Efficient Climate and Energy Policy Reform Needed


Clean, smart and affordable energy services for Hungarian consumers: these are the pillars of the new National Energy Strategy in the making, the main principles of which were presented at an energy investment conference this month. To achieve the goals and a climate-neutral sector, radical changes and huge investments will be needed.

It has been a year since an integrated state secretariat for energy and climate was set up within the Ministry for Innovation and Technology with the mandate to focus on the challenges posed by both fields, not least pursuing efficient energy and climate policy, state secretary Péter Kaderják told Portfolio’s Energy Investment Conference.  

“We have been working on setting strategic goals and drafting legislation that, in the long run, would create a calculable [climate] policy environment for investors,” he explained.  

Part of this work has been to devise a new National Energy Strategy; because that has not yet been finalized, it was not presented, but Kaderják did present some of the underlying principles behind it.  

First, the Hungarian energy strategy needs to be dealt with in the context of climate policy and economic development. Since energy contributes an estimated 70% to climate problems, and Hungary relies heavily on energy imports (coincidently, also 70%), climate and energy issues need to be handled in an integrated manner, Kaderják said.  

Economic development and climate protection are not conflicting, but rather mutually reinforcing goals, and whoever finds a solution to these problems can become a winner. Due to the relative position of the Carpathian-basin, Hungary could well develop solutions for the rest of the world, he said.  

There is a need to strike a balance between climate protection, energy and security of supply, he continued. Because the country’s GDP is below average, it is critical that it uses its resources efficiently.  

Multiple Benefits

When the government is allocating funds for climate protection, it will favor solutions that bring about multiple benefits: for instance, help reduce dependence on imports, cut energy costs and boost economic development.

“We agree with the International Energy Agency that, in order to achieve climate neutrality, we need all known (and even more) technologies,” said Kaderják, referring to the state’s technology-neutral stance. Energy efficiency, the use of renewable energy sources and maintaining nuclear capacities are fields the ministry believe need extra attention and funds, he added.  

The transition to a climate-neutral environment will be painful for many, he warned. There will be players, including coal miners and car manufacturers, that will come under pressure. Therefore a just transition is necessary; no one should be left behind, he added.  

It is possible for Hungary to become climate neutral, but only with radical changes in all industries, Kaderják said, citing Prime Minister Viktor Orbán.

“According to our initial estimates, in the next 30 years roughly 2.5% of GDP should be invested to reach this goal. In the Netherlands, this figure is 0.5%, but their GDP is higher,” he added. The scale of these investments are likely to be around HUF 40 trillion-50 trillion, he said.

The ratio of renewables should be increased to 24% by 2030, while greenhouse gas emissions should be decreased by at least 40% compared to 1990 by the same date, Kaderják highlighted.  

As for energy efficiency, maintaining final energy consumption at the level it was in 2005 would be desirable, he added. Should it exceed this level, the excess could only be covered by generation from renewable sources.   

Farewell, Fossil Fuels  

Divesting from fossil fuels has already begun but should continue at an accelerated pace, said Diana Ürge-Vorsatz, director of the Center for Climate Change and Sustainable Energy Policy. The existing assets should not simply be abandoned, but no new investment should be made.

Coal-based technologies will be priced out of the market by 2030, gas-fueled electricity generation will also decrease substantially, said Csaba Kovács, a partner at KPMG.  

“The future will be characterized by offshore and onshore wind and solar energy,” he said. Onshore wind technology is already competitive on a market basis and solar energy is on route to becoming so, Kovács added, as a result of the generous subsidies paid by European consumers.  

“If it weren’t for these schemes and demand, research resulting in the [drop of] of investment costs and lifecycle could not have been carried out either in Europe or in other parts of the world,” he said.  

The Hungarian subsidy system has moved in the direction of the market; the reform of the feed-in tariff and the introduction of the METÁR system were good steps as they helped cut back on overly generous subsidies, Kovács said.  

In terms of funding, regulation and the role of the financial sector – for example, how to positively discriminate climate-friendly, sustainable investments – remains an important issue, he concluded. 

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