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Central Europe Energy Partners (CEEP)
14 September 2011

Replace "I" with "We"

July 1, 2011 marked an important date for Poles and Europeans. Poland taking over the rotating presidency of the Council of the European Union is an unprecedented occurrence, an opportunity to prove to ourselves and the whole world that we are able to efficiently manage the affairs of the united Europe even in these trying times.

Both Poland and the Community have changed since our EU entry on May 1, 2004. There is no doubt that enlargement has benefited both the “old” and “new” EU countries. The most important task today is to maintain and further develop the benefits of enlarging the Community as well as effective negotiations with countries wanting to join the EU. There is every sign that the accession treaty with Croatia will be signed during our presidency.

This will be a wonderful moment for Poles and Croatians alike, I would even say—for all the nations of Central Europe, which share a rich tradition of good relations and historical and cultural ties, and today we often undertake joint initiatives and business ventures as well. Here is Poland, an EU member for seven years, bringing in a new member that “after six years of tough and in-depth negotiations, has managed to reform the country and meet the requirements for joining the European Union,” as Croatia’s Minister of Foreign Affairs Gordan Jandrokovic has put it.

EU Commissioner for Enlargement Stefan Fuele has called the conclusion of these negotiations a historic day, underlining that Croatia has made impressive progress in fulfilling all the membership criteria.

Thanks to Croatia’s accession and further expansion of the EU’s borders to the east and south, the importance of Central Europe as a region of solidarity will grow steadily. Even today one in five EU citizens comes from Central Europe, a region that is home to 100 million people. It’s up to all of us together whether we form one strong representation in Brussels to defend our interests or are guided by particularisms making all of us lose out.

It was with a view to enabling Central European countries to develop confidently in EU structures that we founded the Central European Energy Partners (CEEP) association in May 2010. This is the first sector organization in Central Europe with a permanent representative office in Brussels. The CEEP was founded on a desire to create a platform of communication and cooperation for companies, universities and research centers, organizations and public institutions from countries in the region involving a wide range of issues related to energy security.

Until recently the EU focused on two main dimensions—northern and southern. Thanks to Poland and Sweden’s efforts and with the commitment of the Czech presidency, the Eastern Partnership was established in 2009. Now the time has come to direct the eyes of representatives of the Council and the European Commission as well as the European Parliament toward a new dimension—the Central European dimension. Outlining the idea behind the CEEP, we decided we needed to define our interests, determine our problems and then solve them together, in a friendly way. Winston Churchill said, “To jaw-jaw is always better than to war-war.” Today these words are even more relevant. A game of interests must in no case mean conflicts. We need to expand the areas of communication and creative, investment-related or market cooperation to work together better but always peacefully. When there is mutual understanding and a will to achieve compromise, there will be no losers, everyone will benefit.

Remember, the EU we know today is a political organism that evolved over decades. Its fundamental cells are the European Coal and Steel Community and the European Economic Community. Soon after World War II ended, politicians, economists and experts from many fields of science realized that only common interests and a strong, united economy would bring Europe peace. This is so much truer today, when problems of the economy and energy security have gained not so much a continental as a global dimension. The more there is common sense and a will to cooperate, the safer the world we live in will be.

Energy is an area where powerful commercial mechanisms operate, along with equally strong political ones. The purpose of the CEEP is not to “meddle” in politics, and certainly not to restrict the role of politicians in the energy sector. On the contrary, business, science and experts working within the framework provided by this organization support the political sphere with practical specifics derived from know-how and experience.

The first real effects of this cooperation are already visible. On June 28, during the Polish Academic-Economic Forum (PFA-G) and CEEP seminar in Warsaw, we discussed security in the energy sector. Businessmen and scientists, together with politicians, called for support in seeking compromise solutions strengthening the EU’s security in the energy sector. We can do this by facilitating the use of the cheapest and most readily available local energy sources while continually reducing carbon dioxide.

