Energy Policy 174 (2023) 113413

Contents lists available at ScienceDirect

Energy Policy
journal homepage: www.elsevier.com/locate/enpol

How would the European Union fare without Russian energy?☆

Ben McWilliams *, Giovanni Sgaravatti , Simone Tagliapietra , Georg Zachmann
Bruegel, Rue de la Charité 33, 1210, Saint-Josse-ten-Noode, Brussels, Belgium

A R T I C L E I N F O A B S T R A C T

Keywords: Russia’s invasion of Ukraine has forced a rapid and profound rethink of the European Union’s energy supply as
Russia the Europe-Russia energy decoupling has sharply accelerated. This contribution explores how Europe can
European Union manage without the imports of Russian coal, crude oil, oil products, and natural gas. We quantify the supply-side
Embargo
gap that will arise and discuss alternative sources of supply, as well as exploring the internal and global bot­
Natural gas
Crude oil
tlenecks that will arise with any attempt to replace Russian molecules. This exercise illustrates that demand-side
Coal measures will be necessary to reduce energy consumption, most notably of natural gas. We offer a perspective of
the deeper energy integration that EU leaders must strive for to ensure that the bloc is ready for life without
Russian energy. We argue that by following four key principles, the bloc will manage without Russian energy: i)
bringing forward all available short run domestic supply capacities, ii) all countries making honest and ambitious
efforts to reduce demand, iii) enshrining cross-border flows and the functioning of European energy trade, iv)
protecting the most vulnerable consumers.

1. Introduction complex international consequences and hence a strong need for inter­
national cooperation which will not be easy, while an end to natural gas
Russia’s invasion of Ukraine has forced a rapid and profound rethink imports would result in a difficult scenario, which if confronted by,
of the European Union’s energy supply architecture. Questions about the European leaders must display significant solidarity and cooperation to
ability of the bloc to live without Russian energy are of paramount prevent worst-case outcomes, whilst looking elsewhere for new supplies.
importance, as during 2022 Russia cut by more than 80 percent its We complement our quantitative analysis by a discussion on the
natural gas supplies to Europe and as Europe first decided to embargo important policy decisions that EU leaders must take in the case of
Russian coal imports and then to embargo 90 percent of the crude oil reduced gas flows. We discuss a “Grand Energy Bargain” that would
and oil products it imports from Russia starting in February 2023. unite leaders and allow the European Union to best manage an absence
In this piece we explore the consequences of a full stop to Russian of Russian energy. Concretely, this consists of four principles: i) bringing
imports of the three key fossil fuels: natural gas, crude oil including oil forward all available domestic supply capacities, ii) all countries making
products, and coal. We first explore the expected gap in EU supply that honest and ambitious efforts to reduce demand, iii) enshrining cross-
would emerge, before exploring the possibilities for addressing this gap, border flows and the functioning of European energy trade, iv) pro­
both by increased supply and reduced demand. We discuss required tecting the most vulnerable consumers.
policy focus at the European Union level for successfully steering the
bloc beyond the era of Russian energy. 2. Existing literature
The scenario of a complete cut-off of all Russian fossil fuels to the
European Union was unthinkable until early 2022, and this piece A few attempts have been made to investigate the impacts of cutting
therefore contributes to an area of literature where analysis is urgently Russian energy flows to the EU, most analysis has centred on calculating
needed. the economic impacts, usually related to natural gas.
We conclude that an end to imports of Russian coal is highly Lau et al. (2022) used modelled scenarios to show that the EU would
manageable, an end to oil imports is manageable but with potentially be able to replace a large share of Russian gas imports by gas-to-coal

☆
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
* Corresponding author.
E-mail addresses: ben.mcwilliams@bruegel.org (B. McWilliams), giovanni.sgaravatti@bruegel.org (G. Sgaravatti), simone.tagliapietra@bruegel.org
(S. Tagliapietra), georg.zachmann@bruegel.org (G. Zachmann).

https://doi.org/10.1016/j.enpol.2022.113413
Received 2 May 2022; Received in revised form 26 December 2022; Accepted 28 December 2022
Available online 26 January 2023
0301-4215/© 2022 Published by Elsevier Ltd.
B. McWilliams et al. Energy Policy 174 (2023) 113413

