Shale gas & the European Union’s energy policy objectives: To frack or not to frack?

Anders Stilling Johansen & Søren Pallisgaard

Student thesis: Master thesis

Abstract

This thesis analyses how the European Commission should work to reconcile the Member States’ shale gas specific preferences with the three EU energy policy objectives of competitiveness, supply security and sustainability. In doing so, the anticipated effect of shale gas extraction in a European context, and how this fits with the EU’s energy policy objectives, is assessed. Principal-agent theory is used to present concrete recommendations to the EC and showcase the constraining and enabling factors affecting homogeneity of preferences and interests in this inter-institutional relationship of delegation of agenda-setting capabilities. If no binding regulation on shale gas is agreed upon among the EU institutions, the revolutionising effect of shale gas in the US cannot be mirrored in the EU. This is due to lacking commercial arguments, and public discontent resulting from environmental mismanagement. Through empirical investigation, this thesis shows that only a pan-European approach can unlock the commercial benefits of shale gas through economies of scale, increased competition, and transparency. Likewise, only a European legislative framework will be sufficient to align the environmental aspects and concerns regarding shale gas extraction, with the need for a positive Break-Even Price to spur investments. Principal-agent theory confirms the suspicion that the European Commission and Council of Ministers inherently have diverging preferences on the kind, and level, of integration necessary on shale gas development. It also shows that only by broadening the discourse on shale gas from environmental concerns, and tying it to existing institutions, being the EU’s energy policy objectives, can the European Commission reconcile the initial conflict of preferences. This is needed to facilitate a departure from the legislative status quo, which is found both detrimental to the energy policy objectives, and also to the prospect of profitable commercial-scale shale gas extraction in the EU.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages210