“I do not see a high risk of Russia invading, and trying to occupy, all Ukraine or even any part of it outside of the existing separatist-controlled area…. (Russian President Vladimir) Putin will play this very effectively over the next year. Recall that it was Germany and Russia that wanted Nord Stream 2 after the Ukraine transit crisis in 2009 and it is again both that want the safe direct route for the additional gas. Weafer said the Biden Administration wanted to lift sanctions against Iran in exchange for a new deal with Tehran. A lot of the rare minerals needed for lithium batteries, computer chips and other key products are in China, he said, adding, “That’s going to add another level of nervousness”. US supply, especially shale, is less of a factor than it used be and the major western producers will come under even greater pressure to curtail capex in traditional hydrocarbon projects, Weafer said. Finally, Urquhart Stewart said another area which is going to be interesting for geopolitical issues is going to be China with rare earth mining. The timing is very uncertain, but it seems more likely to happen in early summer as gas companies in Europe will want extra volumes in these months to rebuild inventories ahead of the 2022/23 winter,” Weafer argued. Russian gas flows from it through the Yamal Gas Pipeline Link into the German gas pipeline network and westward. “But they are running out of time as such a move would be deeply unpopular in the US Congress and President Biden will have to avoid any such contentious actions coming up to the mid-term elections in the US. style=”font-size:40px; line-height: 1.3em; font-weight: 800; padding:7px;”>Gazing into the Energy Crystal Ball for 2022

By Kostis Geropoulos
Energy & Russian Affairs Editor, New Europe

The gas compressor station in Mallnow, north of Frankfurt an der Oder, Germany. Turning to natural gas prices, Weafer believes the EU gas price will stay high in the first half of 2022 but does not see a crisis as such. GAZPROM