switching in the power sector. This is a theoretical finding, constrained of thermal coal imports (37 MT/year) and just over 15% of metallurgical
by real world politics. Flanagan et al. (2022) modelled the economic coal (7 MT/year).
impact of a cut-off of Russian gas, showing that far less severe con­
tractions are expected in an “integrated market scenario” where EU 4. Replacing supply in principle
countries cooperate and continue to trade gas.
Baqaee et al. (2022) perform economic analysis for the EU. Their The EU is immediately able to replace at least 50% (750 TWh) of
results suggest a “relatively low impact”. The economic impact ranges Russia’s gas supplies, when considering a ‘theoretical maximum’. This is
by country, but on average is in the same order of the German specific done by maintaining flows through pipelines from Norway, Algeria, and
impact (0.3–3% GDP). The authors highlight the role that substitution of Azerbaijan to the EU at high volumes and most importantly by securing
gas can play in the industrial and power sector. record volumes of Liquefied Natural Gas imports.
Modelling analysis by Albrizio et al. (2022) estimates that a complete Running LNG terminals between their historical and technical
shut-off of Russian gas flows to the EU, would result in a contraction of maximum capacity would allow the EU to import a record 1250–1700
0.4% of Gross National Expenditure. Notably, the economic conse­ TWh LNG compared to 750 TWh in 2021, an increase of 500–950 TWh.
quences extend to buyers of LNG, such as Japan, Korea, and Pakistan of a In the first nine months of 2022, the EU27 imported 935 TWh of LNG,
broadly similar magnitude to the EU due to increased EU demand for and the UK a further 263 TWh offering evidence that the lower bound of
LNG. The modelling work built upon an earlier effort by Bachmann et al. our estimate is feasible (ENTSOG Transparency Platform). The UK has
(2022) which found that for Germany a cut to Russian gas flows would substantial LNG import capacity and the ability to re-export this gas to
result in a GDP decline ranging between 0.5 and 3%. Beligum and the Netherlands. From April to September, the UK sent 15
Meanwhile, Bachmann et al. (2022b) investigated the impacts of a TWh/month to Belgium and 4 TWh/month to the Netherlands.
cut in Russian gas to Germany, concluding that a reduction in demand of Continued cooperation with the UK is essential. National Grid has
approximately 20% would be necessary for Germany to survive the reassured markets that they expect trade to continue via the inter­
winter of 2022/23. connector over winter months but provide analysis showing that de­
A longer-term approach comes from Chepeliev et al. (2022) who mand in the UK will influence the flow direction across the Channel in
investigate the impact of the EU and other high-income countries pro­ winter months (National Grid, 2022).
gressively implementing sanctions on Russian fossil fuel export starting The situation might be further relaxed by the rapid deployment of
in 2022. Their results show a cumulative reduction in real income of less FSRUs (floating storage and gas units). By December 2023, the authors
than 0.4% for the EU in the period to 2030. calculate on publicly available information that the deployment of
FSRUs has the potential to provide an extra 500 TWh per annum ca­
3. Russian energy imports: the supply gap pacity, providing substantial extra import ability. Europe will still need
to compete for LNG on global markets, placing upward pressure on
For natural gas, in 2021 Russian pipeline exports made up 38% of prices. Under generous assumptions that the EU is able to find extra LNG
EU27 total demand. Already in the first six months after the invasion of on global markets and run FSRU capacity at 80%, up to 75% of Russian
Ukraine (March–August) this share was down to 18% as lower Russian supplies could be replaced. This means that demand needs to be reduced
flows were compensated by higher LNG imports (Zachmann et al., by between 25 and 50% of Russian supplies, which is roughly in line
2022). Russia also exports some LNG to the EU, typically around 15% of with the 15% total demand reduction agreed as necessary by the Eu­
EU total LNG imports (European Commission, 2022a). The result is that ropean Union.1
Russian gas imports to the EU have over the last years usually made up In 2021, 1400 TWh were imported by pipeline from Norway, North
around 40% of supply. Africa, and Azerbaijan. These supply routes were already operating at
For oil, Russia accounted for just under 30% of the EU’s crude oil close to maximum capacity and only marginal additional flows can be
imports and just over 15% of oil product imports. In November 2021, the expected.
EU imported 15.5 million barrels per day (mb/d) of total oil, of which 9 Were EU-Russian oil trade to stop, around 3 mb/d of Russian crude
mb/d was crude oil and 6.5 mb/d oil products. Russian crude imports supply and around 1 mb/d of oil products would removed from global
were just under 3mnb/d and oil products 1mnb/d. For crude imports, supply, depending on the ability of Russia to reroute this oil. This con­
Russia exports around 0.75 mb/d to the EU via the Druzhba pipeline and trasts with a global oil market of around 100 mb/d. In principle, avail­
the remainder by ship. For oil products, the EU is most dependent on able supply could be rerouted for the EU to replace these supplies; the
Russian supplies for fuel oil, road diesel and naptha (Fig. 2). Road diesel challenge is that this will tighten global oil markets, forcing prices
is used for transport, particularly freight and delivery. Naptha is used as higher, and destroying oil demand elsewhere. A dramatic scenario will
a feedstock, valued for its chemical properties while fuel oil is largely emerge in case Russian trade flows to the EU cease, and Russia does not
used to fuel ships. In all cases, direct substitution is very difficult. This reroute a substantial portion of these elsewhere. Extra EU demand on the
suggests that the EU will need to find alternative supplies or reduce global market will push prices significantly higher and price out less
demand as a consequence of the Russian embargo. competitive countries, similarly to how the EU has priced out other in­
As the EU’s domestic production of hard coal diminished in recent ternational LNG buyers in gas markets.
years, Russia has played a growing role in filling the gap between do­ In October 2022, OPEC+ agreed a cut to production quotas of 2 mb/
mestic production and consumption. Russian hard coal exports to the EU d. Although many OPEC+ members were operating below quotas – this
grew from 8 million tonnes (MT; 7% of total EU imports) in 1990 to 43 suggests that spare capacity exists within OPEC (namely Saudi Arabia,
MT (54% of total EU imports) in 2020, while accounting for 30% of EU’s UAE) which could be released in case oil prices spike following a
inland consumption. cessation of Russia-EU trade. Decisions by OPEC+ members on whether
Similarly, Russian metallurgical coal accounts for 17 percent of the to release spare capacity are made based on market fundamentals, with a
EU’s coal imports, while the Russian share of the EU’s imports of ther­ goal for price stability. Fair expecatations are that this spare capacity
mal coal is almost 70 percent. Germany is particularly reliant on thermal will be tapped only in a scenario where the Russian embargo leads to
coal from Russia. For brown coal Russia is less relevant both for total dramatically spiking global oil prices.
imports (30% in 2020) and even more so for domestic consumption (less Outside of OPEC, US production dropped by around 3 mb/d at the
than 1% in 2020). start of the pandemic, and has gradually clawed back around half of this
In total, were Russian energy exports to the EU to suddenly stop, the
shortage would amount to 40% of gas imports (1500 TWh/year), 30% of
crude oil imports (3mnb/d), 15% of oil product imports (1mnb/d), 70% 1
Regulation 11568/22 of the Council of the European Union.

