REPowerEU is “Russian roulette” for Europe’s energy

The REPowerEU plan, designed to end Europe’s dependence on Russian fossil fuels, is a political document that has plunged the European Union (EU) into a game of Russian roulette, and the arguments for both possible outcomes are strong, said Željko Lovrinčević, a senior research fellow at the Institute of Economics, Zagreb. He warned that the question of the economic viability of the plan hasn’t been raised yet, but that EU citizens would do it soon enough because they would have to shoulder the cost through higher energy and food prices.

Željko Lovrinčević said the REPowerEU plan is primarily a political document in the context of achieving energy and climate goals.

Lovrinčević said that all political documents must be assessed for economic feasibility and sustainability, and he asked whether European firms’ competitiveness is sustainable against companies from other parts of the world with different energy prices.

The question of the sustainability of the REPowerEU plan will be raised by citizens

Lovrinčević claims that the question of the plan’s sustainability will very soon be raised by the public, by EU citizens,  in the context of costs related to the Ukraine war.

It is certain, in his words, that European citizens will see continued growth in the share of energy bills in their spending, and a similar thing will happen with food. Lovrinčević also asked what would happen in countries where energy costs already make up more than 50% of total expenditure.

Speaking at a webinar on how REPowerEU will affect Croatia and Europe’s energy outlook, Lovrinčević asked whether citizens would reject REPowerEU to avoid losing money intended for things like health or education.

Is the political agenda blurring the view of the whole situation?

The senior research fellow at the Institute of Economics, Zagreb, also said that for him, the main questions are what the plan means for citizens in terms of their standard of living, how energy costs in Europe will compare to the rest of the world, how Europe’s competitiveness will be affected, and whether the political agenda is blurring the view of the whole situation.

Lovrinčević believes Europe has embarked on a game of “Russian energy roulette,” which, as he says, sometimes ends well and sometimes not. In his words, it could be a turning point, a big success, but it could also turn out to be a failure. The arguments are quite strong for both outcomes, he added.

Too much burden on European citizens could ruin a good idea – the energy transition

According to Lovrenčić, sometimes good ideas fail, and that could happen to the energy transition in this case. If things accelerate too much and unrealistic goals are set, the burden put on European citizens may have the opposite effect.

Europe will spend the coming years, even decades, securing new energy sources for basic needs, for something that today everyone takes for granted, he stressed.

That will be easier for the rich countries, but much tougher for countries in Central and Eastern Europe, which are more dependent on Russian fuels and have lower income.

If richer countries don’t show solidarity, there will be resistance among the poorer ones against entering the process, Lovrinčević warned.

Babić: low-income EU countries will be taken into account

Ante Babić, a senior official at the European Commission’s Directorate-General for Energy, admitted there are many obstacles to implementing the REPowerEU plan and that it indeed is a politically motivated document, noting that politics has prevailed.

EU member states have different views on the energy transition, from those that say the process is too slow to those that don’t see it as something good. But, in his words, it is clear that the EU has no oil, no gas, and no coal, so it must turn to renewable energy sources.

The EU is preparing a mechanism to make sure funds do not end up in rich countries

According to Babić, the financing mechanism under the REPowerEU plan will take into account the countries that buy more oil and gas from Russia so that they receive more funds.

The European Commission is working on a mechanism to ensure projects don’t end up only in Germany or Italy, but also in countries from the Baltics to Bulgaria, Babić said.

The webinar was also attended by Ivo Milatić, State Secretary for Energy at the Ministry of Economy and Sustainable Development, Ana-Maria Boromisa from the Institute for Development and International Relations, Božidar Poldrugač, member of the Management Board of Končar, and Darko Lopotar from Schneider Electric. The event was organized by the EU Delegation to Croatia.