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The Covid pandemic and geopolitical issues are likely to be key issues for the energy prices in 2022. None of the major producers in the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, want to see the oil price crash under an excess supply, regardless of what consuming nations demand, Weafer said, adding that if there is a slowdown in demand in the first or second quarter then OPEC+ would probably suspend the current recovery program and wait until they see demand recovering. It’s going to be going up and down, up and down, up and down, on a relatively small scale and it will be driven by geopolitical issues and, of course, the pandemic issues. According to the Moscow-based expert, the outlier on the upside would be if there was war between Ukraine and Russia that led to Russia being restricted within SWIFT or some other trade restrictions. He opined that Russia will not push more gas through the Ukraine transit system than it is contractually obliged to do. I should expect to see prices probably rise,” Urquhart Stewart argued. A colder than usual winter would push prices even higher. “Germany cannot take the risk of Russia not extending that contract and not having Nord Stream 2 fully operational. That is 40 billion cubic meters per annum until the end of 2024. According to Weafer, the Brent price will trade in the $70s per barrel through the first half of 2022 with a lot of volatility in the first quarter, as Covid numbers and restrictions are likely to be worse then. “What we have to have when we’re looking at these figures would be the economic debate on the use of all those commodities and the increasing demand,” Justin Urquhart Stewart, co-founder of Regionally in London, told New Europe, asked about the oil and natural gas prices for 2022. “Environmental activism is ratcheting pressure on the oil majors, on the investment funds and on banks. That level of coordination clearly works, and I believe Russia and the major OPEC producers, especially Saudi and the UAE, will also want that to continue,” Weafer said. “And then the second point is geopolitical because we have never seen so much political angles on this having such effect and obviously this particularly gas, Russia, Nord Stream 2 and the – unofficial not really talked about – intercountry blackmail but in terms of border with Ukraine and the gas prices. According to the Macro-Advisory co-founder, the price of gas will inevitably stay high in the first quarter and into the second quarter because inventories in Europe are low and demand will be high through the winter months. He expects the price of gas to be a lot lower this time next year and coming into 2023, as Russian supply will be higher with the Nord Stream gas pipeline from Russia to Germany and with the continued use of the Ukraine transit route at least until end 2024. follow on twitter @energyinsider “We’re heading to the coldest part of the year, and I think prices will be maintained at a high level until the level of confidence that political stability or relations with Russia is developed successfully which is unlikely,” he opined. “I expect the price to stabilize close to $80 per barrel in the summer and early autumn – based on an assumption of economic recovery strengthening in 2023 and, with it, finally a return to pre-Covid oil demand,” he said. This is an area completely unknown,” he said, adding that investors should expect higher oil prices and gas prices staying roughly where they are for the time being. What impact that’s going to have on prices? Asked if he expects any more sanctions affecting the pipeline if the situation between Russia and Ukraine worsens, Weafer noted that the major uncertainty is of course what happens in Ukraine and if there is a war or, more accurately, what type of war and for how long? Chris Weafer, co-founder of Macro-Advisory in Moscow, told New Europe the two most important factors for the oil price in 2022 will again be Covid-19 and OPEC+. If we want a letter of the alphabet, it’s probably going to be not a capital but underscore ‘w’. Germany sees transit country routes as less secure in the same way as Russia does,” Weafer argued. So, the odds on a deal and for a return of 2 million barrels of Iranian oil to the export market, are falling quickly,” he said. According to the London-based expert oil prices will move towards $100 per barrel and the gas prices will not weaken any time soon. “The former, especially if the Omicron variant forces extended travel and business restrictions, will continue to hang over demand assumptions and lead to frequent scares,” he said, adding that it seems inevitable that a return to pre-Covid demand volume will be seen later and more likely not until 2023. “I expect the price of Brent to trade in the mid to high $80s in the latter part of 2022, again based on that demand recovery optimism in 2023 and with OPEC+ supply coordination continuing even past the end of the current deal. “The gas crisis and price spikes seen in Europe this year, and the inevitability of high prices this winter, will guarantee that Nord Stream 2 will be approved and become operational in 2022. It means that OPEC+ will be increasingly in the driving seat, in terms of growing market share, to the end of this decade, at least,” he said. Weafer noted that the latter proved very effective through most of 2021 and should again act decisively in 2022 to ensure that supply is more evenly matched with demand and inventory trends. The oil prices would be in mid-$50s per barrel for a month or two. “The V-shaped recovery is a loser that’ s just bouncing back from a terrible position. Weafer expects demand to remain high into the spring and summer, rather than fall as usual, because countries and gas companies will want to rebuild the storage tanks that they let fell to low levels last winter. Urquhart Stewart said the economic recovery should continue. He explained that Russia is the biggest supplier of oil with just over 4 million barrels per day plus oil products of just under 3 million barrels to the world economy, including 800,000 barrels of crude per day to US Gulf Coast refineries, so any disruption in that trade, or even a fear that it might happen, would lead to a much higher oil price – at least $100 per barrel for Brent – for several weeks. the exception being a new land bridge between the separatist region and Crimea perhaps,” he argued. He noted that the outlier on the downside would be if Covid-19 variants prove more damaging and demand for oil falls, or event stalls, and OPEC+ takes no action.

The measure will apply until the end of 2030. In this context, Austria will carry out a yearly review of the costs of producing electricity from the supported renewable energy versus the market prices. EPA-EFE/CHRISTIAN BRUNA/FILE PICTURE

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An Austrian aid scheme to support electricity production from renewable sources complies with EU State aid rules, the EU’s antitrust chief said on December 20. Furthermore, Austria envisages maximum price caps based on the cost of production. Finally, the Commission said the positive effects of the measure, in particular the positive environmental effects, outweigh any possible negative effects in terms of possible distortions to competition. Hence, the investments by the selected beneficiaries would not take place in the absence of the aid. Under the scheme, the aid will take the form of a top-up premium, calculated as the difference between the average production cost for each renewable technology and the electricity market price, the Commission said. style=”font-size:40px; line-height: 1.3em; font-weight: 800; padding:7px;”>Austrian scheme to support electricity production from renewables gets EU nod

By New Europe Online/KG

Wind turbines on fields near Herrnleis, some 50 kilometres northern Vienna, Austria. The level of aid will be determined by competitive tenders for electricity produced from wind, solar energy and biomass. Moreover, Austria has committed to ensure sufficient flexibility to adapt the support scheme to market developments, with a view to maintaining a cost efficient support. In particular, in view of the novelty of the system for the country, Austria put in place a mechanism of review, notably with an interim evaluation by 2025. The aid will be granted in the form of a top-up premium, which cannot exceed the difference between the market price of electricity and the production costs. It also has an incentive effect, as current electricity prices do not fully cover the costs of generating electricity from renewable energy sources. “This scheme will enable Austria to support renewable technologies, as it has set its goal to achieve 100% CO2 free electricity generation in 2030,” EU Commission Executive Vice-President Margrethe Vestager said.   The aid will be paid out to the selected beneficiaries for a period of maximum 20 years from the starting of the operation of the plant. Austria also committed to open the renewables support scheme to energy producers established outside Austria, subject to the conclusion of bilateral or multilateral cooperation agreements with other countries. In particular for electricity produced from wind, solar energy and biomass, the aid will be granted through technology specific competitive bidding processes, which should contribute to keep the support proportionate and cost-effective. According to the Commission, the measure will help Austria reach its target of 100% renewable energy in 2030, in line with its Recovery and Resilience Plan as endorsed by the Commission and approved by Council, and will contribute to the European objective of achieving climate neutrality by 2050, without unduly distorting competition in the Single market. It has also envisaged a possible adaptation of the system in order to ensure that tenders remain competitive. The measure will contribute to the reduction of CO2 and other greenhouse gas emissions, in line with the EU Green Deal objectives and the environmental targets set in Austria’s Recovery and Resilience Plan, without unduly distorting competition in the Single Market,” she added. Furthermore, the aid is proportionate and limited to the minimum necessary. Austria has also foreseen mixed-technology tenders including wind and hydro in their framework. Austria has set itself the target to increase the share of electricity produced from renewable energy sources from the current 75 % to 100% in 2030. The Commission said the aid is necessary to further develop energy generation from renewable sources and help Austria achieve its environmental targets. On this basis, the Commission concluded that the Austrian scheme is in line with EU State aid rules, as it will facilitate the development of renewable electricity production from various technologies in Austria and reduce greenhouse gas and CO2 emissions, in line with the European Green Deal, without unduly distorting competition in the Single Market. Austria notified the Commission of its intention to introduce a scheme to support electricity produced from renewable energy sources namely wind, solar, hydro, biomass and biogas. The measure is one of the targets to be achieved by Austria in the context of its Recovery and Resilience Plan. Payments under the scheme have been estimated to amount to around €4.4 billion until end 2032. The Commission assessed the scheme under EU State aid rules, in particular the 2014 Guidelines on State aid for environmental protection and energy.

It provides for support of inspectors, police, prosecutors and judges through training, investigative tools, coordination and cooperation, as well as better data collection and statistics. style=”font-size:40px; line-height: 1.3em; font-weight: 800; padding:7px;”>Commission proposes to strengthen the protection of the environment through criminal law

By New Europe Online/KG

EC Sinkevičius hang on a tree a bird house in Pikku Vesijärvi park in Lahti on 03.05.2021

EU Environment, Oceans and Fisheries Commissioner Virginijus Sinkevicius hanging on a tree a bird house Lahti, Finland, May 3, 2021. The proposal intends to make protection of the environment more effective by obliging Member States to take criminal law measures. Environmental crimes often impact several countries for example the illicit trafficking of wildlife or have cross-border effects (for example in the case of cross-border pollution of air, water and soil). The Commission proposed to set a common minimum denominator for sanctions for environmental crimes. Finally, as environmental crime is a global phenomenon, the Commission will continue to promote international cooperation in this area. At a time where the international community discusses the crime of ecocide, a high level of environmental protection is not only important for present but also future generations as we redouble our efforts to fight environmental degradation,” Sinkevicius said. Criminal law is one of them, and this proposal will give law enforcement authorities and the judiciary the tools to act more effectively against environmental crimes across the Union,” Jourova said. In addition, the proposal clarifies existing definitions of environmental criminal offences, providing for an increased legal certainty. EU Environment, Oceans and Fisheries Commissioner Virginijus Sinkevicius stressed that environmental crimes cause irreversible and long-term damage to people’s health and the environment. The legislative proposal will now be submitted to the European Parliament and the Council. EUROPEAN UNION, 2021/EC – AUDIOVISUAL SERVICE/ALESSANDRO RAMPAZZO