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B. McWilliams et al. Energy Policy 174 (2023) 113413

Fig. 1. Russia is the EU’s largest supplier of natural gas, crude oil and hard coal.
Source: Eurostat. Note for Crude oil 2021 refers to the period January–November.

Fig. 2. EU oil imports dependency on Russia, November 2021.

Source: Eurostat

Fig. 3. EU27 hard coal imports by partner country, excluding intra-EU trade, 1990–2020.
Source: Eurostat

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B. McWilliams et al. Energy Policy 174 (2023) 113413

(EIA, 2022). Over a timescale of 6–12 months, it can be expected that in European natural gas prices has been to redirect LNG cargos away from
a scenario of very high prices US shale could reclaim some of these 1.5 importing countries in the developing and emerging world that can no
mb/d, depending on investor preferences between boosting production longer afford them (IEA, 2022b). As of the end of 2022, EU member
and debt repayments. states have already provided €600 billion to shield consumers from
Finally, OECD members hold strategic oil reserves of 1.5 billion rising energy prices (Sgaravatti et al., 2021). An important implication is
barrels. Industry holdings are another 3 billion barrels (IEA, 2022). that the EU has been competitive on international markets directly as a
Therefore, the embargo on Russian oil can be partially mitigated by result of government support which likely cannot be continued indefi­
slowly drawing down on strategic stockpiles while markets gradually nitely. A risk is that third governments are encouraged to subsidies
rebalance. domestic purchases creating a self-defeating government subsidy race.
Russian coal can be replaced because global coal markets are well For crude oil, while estimates are that OPEC members do have spare
supplied and flexible. In principle, shipments from countries that have capacity, the reality is that many members are already struggling to hit
reduced exports to the EU are still largely available to substitute for production quotas. Like the LNG market, prior to Putin’s invasion,
Russian coal. In Fig. 4 we compare the maximum yearly global exports global oil markets were already tight. In December 2021, OPEC + output
of the main exporting countries in the last six years (2016–2021) against increased by 0.25 mb/d compared with the target of 0.4 mb/d, implying
their 2021 export levels, with the size of the bar reflecting the gap be­ that members cannot already meet existing quotas (IEA, 2022c).
tween 2021 exports and the last six year maximum. This shows signif­ For coal, constraints in demand and production by exporting coun­
icant margin to replace Russian global exports of coal entirely – for tries may prevent full exploitation of the export margin. For example, in
example, if South African and USA exports were increased to the six year January 2022 Indonesia introduced a temporary ban on coal exports
maximum they would compensate for Russian exports to the EU. If (Listiyorini, 2022).
China and India (the two main consumers of coal worldwide) were to
buy more coal from Russia, the export margin from other global sup­ 5.2. EU import capacities
pliers may increase further. Similarly, increasing EU domestic produc­
tion which reached a new low in 2021 (329 MT vs 373 MT in 2019) by Non-Russian gas pipeline imports into the EU are close to being
some 40 MT might be possible in an emergency. maxed out. For LNG, the broad constraint on the EU’s ability to import is
the availability of regasification facilities. Our upper bound assumption
5. Replacing supply in practice involves running regasification facilities at full capacity all year round
which assumes no technical challenges or scheduled or unforeseen
In reality, a range of physical infrastructure bottlenecks and political maintenance work.
considerations may constrain imports to levels below their theoretical For crude oil, ports can relatively simply receive supplies from non-
maximum. Russian sources. Certain European refineries are however optimised to
use Russian oil and will be less efficient if producing with a different
5.1. Global supply-side capacities quality of crude resulting in different profiles of products production.
Particularly vulnerable are six large refineries along the Druzhba pipe­
For natural gas, our analysis assumes that the EU does not face re­ line (in Poland, Germany, Czechia, Austria, Hungary and Slovakia).
strictions in importing additional LNG. In reality, global LNG markets These refineries have historically been dependent on Russian crude;
are already extremely tight and an additional annual demand of however, in the last years efforts have been made to diversify import
500–950 TWh from the EU will exacerbate the situation. In 2021, structure. In 2019, when contamination forced the Druzhba pipeline to
worldwide LNG trade totalled 5400 TWh, with China, Japan and South close for two months the refineries were able to survive (Yermakov,
Korea as the world’s largest importers. In 2022 global production is 2019).
forecasted to increase between 63 and 300 TWh (1.2–5.5%) from 2021 Beyond crude oil supply, the EU must also consider replacing Russian
(ICIS, 2022; Shell, 2022). refining capacity that produces diesel, naphtha and fuel oil. European
Global liquefaction capacity is almost fully utilised significantly refiners could try to compensate for this by increasing refinery
constraining the amount of additional LNG volumes that can be brought throughput. To replace lost Russian diesel supply, for example, Euro­
to the global market anytime soon. Liquefication facilities take multiple pean refineries would have to raise runs by about 10 percentage points,
years to build and thus in the next 2–3 years the EU must compete with taking them to almost 90% of total capacity of 15–16 mb/d. It would be
other countries for these limited supplies. The effect of skyrocketing the highest utilisation rate this century (Benedict, 2022).

