The recent spike in energy prices has put the issue back on the top of the political and media agenda. European governments and the Commission have rushed to offer short-term solutions. But these will not be enough to meet the challenges we are facing. An interview with Lavinia Steinfort, a researcher at the Transnational Institute explains why.

“Climate change is the biggest market failure”. Lavinia Steinfort, a researcher at the Transnational Institute (TNI), sums up with this sentence the key issue of the moment. The neo-liberal market-based system not only creates and widens deep injustices, but is also ineffective in meeting the challenges of our times. It is there for all to see, and the rise in energy prices is just the latest staggering example.

TNI is an international research and advocacy institute working on energy and climate for over many years, criticising the market approach and calling for public ownership and democratisation as a solution to the climate crisis. Steinfort is a political geographer and activist. As a researcher with TNI, she is working on public alternatives such as (re)municipalisation of public services, a just transition towards energy democracy, and transforming finance for the 99%.

We met her to discuss the current spike in energy prices and the distortions of the market.

Energy prices are reaching record highs across Europe and worldwide. Why is this happening?

For a number of reasons. Part of the explanation is that the methods to dig up fossil fuels are also getting increasingly extractive, so nowadays one needs a lot more energy to continue to extract oil and gas and turn them into fuel and energy. In addition to that, the climate crisis is leading to warmer summers and colder winters, this is increasing domestic energy use meaning less energy is available for export.

There are also conflicting positions that are trying to make sense of this price rise. For      example, many argue that the spike in prices could be a good thing because it forces us to think and act in terms of energy efficiency. I do think that this argument is very much missing the bigger picture.

Which is?

The energy market is driven by profit. The past has shown that the more we liberalised the market and tried to encourage competition, the more this led to power concentration. If we don’t change the system, the solutions proposed so far – even the much-talked-about ‘net zero target’- are simply reinforcing energy as a commodified, if not entirely privatised, good. With the current model, the energy transition is dependent on price mechanisms and liberalised market profits. Within this framework, profits are dependent on public subsidies, therefore the moment public money stops flowing to private corporations, these stop investing, resulting in a massive investments deficit for the sector. This happens because governments are spending money to attract private investment and not to build themselves a sustainable energy sector. This wouldn’t need to happen in a fully public energy model because then any revenue could be reinvested in the energy transition to ensure justice and urgency is served. In the same vein, volatile prices wouldn’t be happening if we had a democratic and need-based system that treats energy not as a competitive commodity but as a right and responsibility.

However, someone benefits from this system…

Thanks to market liberalisation, the energy sector in Europe has become an oligopoly, dominated by five big power producers that crushes small cooperative producers as well as experiences of municipalisation, where towns and cities start supplying energy to citizens. But as long as competition and profitable prices are decisive for climate action, then a fully-fledged transition will remain a pipe dream. Markets and their private protagonists simply cannot deliver an energy transition.

So the market is not only unfair, it is also ineffective?

Private investors are keen to invest in the energy sector when their profits – sometimes in the range of 30% – 50% – are guaranteed by the public. People may think this is necessary but these agreements with big businesses (known as Public Purchasing Agreement or PPAs) are actually undermining the climate transition. However, recent research from TNI for example reveals that Vattenfall Netherlands, a subsidiary of the Swedish energy multinational, received over half a billion in subsidies from the government between 2015 and 2020. While this has led to hundreds of millions in profits for the company, its renewable energy production in the Netherlands almost halved in the same period. This is outrageous: we are just pumping public funds that enable excess profiteering while jeopardising the transition.

How can we get out of this situation?

We have to change course. To have an actual transition towards a renewable energy model in a way that honours the right to energy and a liveable climate for all species, we need to reclaim our energy systems from the market. We have to make sure that workers and residents, especially those that are most oppressed by this system – also due to racialised, gendered and classist divisions of labour – are the ones who get to co-determine climate and energy policy. This kind of democratisation could tackle energy poverty at its roots and force rich countries and elites to radically reduce their energy use,because once big business is sidelined and power equitably distributed, society could be run with much less energy.

And how do we do that?

To start, I think that this requires closing down the wholesale and the retail market, stopping big Power Purchasing Agreements, and nationalising as well as municipalising private energy companies. Once we do this, we can actually start developing both integrated and decentralized public ownership models to enable participatory planning, democratic governance, and co-creation by communities.

Are the Commission’s proposals going in this direction?

No. The European Commission’s recent toolbox just provides bandaids which are falling very short of a structural solution to the volatile prices caused by a liberalised market. For an adequate response, the Commission should rein in the power of corporations and really understand that the energy model and its transition to renewables are a public task. 

What are TNI’s demands to meet these challenges?

A transition towards 100% renewable energy and advancing energy as a fundamental right and public good should be understood as two sides of the same coin. Unfortunately, those in power are still seeing these two things in conflict with each other. In parallel, we need to develop a global public goods approach: to own up to its ongoing history of plunder and colonisation, the so-called global North should be the first to cut its dirty, harmful and non-essential energy use, abolish intellectual property rights to make sure that renewable and conservation technologies are commonly available and finally, pay  climate reparations to countries and communities across the global South so that they can shape democratic provisioning systems on their own terms.