Speech by Maroš Šefčovič at Bruegel's Annual Meetings 2016

Many thanks Guntram. Ladies and gentlemen,

Looking at your programme of the last two days I must say I'm extremely impressed by the scope, level, and diversity of this year's Annual Meetings.

I also see that the Energy Union features prominently as the first and last session of this year's conference, with many cross-sectoral sessions on research, innovation, economic and financial reforms, geopolitics etc. These are cross-cutting areas where Bruegel's publications and events are making a big difference for us, policy-makers.

By now, we all realise that problems cannot be dealt with in isolation. The butterfly effect of one sector can end up having a major impact on entirely different policy fields.

And we have seen some spill-over effects which created some of the greatest challenges of our generation:

• Climate change has manifested its looming dangers in a way are no longer refutable;
• The weight of Europe within the global economic growth is diminishing;
• The economic and financial crises have had a devastating impact on our children's generation, whose starting point is to a large extent more difficult than it was 20-30 years ago.
• The public trust in EU –and as a matter of fact national institutions – is at record-low (according to the last eurobarometre survey), populist parties are on the rise in many places of Europe.
• And it's not only about levels of unemployment, investment, and growth which have not yet picked up to pre-crisis levels, it is more broadly about what the EU can bring to its citizens.

All this needs to be addressed collectively.

These challenges are not solely an issue for EU decision-makers. As we see it in the Member States and their regions, it has become an issue of concern to national politicians but also local and corporate actors.

The Commission President will give next week his State of the Union address to the European Parliament – this should set the tone for the debate. I am also coming back from Bratislava and the Slovak Presidency is hosting an informal summit next week with Heads of State and Government to collectively address the roots of the crisis.

I will say a word later on the G20 summit that just took place in China to tackle what the leaders called "a profound transformation in the global economic landscape and growth dynamics".

As you might know, the Chinese word for 'crisis' is made up of two characters which can be translated into: 'danger' and 'opportunity'. And indeed, when I look at these challenges, at climate change, unemployment, investment, and the emerging markets, I see not only very big challenges but tremendous opportunities ahead of us.

I will focus on some of these opportunities which are at the heart of the Energy Union project.

The fight against Climate Change

It took many years of persuasion but the man-induced climate change is now widely recognised, and the fight against it has now become a global effort. There are obviously varying levels of ambition, there are different political approaches but there is a clear need to act immediately and collectively now crosses continents, cultures, and political camps.

We have seen this sense of ambition at European level in the Council decision from 2014 which set high European targets on the share of renewables, the reduction of GHG emissions, and boosting our energy efficiency. We have seen it in the historic success of the Paris Agreement last year, when the international community decided to find ways rather than excuses; and to do what it takes to fighting climate change. We have seen it in the global "Mission Innovation" initiative, set by President Obama to have major economies double their public investment in clean energy innovation, of which the EU has become an active member. And with the "Breakthrough Energy Coalition", under the leadership of Bill Gates and other philantropists, to make sure the private sector works in partnership with governments on leveraging investment. Or at local level, with the new Global Covenant of Mayors that we have put into place to bring local players to the forefront of climate action.

But we should not take these achievements for granted. We see many detractors in Europe and the US that are aiming to rise to power, to undo what has been arduously achieved.

We also see that political declarations do not suffice. The energy – or low carbon – transition must move from the political level to the ground level. This is where we should concentrate our efforts.

Of course it is not all gloomy. We can build upon existing strengths.  EU companies hold 40% of all patents for renewable technologies. Some 9 million Europeans already work directly and indirectly in the low carbon energy industry and we expect this number to double by 2030! Eco-design and energy labelling policies are expected to contribute to the creation of 800,000 additional jobs and provide €54 billion extra revenue for Europe’s industry by 2020. Other eco-industries are important job engines, too, such as waste and wastewater management and other activities linked to the protection of the environment. So this transition to a low carbon and greener economy can represent a goldmine for jobs and growth.

But we need to work better on the commercialisation (or market uptake) of our low carbon (and energy efficient) technologies. There are huge opportunities to be taken. The International Energy Agency has assessed that – only for the period between now and 2030 – the 2°c goal – will need global investment in the range of USD 16.5 trillion. In India alone some 300 million people currently have no access to electricity, and Prime Minister Mohdi is determined to do it the low-carbon way.

Annual global investment in renewable electricity alone is expected to increase from some €240 billion in 2014 to € 360 billion in 2030. The global installed PV capacity is foreseen to increase more than twenty-fold by 2050 and wind capacity installed by 2030 in Europe is expected to reach 350 GW, of which 150 GW offshore. This shows that there are huge market opportunities for our energy operators and technology providers.

To reap the benefits of the low carbon transition, we must better position our companies, support the market uptake of our innovative technologies,  create an environment that is conducive to attract investment, develop innovation ecosystems (which could be specialised regional clusters in energy, mobility, etc), and work in partnership with the industry and cities, and other facilitators, to that effect.