Fig. 4. Export margin by country, yearly, MT.

Source: Bloomberg

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B. McWilliams et al. Energy Policy 174 (2023) 113413

For coal, European ports will be able to receive coal cargoes from result of the geopolitical fallout.
alternative countries. The logistics of transporting this coal to points of In its scramble for new sources and routes of LNG, the EU risks
consumption should remain the same as under a scenario of Russian building excessive new fossil fuel infrastructure. Even in an adverse
imports. Indeed, Poland already by March 29th announced a ban on scenario where Russia cuts all of its pipeline exports to the EU by 2023,
Russian coal imports (Wanat, 2022). Most European coal consumers the EU will have sufficient import capacity to meet demand by 2024. We
already source from different suppliers and should be able to build on visualise this in Fig. 6, which compares anticipated pathways for gas
existing relationships. demand reductions in the EU resulting from climate policy with
assumption about supply capacity into the continent (see methodology).
5.3. Intra-EU infrastructure To prevent excessive fossil fuel build out, countries should coordinate
plans for building new gas infrastructure such that capital investments
The availability of global supply to replace Russian imports does not are not excessive. It should be noted here that the existence of sufficient
suffice – fuels must be able to move from points of import to points of import capacity does not mitigate the other bottlenecks discussed above,
final consumption. And the EU energy market, particularly for natural particularly upstream liquefication capacity. The EU have the ability to
gas, has evolved from a dependency on low-cost Soviet Union/Russian import sufficient LNG, but will have to compete on tight international
supplies from the east. The result is that EU gas markets are not designed markets to do so.
for supplying all of central and eastern Europe from the west and it will Not only physical but contractual infrastructure is also needed for
be a large challenge to successfully reorientate gas flows. longer term LNG imports. Concretely, market players in the EU will
The Iberian Peninsula, for example, is a hub for LNG import termi­ consider signing new long-term LNG contracts. Often contracts have
nals. As a result, the region can import around 50 TWh per month, but terms of 20 years, which can appear contradictory to the EU’s goal of
only consumes 30 TWh and existing pipelines permit a maximum phasing out gas as a transition fuel especially noting the European
transfer of 5 TWh a month to France. Until October 2022 France was not Commission proposal for no new natural gas contracts to extend beyond
logistically able to send gas to Germany due to technical issues of 2049 (European Commission, 2021). The signing of contracts with
odorization. High level political agreement allowed for this bottleneck flexible destination clauses is desirable here, as it would allow in the late
to be alleviated and France to begin sending gas into an area of Germany 2030s rerouting of LNG to non-European markets. Additionally, there
with much higher prices. may be a role for government in negotiating and managing long-term
Nonetheless, significant bottlenecks still exist in the European gas contracts. Governments could take on contracts as “transition assets”
grid. For example, in September 2022 Belgium imported as much LNG as with commitments to wind down their value progressively in line with
possible to pass through into Germany but reached the constraint on the transition away from gas.
export capacity into Germany. Similarly, exports from the UK to Belgium At the same time, the EU will need to develop a more active inter­
were also maxed out in September (ACER, 2022). These constraints national outreach to accompany its rapid entry into the global LNG
drive the necessity of additional LNG import capacities in north-west market. Two consequences loom large. Firstly, the EU has priced out
Europe. many countries from the market. For certain countries, such as Pakistan
The Baltic Pipe connecting Norwegian gas fields via Denmark to and Bangladesh, this has led to rolling blackouts and harsh economic
Poland, as well as interconnectors between Poland-Slovakia, Poland- consequences. While the market is intended to function globally, efforts
Lithuania and Bulgaria-Greece completed in the second half of 2022 all by the EU to reconcile and provide support to affected countries is wise.
contribute to a more resilient EU gas grid. The Poland-Lithuania inter­ Secondly, the EU’s aggressive push for LNG imports and the post­
