Territorial Competitiveness and Cohesion The Effects of Rising Energy Prices. Contribution to and ESPON workshop at the RSA Annual



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Territorial Competitiveness and Cohesion The Effects of Rising Energy Prices Contribution to and ESPON workshop at the RSA Annual International Conference 2010

Paper Overview Regions at Risk of Energy Poverty Based on the findings of the ESPON project ReRisk Analyses the possible impact of rising energy prices on Regional Competitiveness Regional Cohesion Energy is becoming a key policy issue Big concern about increases in oil prices

Energy prices a major political concern in Europe International oil prices have recently reached an all-time high. Estimates indicate that the current high oil prices will have long-term impacts, reducing growth and increasing inflation in the EU economy. Through higher input and transport costs, high fuel prices increase food prices. These high price levels are squeezing the purchasing power of all EU citizens, with the most severe impact on the lowest income families, and putting a strain on business. Energy intensive sectors, as well as transport and agriculture, and in particular fisheries, are most affected and face a difficult adjustment process The response of the EU to recent increases in oil prices should be based on the assumption that prices are likely to remain high in the medium to long term. COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Facing the challenge of higher oil prices

Paper Overview Regions at Risk of Energy Poverty To link already available data on energy production consumption in the European Regions with their spatial characteristics, integrating social climate-related competitiveness indicators To obtain a clear picture on how the increase of energy prices might affect regional cohesion competitiveness To assess which are the policy options available to regions in order to cope with this challenge

Paper Overview - Regions at Risk of Energy Poverty Region s vulnerability has been measured in 3 dimensions, which account 84% of energy consumption: Impacts on competitiveness and employment Transport dependency Social situation The focus has been set on energy consumption (demand) side by Identifying sectors with the highest energy spending Regions with high level of employment in these sectors Comparing to regional industrial consumption where possible Climate characteristics data PV and wind potential

Paper Overview - Regions at Risk of Energy Poverty The combined data has then been processed further in a clustering process to identify groups of regions with similar characteristics, which may be addressed by a common set of policies. The policy recommendations, which are the main output of the project, have also taken into account the long-term planning framework in the energy sector, which is described in four qualitative scenarios. Further input has been obtained from a survey of 40 regional administrations, from the case studies carried out in several EU regions (Samsø, Denmark; Navarra, Spain; Kalundborg and Landskrona, Sweden; and Freiburg, Germany) and from relevant EU policy documents.

Understanding di the Economic Impact of Rising i Energy Prices Increases in oil prices spread across the energy sectors and the economy because: gas supply contracts t areindexed d to oil prices gas-fired power plants define the daily price in the wholesale electricity markets in most EU countries International coal prices follow the upward trend, due to increased transportation costs. In many EU countries households are not directly exposed to these prices hikes, because end-user prices are still regulated The impact of energy price increases will not vary significantly in most EU Member States because of different fuel mixes in electricity production, but because of different patterns on the consumption side

Identifying i vulnerable regions Raw data Eurostat Energy spending by industry 2005, NACE 2, 3 and 4 digit level, NUTS 0 Derived indicators Ranking of industries by energy spending Comparisonof energy spending by industries (NACE 2,3, and 4 digit level) to EU average Identification of 5 sectors with highest overall spending on energy purchases per country (NACE 2 digit level) Raw data Eurostat Employment 2005, NACE 2 digit level, NUTS 2 Derived indicators Identification of employment in industries with high energy spending in NUTS 2 regions (analysis of economic structure) Calculations Raw data Eurostat GrossValue Added, 2005, NAC E 2 digit level, NUTS 2 Derived indicators Gross Value Added, 2005, NACE 2 digit level, NUTS 2 Raw data national statistical offices Industrial energy consumption, 2004/2005, NUTS 2 Derived indicators Correlation with actual industrial energy consumption in 4 Member States Identifications of regions with high levels of economic vulnerability = wealth creation and employment dependent on industries with high energy spending

The most vulnerable regions Economic vulnerability: regions in which a high share of wealth creation or employment depends on industries with high energy spending Region Employment in industries with high energy purchases / total t employment (%) Moravskoslezsko 14.23% Emilia-Romagna 13.91% Strední Morava 12.75% Severovýchod 12.52% Friuli-Venezia Giulia 12.50% Lombardia 12.37% Norra Mellansverige 12.14% Veneto 12.09% Severozápad 11.49% Jihovýchod 11.33% Piemonte 10.95% Marche 10.41% GVA of industries with high energy spending / total Region regional GVA (%) Moravskoslezsko 25.13% Groningen 22.36% Principado de Asturias 21.02% Severozápad 20.37% Pais Vasco 18.40% Comunidad Foral de Navarra 17.82% Niederbayern 16.84% Castilla-la Mancha 16.76% Prov. Brabant Wallon 16.44% Emilia-Romagna 16.25% Strední Morava 16.04% Sterea Ellada 15.79% Zeeland 15.71% Severovýchod 15.64%

The most vulnerable regions Transport dependence can be measured by the % of employment in the transport sector, commuting, the cost of freight transport and the extent of air travel Region Fuel costs as % of GDP 2005 Severen tsentralen 14.22 % Yugoiztochen 8.18 % Swietokrzyskie 7.99 % Severoiztochen 7.16 % Yuzhen tsentralen 6.72 % Lubuskie 6.67 % Podlaskie 6.59 % Severozapaden 6.39 % Strední Cechy 6.27 % Región de Murcia 6.13 %

The most vulnerable regions Social vulnerability is strongly related to the levels of poverty in the regions. Long-term unemployment and low rates of economic activity it are two of the most important reasons why people slide into poverty. Regions with the lowest activity rates Region Economic Activity Rate, 2005 (%) Calabria 41.7 Puglia 42.1 Sicilia 42.1 Severozapaden 42.9 Campania 42.9 Molise 43.0 Basilicata 43.8 Észak-Magyarország 45.0 Észak-Alföld 45.6

Facing energy poverty Normalised and weighted variables Climate conditions mean max temperature July mean min temperature January) Economic structure % employment in industries with high energy purchases (x2) Transport dependency fuel costs of freight transport % workers commuting Social vulnerability long-term unemployment rate disposable income in households) Production potential of renewables wind power potential PV potential)

Facing energy poverty 1. Green High- tech 2. Energy- efficient i Europe 3. Nuclear energy for Big Regions 4. Business as Usual? Emphasis on renewable energy Emphasis on fossil energy (gas) Emphasis on nuclear Emphasis on fossil energy (coal) High innovation capacity Moderate innovation capacity Moderate innovation capacity Low innovation capacity High presence of the service and knowledge economy Balanced presence of all sectors in the economy High presence of the primary and manufactory industry Negative economic growth -Urban and rural growth -Urban and rural growth -Urban and rural growth -Increasing I i settlement centralization

Policy Recommendations The policy recommendations results do not focus on energy policy only, since energy is a cross-cutting issue and therefore has to be approached from many different angles. While rising energy prices will result in structural changes in regions new business opportunities may appear in all scenarios. The recommendations are addressing decision-makers on regional level with the objective of: reducing the regions vulnerability on the short term improving the regions adaptive capacity on the medium and long term

Policy Recommendations General policy recommendations (good governance) Promote energy solidarity between regions and territories Strengthen regional and local networks Fund and stabilize transnational research agencies Promote awareness among regional policy makers on the impact of rising energy prices and the need for economic diversification Define a vision for a regional energy model 2050 Push municipal leadership in public-privateprivate partnerships

Policy Recommendations Spatial planning policies and strategies towards a more sustainable territorial management Develop integrated spatial planning instruments Strengthen regional and dlocal lnetworks Establish urban planning principles for solar energy use Implement Urban Metabolism procedures Promote industrial i symbiosis i and/or industrial i eco-parks All these initiatives require good governance Extended bottom-up participation processes are necessary to guarantee the efficiency of many long-tem developments.

Policy Recommendations Environmental Protection and Risk Prevention Sustainable use of biocrops Prepare for climate change impacts in the regional energy infrastructure Policies to Accelerate Deployment of Renewable Energy Sources Evaluate the feasible potential of all renewable sources in the region Incorporate solar and wind facilities in urban areas Accelerate the transition to non-fossil fuels in the aviation industry

Policy Recommendations Policies to Promote Energy Efficiency Improve the data on energy use and efficiency in Europe Involve end users in energy efficiency programmes and policies Create a market for energy efficiency (White certificates (EC, DG Environment, 2005) Improve efficiency of office design and work arrangements BAT (Best Available Technologies) for industrial energy efficiency

Some conclusions A large group of so far lagging regions have options for growth by exploiting their potential for renewables, while others could become even less competitive and face growing g social problems. Some of the Pentagon regions, especially in Belgium, could benefit less from growth opportunities in the economic centres, thus dropping out of the circle of best-performing regions in Europe. So far wealthy regions in the European periphery, especially the North, with a heavy industrial base, may have to analyze how increasing energy bills will affect companies competitiveness.

Thank You for your attention