I am eager to discuss with you how that could and be done. We will come up before the end of the year with an Energy Union innovation and competitiveness strategy. Next year, I will also continue to go and meet the actors on the ground, in the "smart" or innovative cities, cooperatives and companies, that make this transition visible and possible for the citizens, to see how we can better support them.

Investment & Competitiveness

That brings me to the challenge of investment.

In fact, sustainable investment was a very central topic during the Paris COP21 summit and my meetings there with the business community. Later, on the margins of the signing ceremony in New York, I discussed this further with the UN Environment Programme Director, Achim Steiner. We agreed it was critical to minimise the risk of financial instability linked to climate change and the transition to a low-carbon economy. I told him that some EU Member States are taking a lead when it comes to ensuring sustainable investment. The Dutch Central Bank, for example, has updated its mission to not only “safeguarding financial stability”, but also “contributing to sustainable prosperity in the Netherlands”.

In the energy sector alone we are currently facing an investment gap of no less than €200 billion per year (across the EU). Connecting the Europe's transport corridors (TEN-T) requires an additional investment of €200 billion until 2020. The same is true for the entire transport sector and the need to invest in research and bringing innovations to the market.

But as I often say, it is rather paradoxical that the investment is not there given the tremendous potential in low-carbon technologies. But I am convinced that this will change soon. We, in the Commission, have made it a primary objective to create a more stable and favourable environment for investment. We've been doing it through a wide range of tools at our disposal which are starting to show tangible results.

First and foremost, we are trying to stabilise the regulatory environment across our market because such instability is the first factor which scares investors away. Through our Energy Union legislative packages we are inducing much needed predictability and consistency in the regulatory framework. By the end of this year the EU legislator will have, on its table, nearly all of these interrelated initiatives.

Second, we have found ways to unblock investments to where they are needed. The famous EFSI or Juncker Fund has been around since June last year. During its first 12 months, almost 290 projects were approved by the European Investment Bank Group across 26 Member States, and they are expected to trigger a total investment value of €115.7 billion. The energy and research, development and innovation sectors represent together almost 50% of EFSI-backed investments so far.

The EFSI has also been successful in attracting other sources of investment, which is one of its key objectives: around 80% of the expected total investment comes from private or public investors outside the EIB Group.

We must thus strive to develop an enabling environment that removes regulatory barriers, encourages investment and risk taking, provides stability and predictability and rewards innovation in low carbon and energy efficient technologies.

Looking ahead

Ladies and gentlemen,

A better future obliges us to challenge our traditional modus operandi and adjust to the ever-changing environment. I started off by congratulating you, Guntram, for having this conference touch upon a very wide array of issues, without sacrificing its rigour in addressing them.

This new horizontal, systemic approach characterises our new way of working.  The synergies between fields is even more apparent in our new globalised and digitised economy. Who would have thought 10 years ago that a few mobile apps could disrupt the tourism industry, our public transport, or the way we heat and power our homes? That nanotechnology would have such impact on medicine? "3D" printing on our manufacturing? Artificial intelligence on the way we organise our society? Or that 4/5G internet would change everything we know about driving cars (who now drive by themselves)?

That is why the current Commission was structured to tear down the "silos", ensuring we recognise potential synergies upstream and avoid duplications. And as importantly, that we manage to think creatively and disruptively, in the face of global challenges, to be able to embark fully on the industrial revolution. It is no coincidence that the G20 leaders in Hangzhou have focused so much of their attention to sustainable Innovative Growth and the Industrial Revolution.

The Energy Union has the word 'energy' which confuses some people to think that it's the new name for the EU energy policy. But in fact it is about energy and many other policy fields, put together in a way we ensure that we address it together with transport, innovation, agriculture, competition, consumers' rights, climate action, industry, etc. etc. It is about consumer empowerment – or prosumers (i.e. democratisation), as a result of greater decentralisation, decarbonisation and digitalisation of our energy and mobility systems.

It is about user-focus disruptive technologies to allow for greater service driven models. It is about enhanced diversification of both our energy sources and their usage (through heating and cooling, low emission mobility, storage and vehicle-to-(smart)grid, real time demand-response etc.)

Ultimately, the Energy Union is about the modernisation of our economy, in a way that creates new markets, new business models and leads to innovation-driven jobs, growth and investment agenda in Europe.

It is a major challenge that is radically impacting our lives as citizens, urban residents, commuters, workers, consumers, entrepreneurs, innovators, researchers, local actors, etc.

I would conclude by saying that this multifaceted vision of society brings us back to the great work of Bruegel, after which you institution is named.

As a very gifted painter, he was able to depict the complexity of society, the many actors who interplay, the complex relations they have and to magnificently display the overall societal picture.

And I understand that is also what have collectively and creatively done so in the last two days.

I will stop here because I am sure you will have a lot of insight, comments, and questions after these days of intense debates and I am therefore very much looking forward to hearing from you.

Thank you very much.