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The European Commission has adopted a proposal for a new EU Directive to crack down on environmental crime, fulfilling a key commitment of the European Green Deal. According to the Commission, the proposal sets new EU environmental criminal offences, including illegal timber trade, illegal ship recycling or illegal abstraction of water. That is why we need to strengthen our environmental criminal law. The proposal today builds on lessons learned and experience gained over the past years and will directly address root-causes that have prevented the protection of the environment from being as effective as it should be,” he said. The Commission said the proposal also aims at making  relevant investigations and criminal proceedings more effective. The Commission proposed that each Member State develops national strategies that ensure a coherent approach at all levels of enforcement and the availability of the necessary resources. Law enforcement and judicial authorities can only tackle these crimes when they work together across borders. Where offence cause or are likely to cause death or serious injury to any person, Member States have to provide at least for imprisonment of up to ten years. Finally, Justice Commissioner Didier Reynders warned that there is no time to lose. Letting law-breakers act with impunity undermines our collective efforts to protect nature and biodiversity, fight the climate crisis, reduce pollution, and eliminate waste,” EU Commission Executive Vice-President for the European Green Deal Frans Timmermans said, adding that serious abuses must be met with a serious response, and today’s proposal lays the groundwork for that. Commission Vice-President for Values and Transparency, Vera Jourova noted that the environment knows no borders and crimes against it display their negative effects across Member States. With this new directive, we have another strong tool to protect the environment and ultimately our planet. It also obliges the Member States to support and assist people who report environmental offences and cooperate with the enforcement. It defines new environmental crimes, sets a minimum level for sanctions and strengthens the effectiveness of law enforcement cooperation. The proposal will help cross-border investigation and prosecution. The draft directive also proposes additional sanctions, including the restoration of nature, exclusion from access to public funding and procurement procedures or the withdrawal of administrative permits. The Commission said it will continue to support Member States by offering law enforcement practitioners and their professional networks a platform for strategic discussions and providing them with financial assistance. “We must use all possible means to protect the environment at Union level. “Yet, they are hard to investigate and bring before the Court, while sanctions tend to be weak. “The willful destruction of our natural environment threatens our very survival as humanity. This proposal will help to protect nature and natural resources, as well as public health and well-being. “We must make sure that our rules on fighting environmental crime are targeted and ambitions enough to create a real change.

They include sections to support the decarbonization of the economy in a broad and flexible manner open to all technologies that can contribute to the European Green Deal, including renewables, energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity as well as measures to ensure security of energy supply. The CEEAG introduce safeguards to ensure that the aid is effectively directed where it is necessary to improve climate and environmental protection, is limited to what is needed to achieve the environmental goals and does not distort competition or the integrity of the Single Market. In particular, the new guidelines broaden the categories of investments and technologies that Member States can support to cover all technologies that can deliver the European Green Deal. The new guidelines also cover aid for numerous areas relevant for the Green Deal. EUROPEAN UNION, 2021/EC – AUDIOVISUAL SERVICE/LUKASZ KOBUS