connector is notable particularly for being the first pipeline to bring the ponement of coal power plants shut offs (Sgaravatti et al., 2022) are not
‘Baltic gas island’ into contact with mainland Europe. without controversy. The rapid shift to LNG imports has called into
For crude oil, while the supply to ports can be relatively easily question the stance of the EU to increasingly oppose any new fossil fuel
substituted, it will be necessary and challenging to reroute supplies from financing even when developing countries call it critical for economic
the ports of Gdansk, Rostock, and on the Adriatic Sea to feed refineries development. Climate negotiators and political leaders must discuss this
on the Druzhba pipeline. Large volumes of this oil would flow by issue and justify Europe’s approach as a point of urgency at international
existing pipelines, but capacities are not enough to offset Russian crude. negotiations.
Therefore, additional supplies would likely be necessary by rail with Nonetheless, the European Commission has also published its
logistical difficulties (Lee, 2022). Action is already being taken with the REPowerEU strategy setting the 2030 target of renewable energy ca­
German Leuna refinery cutting its dependence on Russian crude by half pacity to 1236 GW, to save up to 21 bcm of gas per year (European
in April 2022 (BMWK, 2022). Commission, 2022b). The Commission also introduced a new target on
Certain EU countries still have high shares of coal in their energy the sustainable production of biomethane of 35 bcm by 2030 as a
mixes and will find an end to Russian imports more difficult to manage. cost-efficient path to reduce imports of natural gas from Russia and a
Germany in particular is reliant on imports for its domestic needs of hard more ambitious target of 20 million tonnes of renewable hydrogen, of
coal and half of these come from Russia. While brown coal in Germany is which 10 produced domestically and 10 imported through priority
by far the most important coal type in domestic consumption, a com­ corridors by 2030. Some preliminary evidence seem to point towards a
plete stop of the hard coal imports from Russia would represent an faster deployment of clean energy sources by EU countries.
important challenge for industry. On the other hand, Poland is in a
better position as much of its domestic needs are met by internal pro­ 5.5. Politics outside the EU
duction, and accordingly implemented a national ban on Russian coal
before the EU took action. The weight of Russian coal in the energy mix The contractual structure of the global LNG market places limits on
of the other EU countries is so limited to cause no concern. the possibility of re-directing volumes to Europe. The LNG business
developed on the basis of long-term 20–25-year contracts, necessary for
5.4. Compatibility with climate policy both sellers and buyers to justify the significant investments required for
the construction of liquefaction plants and receiving terminals.
In principle, efforts to replace Russian molecules do not contradict LNG contracts are today more flexible than in the past and as such
climate ambition. The EU is pivoting toward new partners, not raising they can provide important short-term flexibility to international gas
overall energy or fossil fuel demand. Yet in practice, we identify two markets. This flexibility is provided by two elements. First, the number
risks to climate policy credibility: (i) build out of excessive new fossil of contracts with flexible destination clauses has grown from an average
fuel infrastructure, (ii) tensions in international climate negotiations as a of 34% in 2015–2017 to an average of 64% in 2018–2020, driven by

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B. McWilliams et al. Energy Policy 174 (2023) 113413

Fig. 5. EU countries’ coal supply by source (2020).

Source: Eurostat

Fig. 6. EU27 natural gas import capacity and demand scenarios.

Source: Author’s calculations on a variety of sources (see methodology section).

new US LNG projects (IEA, 2021). Second, an increasing share of LNG among which European majors feature prominently (GIIGNL, 2021).
contracts has been signed by portfolio players – ie energy companies that These sources of flexibility underpin Europe’s current capacity – due to
procure a mix of LNG supplies from various origins and resell to cus­ its higher prices – to attract US LNG cargos otherwise destined for Asia.
tomers according to their requirements via term and spot contracts, Any growth in non-EU (particularly Asian) LNG demand will create

