liquidity remains available to businesses and to compensate companies for the additional costs incurred due to exceptionally high gas and electricity prices.

Member states are invited to include sustainability requirements in granting aid, which should lay the ground for a sustainable recovery while tackling the current crisis. Environmental non-governmental organisations, such as E3G, rightly emphasise that the potential role for industry in reducing the EU’s dependence on natural gas is far from exploited. Energy savings of up to 17-26 per cent could be achieved through efficiency measures in various sectors and the electrification of processes could replace half of industrial gas consumption.

All available means

The IndustriAll union stresses that while reaching climate neutrality must remain the EU’s main objective, the current geopolitical situation and its impact on energy supplies and costs demand mobilisation of every available means to secure affordable energy for all in the coming months.

At the root of European integration was regulation of the fossil-fuels market as a prerequisite for peaceful development of the continent. Created in 1951, in the aftermath of World War II, the European Coal and Steel Community brought together Belgium, Germany, France, Italy, Luxembourg and the Netherlands to organise the free movement of coal (and steel) and to free up access to sources of production. Along with the European Economic Community treaty, the Euratom treaty was signed on March 25th 1957, establishing the European Atomic Energy Community with the original purpose of creating a market for nuclear power in Europe.

Ironically, the end to peace in Europe has come within the long and winding transition away from fossil fuels. How the Ukraine war will end and what the outcomes of the energy transition will be are unpredictable. What is clear, though, is that these will not be neutral for labour and European trade unions.

Fossil fuels have contributed to the possibility of modern democracy but also set its limits, according to Timothy Mitchell. Conversion of the energy system from coal to oil sought to ‘permanently weaken the coal miners, whose ability to interrupt the flow of energy had given organized labor the power to demand the improvements to collective life that had democratized Europe’. Mitchell says that ‘as early as the 1940s, the architects of the Marshall Plan in Washington argued for subsidising the cost of importing oil to western Europe from the Middle East, in order to weaken the coal miners and defeat the left’.

As a highly capital-intensive resource, transported around the globe and far from the sites where work takes place, oil and its by-product synthetic goods have become the energy of globalisation and consumerism, weakening human ability to interfere with economic activities and keep them within planetary boundaries. Besides its destructive effect on the climate and the environment, oil has been a geopolitical tool of imperialist power. Now, when the fossil-fuel era is approaching its end, oil and gas have returned for a last revenge in the context of Russia’s aggression.

Rediscovering power

Eradicating the root causes of the vulnerability of labour is essential to any post-industrial vision of organised labour which could break the imperialist and corporate domination of energy—and apply the power of public governance to the creation of a new democratic energy system, truly serving human welfare and advancing working conditions within ecological limits. Retracing the miners’ modus operandi in the coal age, 21st-century unions should rediscover a source of power in the energy market, to augment that within the labour market.

Steering the energy transition towards a decentralised, community-based energy system would be a significant step in this direction. Greater independence from, and influence upon, the energy market could give organised labour and communities the capacity to challenge the root causes of energy poverty, allowing them to steer the sustainable development of post-industrial society, while embedding the market within a broader socio-ecological space.

In this critical moment the EU needs to strike a delicate balance. It must turn away from Russian fossil-fuel imports as rapidly as possible, while cushioning the short-term price effects in a targeted and temporary manner. Yet it must not let a more ambitious energy transformation become derailed.