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The European Commission’s College of Commissioners endorsed on December 21 the new Guidelines on State aid for climate, environmental protection and energy (CEEAG). According to the Commission, the new rules involve an alignment with the important EU objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and cater for the increased importance of climate protection. The revised rules generally allow for aid amounts up to 100% of the funding gap, especially where aid is granted following a competitive bidding process, and introduce new aid instruments, such as Carbon Contracts for Difference to help Member States respond to the greening needs of industry. In this respect, the CEEAG will for example enhance stakeholder participation in the design of large aid measures requiring Member States to consult stakeholders on their main features. The Guidelines also aim at facilitating the participation of renewable energy communities and SMEs, as important drivers for the green transition. The CEEAG also include a new section on aid for the closure of coal, peat and oil shale plants to facilitate decarbonization in the power sector. “Although a significant share will come from the private sector, public support will play a role in ensuring that the green transition happens fast. The new Guidelines endorsed today will increase everything we do to decarbonize our society. They’re critical to the visibility of the industry and preserving and expanding the European wind supply chain” WindEurope Chief Policy Officer Pierre Tardieu said. The rules have also been reviewed to better sustain the progressive decarbonization of these companies by, among others, linking levy reductions to commitments by the beneficiaries to reduce their carbon footprint. Moreover, the CEEAG feature dedicated sections for aid incentivising investments in flagship areas such as energy performance of buildings, and clean mobility, covering all transport modes. This is a major step to ensuring that our State aid rules play their full role in supporting the European Green Deal,” she added. The State aid rules endorsed on December 21 support projects for environmental protection, including climate protection and green energy generation. The European Commission decided to allow for up to 30% of non-price-based criteria to be introduced to national auctions. The revised Guidelines include important adjustments to align the rules with the Commission’s strategic priorities, in particular those set out in the European Green Deal, and with other recent regulatory changes and Commission proposals in the energy and environmental areas, including the Fit for 55 package. The rules aim at limiting the risk that, due to these levies, activities in certain sectors move to locations where environmental disciplines are absent or less ambitious than in the EU. “The European Commission allows for qualitative criteria in competitive wind energy auctions. style=”font-size:40px; line-height: 1.3em; font-weight: 800; padding:7px;”>EU endorses new climate, environmental protection and energy guidelines for state aid

By New Europe Online/KG

Margrethe Vestager

Press conference by Margrethe Vestager, Executive Vice-President of the European Commission, on the project guidelines on state aid for Climate, energy and the environment, Brussels, December 21, 2021. “Europe will need a considerable amount of sustainable investments to support its green transition,” EU Commission Executive Vice-President Margrethe Vestager, in charge of competition policy, said. The Guidelines specifically mention revenue stabilisation mechanisms in the form of two-sided Contracts for Difference (CfD) as a good model to support the further expansion of renewables. The new Guidelines on State aid for climate, environmental protection and energy introduce changes to the current rules on reductions on certain electricity levies for energy intensive users. In order to cater for the enhanced decarbonization efforts required to meet the EU climate targets, the CEEAG cover the reductions in all levies financing decarbonization and social policies. Moreover, they ensure coherence with the relevant EU legislation and policies in the environmental and energy fields, by, among others, ending subsidies for the most polluting fossil fuels, for which a positive assessment by the Commission under State aid rules is unlikely in light of their important negative environmental effects. The new rules create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the European Green Deal objectives in a targeted and cost-effective manner. “National Governments can continue with technology-specific auctions: good. Furthermore, with a view to enable Member States to maintain a level playing field, and based on objective indicators at sector level, the CEEAG have streamlined the number of eligible sectors. Among others, they will facilitate investments by Member States, including in renewables, to accelerate the achievement of our Green Deal, in a cost-effective way. Measures involving new investments in natural gas are unlikely to be approved unless it is demonstrated that the investments are compatible with the Union’s 2030 and 2050 climate targets, facilitating the transition from more polluting fuels without locking-in technologies that may hamper the wider development of cleaner solutions. The rules aim at helping Member States meet their ambitious EU energy and climate targets, at the least possible cost for taxpayers and without undue distortions of competition in the Single Market. This includes new or updated sections on aid for the prevention or reduction of pollution other than due to greenhouse gases, including noise pollution, aid for resource efficiency and circular economy, aid for biodiversity and for the remediation of environmental damage. The CEEAG will be formally adopted in January 2022 and will be applicable from that moment.   Price will continue to be the lead criterion for allocating public support to wind energy projects, but not the only one. That’s good. Also, the new guidelines increase flexibility and streamline the previous rules, also by eliminating the requirement for individual notifications of large green projects within aid schemes previously approved by the Commission. A new single section covers the reduction or avoidance of greenhouse gas emissions, facilitating the assessment of measures supporting the decarbonization of different sectors of the economy, including through investments in renewable energy, energy efficiency in production processes and industrial decarbonization, in line with the European Climate Law. It will continue to ensure that the energy transition is delivered at the lowest cost for society,” Tardieu said, adding, “At the same time, it allows National Governments to consider whether they want to factor in sustainability, system integration or activation of the economy in their auctions”.