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B. McWilliams et al. Energy Policy 174 (2023) 113413

larger challenges for EU imports. switching to coal-fired power plants based on a comparison to coal
Long-term contracts are not as prevalent in the oil market and this output in 2019. Additionally, estimates suggest around 10% of gas-fired
would not be as serious an issue for the EU to confront. However, OPEC power plants could run on oil, saving another 90 TWh – albeit increasing
members currently have an agreement with Russia and Central Asian oil demand. Finally, extending the lifeline of three German nuclear
partners known as OPEC+, under which it was agreed in October 2022 plants which were set to close down at the end of 2022 could save 120
to constrain oil production. The United States and its allies face a diffi­ TWh.
cult question of how much political pressure to exert and where to While in the long-run an accelerated deployment of renewable
compromise. Geopolitical tensions, for example relating to the conflict technologies is the solution, timelines for projects to be approved and
in Yemen, influence this relationship. The US has already spoken to constructed limit short-run options. We estimate that rapid solar PV
Venezuela, indicating that Western sanctions on Russia may come at the deployment could save 30 TWh. Meanwhile, faster deployment of heat
cost of removing sanctions elsewhere. pumps has the potential to save another 30 TWh.
In the industrial sector, an undesirable short-term option is demand
5.6. Politics within the EU curtailment. Industries with high consumption of gas are chemicals
(particularly ammonia), non-metallic mineral products, basic metals,
Finally, and most importantly, what is technically feasible might not food & beverages and tobacco, coke and refined petroleum products,
be politically feasible. Notwithstanding infrastructure limitations, EU and paper. Industries such as aluminium are indirectly affected by nat­
members states will need to display significant solidarity. Recent history ural gas price pass-through into power prices.
does not bode well – at the beginning of the COVID pandemic, certain EU Beyond market-based curtailments, EU countries also have emer­
member states imposed a de facto export ban of protective equipment. gency plans which include forcing non-critical industries to shut down in
Were Russian gas to stop flowing the effects would be highly idiosyn­ emergency scenarios (EU Regulation 2017/1938, 2017). Germany
cratic (Fig. 8). enacted the first phase of its plan in March 2022 and is holding dis­
There is a risk that countries with better supply might be unwilling to cussions with industry to determine how “system relevant” they are
share scare gas resources with countries in worse situations. Similar (Connolly, 2022). Simultaneously, the reduction of heating in com­
questions will arise for oil markets. mercial/office buildings and homes could also be mandated.
Finally, the economic costs for the EU of looking elsewhere for im­ High prices and reductions of gas demand in industry can lead to
ports of natural gas and oil are substantial. The crisis situation has led to negative economic consequences for industrial output in the EU. In some
record high electricity and natural gas prices, and substantial govern­ cases, industry will be able to switch away from gas to burning alter­
ment intervention. For the EU to politically manage without Russian native fuels. In other cases, industry will be able to substitute certain
energy, growing attention must be placed not only on the absolute energy-intensive inputs along value chains for imports. These imports
volumes of energy to be imported but on the affordability of doing so. might be from outside of the EU, or from less affected regions of the EU.
Large multinational firms also can temporarily shift production around
6. Demand the world. However, in certain cases reducing gas demand will result in
destruction of industrial output. This will have associated economic and
Over the next 12 months it will not be possible for the EU to replace job losses, and the sustained period of high energy prices will threaten
each oil and natural gas molecule from Russia one-by-one. Therefore, a the viability of many firms. It is important that governments work
complementary and coordinated demand response mechanism is closely with industry to encourage that wherever possible the least
essential, both by switching to alternative fuel sources and by absolute economically damaging cuts are made. The evidence so far is cautiously
reductions in final demand. optimistic. Available data from Germany and Belgium show that over
the summer of 2022 industrial reduction for gas demand was not asso­
ciated with significant reductions to industrial output, suggesting that
6.1. Natural gas
substitution may be possible. From June to August 2022, industrial gas
demand was down 22% and 20% in Belgium and Germany, while in­
Large demands for natural gas come from the power sector, the in­
dustrial output was up 2% and unchanged, respectively (ENTSOG
dustrial sector and buildings.
transparency platform, Trading Hub Europe, Eurostat: sts_inpr_m).
In the power sector, the primary option for reducing gas demand is
Strong conclusions cannot be drawn on the back of only a few months
fuel-switching. We estimate a potential for 270 TWh gas to be saved by

Fig. 7. EU-27 Imports of Solar PV Panels from China, in mln EUR.

Source: Eurostat

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B. McWilliams et al. Energy Policy 174 (2023) 113413

Fig. 8. Attribution of gas imports to individual sources IEA, 2021.

Source: Bruegel based on ENTSO-G and Eurostat. For gas production, UK and UA data from government agencies.

down their heating by 1 ◦ C and implement quick energy efficiency fixes

such as isolating windows and doors. This would be an approximately
10% reduction to buildings demand. For context, in September 2022,
Belgian households reduced demand by 6%, Germany by 14%, Italy by
8% and Luxembourg by 5% compared to the previous three year
average. To encourage this, European governments might consider
giving money back to households by ‘paying them for saving’, giving
households a payment based on their 2023 energy demand compared to
their 2021 energy demand. Rapid deployment of solutions to reduce
final energy demand in households (e.g., insulation) can also play a role.