After listening to the proposal regarding exploitation of local energy sources and the related possibilities to reduce carbon dioxide emissions, as outlined in the CEEP’s memo to the EU’s commissioner for energy Guenther Oettinger, the PFA-G acknowledged that this proposal makes an effort to accept the operation of coal-fueled systems with the possibility of reducing carbon dioxide emissions thanks to continued development of technology increasing the energy efficiency of such systems. The forum’s representatives also highlighted the importance of having the EU’s derogation for Poland shifted beyond 2020, which in practice will enable investment outlays to be amortized. This would allow carbon dioxide emission levels to be reduced consistently.

The CEEP’s initiative supports investors’ extra effort to reduce carbon dioxide emissions, for example by further increasing energy efficiency or using CCS (Carbon Capture and Storage) above the set benchmarks in such a way that each extra percent of carbon dioxide emission above the permitted level causes an extra year of derogation to be added. Moreover, the PFA-G plans to ask the relevant state institutions to support the proposal in the EU as part of the Polish presidency.

The energy sector is key for any country’s development. Therefore we need to look with great concern at proposals aiming to change its rules of functioning, especially those coming from Brussels and involving reducing greenhouse gas emissions. Instruments are being introduced to reduce greenhouse gas emissions in the energy sector and industry. New tax and excise systems are being prepared to stimulate further carbon dioxide emission decreases—a direct tax on coal or taxation of fuel energy value.

A fuel levy poses a threat to Central Europe’s refineries which mostly use REBCO [Russian Export Blend Crude Oil, delivered via the Friendship pipeline]. We need to remember that the EU is not a uniform organism in terms of economic development. In individual cases the solutions adopted by the European Commission can lead to effects different from those originally planned. That is why we need to work toward solutions that will be good for environmental protection processes but at the same time take into account the needs of the refinery sectors in different EU member countries and the necessity to ensure a competitive edge for Europe’s joint refinery capacity in relations with global corporations.

As far as declarations go, the European Commission understands the problem and intends to prevent this from happening. The specific solutions prepared and introduced by the Commission are insufficient, however. Unfortunately they create disadvantageous economic rules for entire industrial sectors in EU countries that heavily rely on energy obtained from coal. This will cause them to lose their competitiveness within the EU to businesses that base their production on low-emission energy sources such as natural gas. They will also lose their competitive edge on external sales markets with regard to businesses that have no restrictions regarding carbon dioxide emissions. The necessary changes to industrial infrastructure require huge capital involvement. This applies not just to Poland but also the Czech Republic and Romania, where coal figures prominently in the energy mix. Meanwhile, the reality is that GDP per capita in Central European countries is three times lower than in the “old” EU15 countries. How do we reconcile outlays on implementing EU directives with more rapid economic growth in Central European countries compared with the other EU members? That precisely is the tough though solvable dilemma.

It can be solved with appropriate cooperation from the European Commission, the governments of the countries in question and companies grouped together in an organization like the CEEP. Remember that energy obtained from coal is the cheapest; the cheaper energy is, the more competitive the economy. Of course, we should support activity aimed at improving the effectiveness of utilizing electricity and heat along the whole chain, from mining the raw material, through improving companies’ energy efficiency, all the way to distribution. However, drastic reductions of carbon dioxide emissions, given the industrial infrastructure, energy resources and price relations in Central Europe, will have the effect of significantly increasing the costs of power and heat generation and causing an even stronger reliance on imports of energy raw materials. Consequently, the solutions adopted by the European Commission will have a negative instead of a positive impact on energy independence, and the countries of our region will depend even more on energy imports, which will reduce the competitiveness of their developing economies.

We are always more willing to implement solutions that we helped design than those which appear to have been imposed on us. We have growing possibilities for communicating, building constructive visions, creating a better future whose essential element is technological progress, including that related to energy.

Of course, the climate constitutes an element of uncertainty. That is why work on this aspect is so important today and should be conducted in great depth. We have to try to control everything that can be controlled. This requires cooperation, replacing the word “I” with “we.” Together we will act more efficiently, more wisely and more safely. This is a credo that has motivated the work of Central European Energy Partners from the very beginning, work to ensure an even better future for the nations of Central Europe.

Paweł Olechnowicz is President of the Board of Directors of CEEP (Central Europe Energy Partners) and Chairman of the Board of Grupa Lotos SA