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The objective is to explore the potential for a new Euro-Mediterranean energy roadmap specifically aimed at further developing the regional cooperation on hydrocarbons and sustainable energy solutions. The future of Mediterranean energy project has a triple focus: enhancing regional cooperation on hydrocarbons; supporting renewable energy cooperation/energy efficiency in the region; and financing Mediterranean energy infrastructure projects.

The Mediterranean region has always represented, and will continue to represent, an area of primary importance for Italy’s external relations. In the midst of the current, complex, geopolitical situation in North Africa, Italy could act as a catalyst for creating the basis of a new Euro-Mediterranean cooperation. Such a new regional cooperation scheme should be primarily focused on energy, the area on which the complementarities between the two shores of the Mediterranean are the strongest. This research project will explore the potential for a new Euro-Mediterranean energy roadmap specifically aimed at further developing the regional cooperation on hydrocarbons and sustainable energy solutions. In particular, the research activity will focus on the potential interactions of gas and renewable electricity at the regional level, on the development of energy interconnections, on regional energy integration and on the promotion of decarbonisation policies in Southern and Eastern Mediterranean countries.

The so-called “Arab Spring” has opened a new era of uncertainty for the Euro-Mediterranean area. Specifically, in the current transition phase the Southern and Eastern Mediterranean region urgently needs to find a new path of strong and sustainable socio-economic development. Considering its macroeconomic and energy fundamentals, the region has a great potential for triggering off a new development process and the ongoing political changes can enhance such a new dynamic.
Today Southern and Eastern Mediterranean countries (SEMCs) face a range of pressing socio-economic challenges including solving the problems of poverty and large structural unemployment, in the context of fast demographic growth. Energy is an essential commodity enabling socio-economic development and for this reason an enhanced cooperation effort of the EU in the Mediterranean region should primarily target this field. In particular, three research lines can be outlined: 1) Enhancing hydrocarbons cooperation; 2) Supporting a sustainable energy transition in the region; 3) Financing of Mediterranean energy projects. The integrated analysis of these research lines aimed at designing a full-fledged energy roadmap for the region, constitutes an original contribution to the existing research activities in the field. Such a comprehensive cooperation scheme would contribute to increase prosperity in the region, opening markets, ensuring access to resources, increasing exports and investments and promoting sustainable global growth. It would also contribute to the establishment of a wider area of stability and peace.

1) Ensuring hydrocarbons cooperation in the region

The research line will provide an in-depth analysis of the current and perspective Mediterranean oil and gas trends, drivers, policies and partnerships, with the aim to develop a win-win Euro-Mediterranean oil and gas strategy able to tackle the barriers that are currently limiting the regional oil and gas sectors, with the target of promoting local development and further exports to Europe at one fell swoop. Such an exercise seems to be particularly important in light of the new “European Energy Security Strategy” published by the European Commission in May 2014. In fact, the strategy calls for an enhanced diversification of EU energy supplies and it clearly targets the Mediterranean region as a crucial contributor to this strategy. The research line will assess the potential of conventional and unconventional oil and gas production in North Africa and the Eastern Mediterranean from the point of view of reserve and resource availability as well as the institutional, governance and commercial attractiveness of the region. The Mediterranean region is not only important in terms of hydrocarbon production but also in terms of transit, as the cases of Egypt and Turkey clearly elucidate. In fact, the Mediterranean is strategically located at the crossroads of existing and potential hydrocarbon flows from the Middle East and Africa to Europe, making it an important transit corridor for global energy markets.

2) Supporting a sustainable energy transition in the region

The current energy situation in SEMCs is characterized by a rapid increase of energy demand, low energy efficiency, and artificially low domestic energy prices due to extensive universal consumption subsidy schemes. All country finances are under the strong pressure of increased investments in new energy facilities as well as financing costly universal energy subsidies. In short, the current energy situation does not appear sustainable and poses several risks to the prospects of socio-economic development of the region. In this area, the research project will mainly focus on the following issues: assessment of domestic energy demand evolution with a special focus on electricity demand and supply, energy efficiency, renewable energy and energy-water nexus. The research line will primarily analyse the fundamentals of SEMCs’ domestic energy market developments using a scenario approach combining quantitative and qualitative analyses, with a particular focus on the trends of the electricity sector (e.g. supply, demand, infrastructure and markets). Energy efficiency represents a key element for a sustainable energy transition in the region. The research project will explore what role the EU could play in supporting the development of energy efficiency measures in SEMCs, particularly focusing on technical assistance programmes and the dedicated financing mechanisms. In fact, technical assistance programmes could easily transfer best practices on energy efficiency, especially for standards and labelling of appliances, equipment, buildings and vehicles. With regard to renewable energy, solar and wind energy continue to cover less than 1% of SEMCs’ electricity generation mix: a figure that strongly collides with the region’s abundant solar and wind resources. The project will explore the reasons of this paradox, particularly focusing on the key barriers to the development of renewable energy in the region: the extensive use of energy subsidies and the lack of adequate electricity infrastructures, energy regulatory frameworks and financing mechanisms. Intra-SEMCs and SEMCs-EU electricity interconnections are needed to create larger, integrated and more efficient, regional energy markets. On the basis of this in-depth analysis, the project will formulate an innovative inclusive, pragmatic and bottom-up approach to tackle these barriers, also analysing the institutional aspects of this issue. To conclude, the research project will also tackle the so-called energy-water nexus, an issue that already represents a major geostrategic challenge for the Mediterranean region and that will likely become increasingly relevant in the future.

3) Financing of Mediterranean energy projects

With regard to the need for new financing sources and instruments for the development of energy projects in the region, new approaches need to be explored. One of them could imply a stronger cooperation between the EU, SEMCs and the Gulf Cooperation Council (GCC). In fact, a strong complementarity exists between these regions. For instance, the wide availability of capital in the GCC, the great energy efficiency and renewable energy potential of SEMCs and the institutional support of the EU could represent the three main pillars of a new “triangle of growth”. Private and public investors (such as Sovereign Wealth Funds) from the GCC are increasingly focusing their investments on the sustainable energy sector, with the aim to transform oil wealth into energy efficiency and renewable energy technology leadership. Part of the investment could be directed to SEMCs, which has among the highest solar energy potentials in the world and which is already promoting several large-scale renewable energy projects. The EU should facilitate the implementation of this process by providing institutional support (both in terms of regulation and public finance) and technological know-how. In addition to this innovative financing scheme, others might include the settlement of new Euro-Mediterranean mechanisms designed to attract North American pension funds and Asian Sovereign Wealth Funds into the regional sustainable energy sector. In parallel to these macro-schemes, national mechanisms should also be explored with the aim to provide an additional, and sustainable, source of financing for the national sustainable energy plans.

The aim of this analysis is to propose a concrete and realistic roadmap for an increased EU-Mediterranean energy cooperation based on win-win strategies. In addition to scientific publications, this research project will include the organization of a series of high-level “FEEM-Bruegel Euro-Mediterranean Energy Talks” inspired by the “Colloqui Mediterranei”, which used to be organized by Giorgio La Pira during the 1950s and the 1960s with the support of Enrico Mattei in order to bring together representatives from the two shores of the Mediterranean to discuss a wide range of cooperation issues. These workshops and possible other dissemination activities will provide the opportunity to disseminate preliminary results of the research to high-level stakeholders and to enrich the final overall research.