6.2. Crude oil and oil products

The transport sector is the area where demand-side measures have

the highest potential to reduce oil use. The IEA detailed these measures
in 2018 (IEA, 2018) and more recently explicitly outlined the ability of
demand measures to reduce demand for Russian oil (Fig. 10). Each IEA
member must maintain a programme of demand reduction measures
which are able to achieve a rapid drop in oil demand of 7%, and as much
as 10% in the case of a severe supply shock – which a stop on the flow of
Russian oil to the EU may be.
Measures include a focus on public transport, such as making ser­
vices free on weekends and campaigns to encourage car-sharing by
Fig. 9. Natural gas demand reduction options. employees, which businesses can be incentivised to support. Stricter
Source: Bruegel own calculations measures such as restrictions on when certain vehicles can drive may be
necessary. Governments should also liaise closely with freight com­
data, as effects may take longer to show up. panies to discuss options for route and fuel sharing.
In the buildings sector, approximately 130 TWh gas consumption In 2021, total EU oil imports amounted to 15 mb/d, of which 3.5 mb/
could be saved by a political campaign encouraging households to turn d came from Russia. Of this 3.5 mb/d around a fifth (0.4 mb/d) could be
displaced in just four months adopting quickly deployable measures

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B. McWilliams et al. Energy Policy 174 (2023) 113413

Fig. 10. Oil demand reductions in the European Union, within 4 months (readapted from IEA).
Source: Bruegel on IEA (2022d) and Eurostat

(Fig. 10). Given the nature of global oil markets, cooperation on this of a household leaving the remainder exposed to prices at the margin.
front from other IEA members, notably the USA, would be highly As of October 2022, there are positive signs that the EU is showing
beneficial. resolve to stick together and jointly address the fallout emerging from a
separation from Russian energy flows. This has been characterised by
7. The need for a coordinated policy response Union level agreement for the reduction of natural gas demand, talks on
compulsory joint purchasing requirements, for the reduction of elec­
The initial policy response (first 6 months) to the crisis was largely tricity demand, and for the design of instruments to tax excess profits
nationally focussed, with governments spending billions of euros to made by domestic energy companies because of market turbulence.
protect their own consumers. Many governments have implemented
narrow and uncoordinated measures which prioritise national security 8. Conclusion and policy implications
of supply and affordability over an integrated approach. The largest
challenge has been policymakers desire to subsidise energy consump­ The European Union will be well able to replace supplies of Russian
tion, to the tune of around 3% GDP on average. This is a misguided coal, and measures are already in place to do so by mid-August. How­
approach and runs the risk that energy consumption becomes unsus­ ever, switching supply away from Russia and potentially boosting coal
tainable, with bidding wars across Europe that will erode trust in mar­ demand to offset gas-fired production will have second-round effects on
kets, and only weakly responding to the threat of Russian cuts to supply. emerging and developing economies by pushing prices higher.
Trust is particularly eroded by national and uncoordinated business Europe can also manage without Russian oil supplies but significant
subsidies which hamper fair competition across Europe’s internal coordination and logistical problems will have to be tackled. While ports
market. can more readily switch suppliers, inland refineries dependent on the
Deeper steps for integration are essential over the coming 12 months. Druzhba pipeline require special attention and emergency planning.
Specifically, EU leaders must strive for energy cooperation along four Similarly, action must be taken to alleviate pressure on key oil products,
key strands: most pertinently diesel. Here, international cooperation would be
Firstly, rapidly bringing forward all available supplies to the energy essential to make direct and indirect spare capacities available. Joint
markets. In the short run, this could involve boosting production from diplomatic efforts towards OPEC producers can help. Short-term deficits
the Groningen gas fields in the Netherlands, as well as keeping open can be met by large oil and product stockpiles, and by activating gov­
nuclear plants in Germany. Simultaneously, attempts to reduce gas ernment plans to reduce demand significantly. A stop to oil imports from
consumption in the power sector involve issuing rapid permitting for Russia will imply higher oil prices for Europe, but global markets will
new renewable plants but also in the short run (e.g., for a matter of ensure Europe gets all the oil it is willing to pay for, and markets will
months) permitting greater use of coal-fired power plants. ultimately rebalance.
Secondly, all governments must honestly and comprehensively make For natural gas, a crisis-scenario would unfold, requiring improvi­
every effort to reduce energy demand. Reductions in natural gas demand sation and entrepreneurial spirit. The EU would not be able to replace
from July to December 2022 suggest that European economies are well about 50% of the imports coming from Russia and therefore demand for
able to achieve this and must continue doing so. natural gas would need to contract by up to 20% compared to 2021. This
Thirdly, political commitments to continue cross-border trade flows will require hard political, logistical and economic decisions to reduce
of energy. While flows continue today, greater reassurances must be demand in a coordinated manner. During the adjustment period, great
given that even in crisis scenarios governments will not succumb to the attention must be placed on the increased energy costs and societal and
temptation of intervening in markets and preventing (re-)exports. political consequences of this.
Reassuringly, the focus on default rules for bilateral solidarity between In all cases, the EU will pass through a short and painful period until
member states during emergency gas shortages was an important topic markets adjust, while the effects on Russia will be devastating and long-
discussed at the European Council on October 25th 2022. lasting. Moreveor, if measures are accompanied by renewed impetus for
Finally, the most vulnerable in society are at serious risk of energy the transition towards zero-carbon energy sources then Russia’s
poverty, with many already experiencing it. Governments should leverage over EU energy supplies will disappear forever.
intervene to protect the most vulnerable in society without stimulating
additional demand. Economic methods for achieving this include lump-
sum subsidies, or subsidies for only the first 80% of energy consumption

