Sun, Jun 12, 2016 - Page 8 News List

Baltic way of seeking self-reliance in energy

By Yang Chung-han 楊宗翰

On Thursday and Friday last week, the World Trade Institute, the Swiss National Center of Competence in Research and Klaipedos Nafta co-organized an international energy forum in Vilnius, Lithuania, that discussed the development of cross-border energy trade, the decarbonization of energy markets and global energy cooperation.

The aspects of the forum that were most relevant for Taiwan pertain to Lithuania’s reforms for energy independence.

Lithuania was 100 percent dependent on oil and gas imports from Russia, but is now 100 percent independent, with a large liquefied natural gas (LNG) terminal built at the Klaipeda seaport, and power links to Sweden and Poland.

The Klaipeda LNG terminal has allowed the nation to obtain a 23 percent discount on natural gas prices. Of the three Baltic states, Lithuania has the lowest LNG price for industrial consumers and the price for households is just slightly higher than in Estonia. In addition, the electricity price in the Lithuanian trading zone at the Nord Pool exchange fell by 18 percent following the completion of the power transmission system to Sweden and Poland.

Looking at the achievements, it is possible to extract three important elements of the reform process: The Lithuanian model emphasizes the role of trade and investment regulations; the country has established a well-designed regulatory environment for the implementation of infrastructure projects; and the authorities implement policy solutions for energy security, economic growth and energy decarbonization simultaneously.

In short, Lithuania not only sees energy market reform as a national issue, but also as a regional and international one. Lithuania has become a global player in the energy sector, and its Klaipeda LNG terminal has the potential of becoming a major hub for joint LNG purchases in the entire Baltic Sea region and beyond. For instance, neighboring Finland ought to use the Klaipeda LNG terminal and the bunkering facilities to boost Finnish domestic competition.

However, in Taiwan, mainstream discussions on energy matters have not properly addressed the importance of international trade rules, mega-regional trade deals and the regulatory design for promoting infrastructure investment. On the one hand, Taiwan depends on imports for about 98 percent of its energy consumption, and on the other, its renewable energy technologies and energy-saving services are still attractive to major international markets. Therefore, facilitating a multilateral solution that combines energy, environmental and economic considerations is a feasible option for Taiwan.

Based on existing WTO and APEC models, the government might first consider observing the International Energy Charter. This treaty — known as “WTO-plus” in the energy sector — outlines principles for cross-national energy cooperation and offers comprehensive mechanisms for investment protection, freedom of energy transmission and international dispute settlements, thereby mitigating risks associated with energy-related trade and investment.

In addition, as Japan regards entry to the Trans-Pacific Partnership as paving the way for US booming shale-gas output and future LNG deals, Taiwan should reflect on its strategies of energy security and the benefits of international trade and investment in the context of both multilateral and bilateral economic integration.

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