SPOTLIGHT ARTICLE

From Polls to Policies: Assessing the 2024 European Elections Impact on the Oil and Gas Sector

 

Written by Tazmyn Gounden, Head of Investor Research, Energy Council

Published 28 May 2024

Energy Council

The upcoming European elections in June 2024 could significantly impact the oil and gas industry, particularly through the interplay of environmental policies and the political leanings of the elected members. The focus in 2019, driven by environmental movements like Fridays for Future and Extinction Rebellion, had shifted political agendas across the spectrum towards combating climate change. This election cycle, however, finds Europe at a crossroads, with the future direction of its energy policies hanging in the balance. As Europe grapples with current challenges related to energy security, climate change, and geopolitical tensions, the election outcomes will determine the policy directions and regulatory frameworks that shape the future of the energy sector.

Pre-election polls by POLITICO, as of May 13, 2024, suggest that the European People's Party (EPP) and the Progressive Alliance of Socialists and Democrats (S&D) will continue to wield significant influence. Yet, there is a rise in populist sentiment, likely boosting the ranks of the Identity and Democracy (ID) group and other right-leaning parties such as the European Conservatives and Reformists (ECR). This shift could signal a conservative pivot away from aggressive climate policies like the EU’s Green Deal, which has been instrumental in fostering sustainable energy practices within the bloc.

Energy Council

The EU’s ambition to become the first climate-neutral continent by 2050 under its Green Deal has been recalibrated in response to external shocks, notably Russia's invasion of Ukraine. This has prompted the REPowerEU Plan, focusing on reducing dependency on Russian fossil fuels, boosting renewable energy, and enhancing efficiency measures. The forthcoming elections will be critical in determining the scale of the EU’s climate ambitions and the resulting implications for the E&P sector. Companies equipped with renewable and carbon capture technologies could find new opportunities, especially as the UK and Norway promote sustainable hydrocarbon sourcing from democratic, low-intensity states, supported by advanced CCS capabilities.

The narrative supporting low-carbon oil and gas production, coupled with carbon capture capabilities, suggests that E&P companies may retain their social license to operate. This pragmatic approach to the energy transition is gaining acceptance as Europe tackles its energy crisis and rolls out new policies like the Net Zero Industry Act (NZIA) and the Carbon Border Adjustment Mechanism (CBAM). The NZIA is designed to bolster the EU's industrial capabilities in clean technologies, meeting significant domestic market demand and positioning Europe as a leader in this essential arena. Conversely, the CBAM aims to create a level playing field for EU producers by imposing a levy on imports that fail to meet stringent EU carbon emission standards, thus encouraging greener manufacturing practices globally.

The outcomes of the 2024 European elections are set to influence the EU’s energy framework, balancing environmental goals with the necessities of energy security and economic stability. The interplay between established powers and emerging populist forces will shape the trajectory of Europe's energy policies. Specifically, the election results will have a significant impact on the exploration and production (E&P) sector, determining how these companies adapt to new regulatory environments and capitalize on emerging technologies. This pivotal electoral outcome will shape Europe's ability to sustain its environmental commitments while addressing pressing energy challenges.

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