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B. McWilliams et al. Energy Policy 174 (2023) 113413

9. Methods (continued )
Item Potetial Demand Note
Fig. 1: For Natural Gas, we take data from Zachmann et al. (2022); Reduction (TWh)
Crude oil imports from Eurostat dataset “Imports of oil and petroleum (difficult) and the 3 set to close at the
products by partner country - monthly data” [NRG_TI_OILM], and do­ end of this year stay open (very
mestic production from Eurostat dataset “Supply and transformation of possible)
Gas-to-coal Switching 270 We compared EU coal output in
oil and petroleum products-monthly data” [NRG_CB_OILM]; Hard coal
2019 to coal output in 2021; and
imports from Eurostat dataset "Imports of solid fossil fuels by partner consider this as the output gap.
country" [NRG_TI_SFF] and domestic production from Eurostat dataset Rapid PV Deployment 30 Additional 15–20 GW solar PV
"Supply, transformation and consumption of solid fossil fuels" installed above forecast levels for the
[NRG_CB_SFF]. year
Reducing Demand in 170 20% reduction in industrial (non-
Fig. 2: Imports from Eurostat dataset “Imports of oil and petroleum Industry power) demand vis-a-vis 2020 levels
products by partner country - monthly data” [NRG_TI_OILM] comparing Residential/ 130 10% reduction in demand
the share of Russian imports vs total from extra-EU27. Commercial Energy
For Fig. 3 we used Eurostat dataset "Imports of solid fossil fuels by Conservation
Rapid Heat Pump 30 3 million air-source heat pumps
partner country" [NRG_TI_SFF].
Deployment installed, covering an average
For Fig. 4 we used Bloomberg indices C0ZAEX GPOR (for South Af­ annual household heating demand
rica), EICLCEX (for the United States), C0COEX (Colombia), AUITCOAV of 11,000 KWh.
(Australia), C0IDEX (Indonesia) and RUIEECOL (Russia), together with
Eurostat dataset "Imports of solid fossil fuels by partner country"
[NRG_TI_SFF]. For Fig. 10 we used IEA’s "A 10-Point Plan to Cut Oil Use" together
For Fig. 5 we used Eurostat dataset "Imports of solid fossil fuels by with Eurostat dataset "Imports of oil and petroleum products by partner
partner country" [NRG_TI_SFF] together with Eurostat dataset "Supply, country - monthly data" [NRG_TI_OILM] and Eurostat datset "Supply and
transformation and consumption of solid fossil fuels" [NRG_CB_SFF]. transformation of oil and petroleum products - monthly data"
For Fig. 6 we used the Independent Commodity Intelligence Services [NRG_CB_OILM].
report (ICIS, 2022) and the Global Energy Monitor (Global Energy
Monitor, 2022) for LNG additions. For all other sources, the ENTSOG CRediT authorship contribution statement
transparency platform was used along with public announcements and
agreements. Both onshore LNG and floating storage regasification units Ben McWilliams: Writing – original draft, Data curation, Writing –
(FSRUs) are assumed to continue running at 65 percent capacity, pipe­ review & editing. Giovanni Sgaravatti: Writing – original draft, Data
line flows from Norway at 86 percent, from Azerbaijan at 92 percent, curation, Writing – review & editing. Simone Tagliapietra: Writing –
North Africa at 45 percent and the UK interconnector at 61 percent. original draft, Conceptualization. Georg Zachmann: Writing – original
Demand projections are based on the 2030 reference scenario of the draft, Conceptualization, All four authors have contributed in equal
European Commission (2030 REF), the EU Fit for 5511 package and the share to the contribution of this piece.
REPowerEU strategy. IEA, 2022 Russia’s supply is estimated to be one
third of the pipelined and LNG aggregate of 2021.
Fig. 7: We used the Eurostat dataset “EU trade since 1999 by SITC” Declaration of competing interest
[DS-018995 custom_3522255]. The product category used was: Diodes,
transistors and similar semiconductor devices; photosensitive semi­ The authors declare that they have no known competing financial
conductor devices (including photovoltaic cells, whether or not assem­ interests or personal relationships that could have appeared to influence
bled in modules or made up into panels); light-emitting diodes. the work reported in this paper.
Fig. 8: we apply Wassily Leontief’s Nobel Prize winning input-output
matrix to the gas market, to approximate attributions for each EU Data availability
members state to sources of supply. The challenge is that substantial
intra-EU gas trade exists, where much of this gas is transited from third Data will be made available on request.
countries, while some may be domestic production. By considering all
flows across the EU, we are able to accounting-wise attribute shares of References
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