Regional Cooperation as an Important Part of Maintaining Energy Security and Aligning Obligations and Opportunities in Achieving Climate Neutrality

Climate change and 'green' transition have been in focus worldwide for some time, including the European Union, which is working towards achieving climate neutrality. All its member states are part of this process, but at the same time, each country has its own plan, different capabilities, and priorities when it comes to 'green' transition. Profitability, existing resources, regulations, energy availability, and numerous other factors play a role here. For this reason, participants in the panel discussion 'Climate-Conscious Neighbors: Croatian-Hungarian Cooperation in the Electricity and Natural Gas Sector' held last week in collaboration with the Hungarian Embassy and the Lider weekly, agreed that regional cooperation among states is extremely important in achieving climate neutrality by 2050, as well as in maintaining energy security.

Csaba Demcsak, the Hungarian Ambassador to the Republic of Croatia, emphasized that energy security is the most sensitive issue when planning a secure future for citizens and that, in this regard, the regional market has shown the importance of cooperation. The ambassador welcomed the cooperation between Croatia and Hungary and noted that in the first eight months of this year, Hungary was the fourth most important trading partner for Croatia, accounting for eight percent of total trade, and such cooperation is needed going forward.

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Challenges in the 'Green' Transition

Attila Steiner, who is responsible for the development of the circular economy, energy, and climate policy at the Hungarian Ministry of Innovation and Technology, also believes that it is important to cooperate at the regional level, especially when considering the capabilities of neighbors.

Given that the 'green' transition is not a simple process, Steiner touched on key issues of this process because, although it is now clear to everyone what needs to be achieved (climate neutrality and the transition to 'green' energy), a significant question remains as to how to achieve this and how to align at the EU level given the large number of regulations, while at the same time each country has its own vision.

– Different countries plan differently on how to achieve neutrality by 2050. We somehow need to implement all these policies, and therefore implementation will be the biggest question in the coming years. We know what we need to achieve; now we need to see how? – explained Steiner.

Also, although it is clear that the goal is to achieve climate neutrality, countries must take into account technical limitations and other aspects of energy policy when planning the transition, such as, for example, price accessibility or supply security, and how to incorporate all of this. In this case, he believes, the importance of regional cooperation is evident because most of the region thinks similarly, i.e., sees the importance of considering accessibility and energy security. Furthermore, the region will play an important role in maintaining the competitiveness of industries that want to be ambitious regarding ecology.

Energy Supply

Cooperation is now also facilitated because, in terms of connectivity and infrastructure, the region has made significant progress in the last ten years, so when it comes to energy supply security, the region is in a good situation. However, Steiner also added that price plays the biggest role in energy procurement, especially gas. Ante Mikulić from CROPEX also commented on the price increase. Regarding energy prices, he explained that they have currently stabilized, but that 'dynamic months' are still ahead, and many factors could influence the price – from the transition to 'green' energy, the creation of energy mixes in European countries, wind production, political situations, conditions in Asia, and then the corona crisis, production conditions, and lockdowns.

– Prices will not return to the old ways, but some predictions indicate that prices will stabilize – added Mikulić.

Kristina Čelić, the director of the Energy Directorate at the Ministry of Economy and Sustainable Development, emphasized that the energy topic is important and added that there is constant consideration of 'green' energy and working on solutions. She believes that Croatia has good potential, especially regarding renewable energy, but modernization and digitalization are necessary for implementation, as well as cooperation with neighbors.

She also touched on the issue of gas supply and emphasized that Croatia is currently quite secure, especially because it has made progress in building systems and connectivity in recent years, and in this case, cooperation with neighbors is also increasing. In this regard, Saša Kovač from LNG Croatia is also positive. He explained that he does not believe in a scenario of gas shortages in Croatia, but when it comes to solutions, he explained that the LNG Terminal, located on Krk and used for gas storage and transport, would not have the capacity to respond to such a crisis. He explained that their job is to send gas into the transmission system.

Moreover, regarding the project that created the Terminal, he explained that it has numerous advantages and that, even if there has been some controversy around it, it has come from politics, not experts.

– Experts did not think there was anything controversial here, but I believe that time will show the benefits of the project, which the market has already shown because our capacities are full. With this infrastructure, we have become part of the global world – added Kovač.

Damjan Međimorec from HOPS also believes that cooperation with states is important. He pointed out that currently, everyone in this market is influenced by the fight against climate change, and therefore the importance of connectivity is further increased. He considers today's challenge to be the 'new role of the market that is striving to achieve climate neutrality'.

Luka Pehar from HROTE commented on the legal regulations regarding energy. He pointed out that the Croatian market is legally developed like other markets in Europe.

– I am satisfied with the current state of the market; we will see what the future holds, but currently, it is positively connected to Europe – explained Plehar.

Financial Aspect 

Magdolna Tokai, chief advisor to the CEO, special commissioner for Southeast Europe, MVM Greening projects, emphasized that the energy sector is currently at a 'crossroads' because on one side it is trying to turn to 'green' energy, i.e., the transition is already happening, while at the same time it needs to be flexible due to the still existing dependence on 'traditional' energies. She also mentioned some solutions to the problem of transitioning to 'green', focusing on digitalization and technological advancement that would check the carbon footprint of companies. She agreed with Steiner's statement that implementation is the biggest obstacle.

In response to a question, she reflected on the dependence of Hungarian projects on EU funds. She explained that EU money is helpful to them, but not necessary.

– We are fully financed from the market. So, although we count on funds and accept them positively, we are not that dependent on them – explained Tokai.

Marko Blažević from HEP agreed with this, at least regarding their projects, as he emphasized that EU funds do not hinder them at all, but that projects do not depend that much on them. He stated that they are working on projects related to renewable energy sources and that last year they invested about 4 billion kuna in various projects, and they continue to invest in wind, solar, and hydroelectric plants.

Given that financing plays a very important role in every project, banks have also become an important factor in the 'green' transition because they can decide not to finance a project if it leaves a carbon footprint. Moreover, banks are actually under pressure not to finance such projects, and Békeffy Balázs, CEO of OTP Bank, explained that both investors and regulators expect banks to reduce projects. Additionally, there are more and more clients interested in 'green' projects, which is why more banks have systems to check who these companies are, how they operate, and what they plan to do with the money.

– We want to create financial benefits for those who operate ecologically. It is important to mobilize financing to be directed towards 'green'. We are here to recognize projects and initiatives and to support them with financing – explained Balázs.

Energy Mixes are Different

Also, considering that Hungary has turned to the use of nuclear energy in the transition to 'green' energy, the question arises as to what will happen if the EU does not approve its use. However, in response to a question regarding this topic, Steiner was very positive. He emphasized that he expects a positive outcome.

– I believe we will have the opportunity to have nuclear energy in our mix. Energy mixes are different in member states, and each can choose its energy. Nuclear energy is not green, but it is carbon neutral. Without nuclear energy, I think the EU will find it difficult to achieve neutrality – explained Steiner.

In conclusion, he added that energy and the fight for climate are complex issues and that regional cooperation is key to achieving the goals set at the EU level.

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