Now or never for common EU energy policy

After the takeover squabbles and fierce debates surrounding national sovereignty issues, the EU is now facing a number of key decisions that will reveal its true resolve in shaping a common energy policy.

EU heads of state and government agreed on the basic principles of a future 'Energy Policy for Europe' at the spring summit in March. Discussions were based on suggestions presented earlier by the Commission in an Energy Green Paper. They include completing the opening of European gas and electricity markets and stepping up relations with major suppliers such as Russia and OPEC. Others relate to further boosting renewable energies, most notably biomass (see the Biomass Action Plan), energy efficiency, and research on low-carbon technologies.

But EU leaders had other problems on their minds at the summit with an ongoing wave of cross-border takeover attempts in the energy sector which they viewed as a threat to their national interest. The moves triggered protectionist reactions with France arranging a last-minute merger between Gaz de France (GdF) and Suez to counter a possible bid by Italy's Enel. In Spain, the government tried to put together a defensive merger between Gas Natural and Endesa to block a bid by Germany's E.ON and is currently still busy placing regulatory hurdles in the way of the Germany giant to discourage the move.

Competition commissioner Neelie Kroes later criticised what she described as "the outdated political rhetoric of economic patriotism in Europe". "We should be vigilant - because if a protectionist trend continues or intensifies, one thing is certain: all of us here in Europe will suffer," she said.

Let's have a closer look at the issues at stake:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: European Union ::


Common energy policy

Discussions on a common energy policy will continue this year, with the results of a public consultation on the Commission's Energy Green Paper due before the end of the year.

The main points of the Green Paper have already been taken up by EU leaders at their annual spring summit in March. But they insisted on protecting national sovereignty on key strategic decisions such as the choice of energy mix - including nuclear - and rejected the idea of a single European energy regulator as premature.

The consultation will give a chance to industry players and other key stakeholders to make their views heard. The results will be fed into a Strategic Energy Review that the Commission will present in on 10 January. The review will weigh different options on external and internal aspects of EU energy policy, including on the right mix of measures needed to meet the EU objectives of supply security, economic competitiveness and environmental sustainability approved at the summit.

On the external relations front, an agreement on the Energy Charter could be struck in the autumn, possibly at the EU-Russia summit on 24 November or even earlier in October. But delays in Russia's WTO accession talks could hinder the whole process.


Liberalisation of gas and electricity markets

The final conclusions of a competition enquiry into the EU energy sector will be published by the Commission in December.

The draft conclusions, published in February, confirmed fears by Brussels that former state monopolies were keeping a stronghold on their home markets, allowing them to raise prices to the detriment of consumers. Competition commissioner Neelie Kroes came out vehemently against them, criticising excessive concentration in what she said reflects the "old market structure of national or regional monopolies".

Later in May, Kroes showed she meant business when the Commission launched a series of surprise inspections at the premises of major power utilities in Germany, Italy, France, Belgium and Austria on suspicion of antitrust practices and abuse of dominant market position in the gas sector (E.ON, RWE, Gaz de France, Distrigas, OMV AG were among the companies targeted). The investigations are ongoing and do not come with a specific deadline but the sense of urgency surrounding energy policy might encourage Brussels to conclude swiftly.

The final report, due in December, will test the Commission's resolve to pursue this policy and eventually bring prices down.


Biofuels for transport and CO2 emissions from cars

Encouraging alternative energy sources was also a major point to come out of the spring summit. The heat is on particularly in the transport sector where the Commission is due to review the EU biofuels directive and authorise increased blending of biofuels with petrol and diesel before the end of the year.

The EU has set itself a target of increasing the share of biofuels in transport to 5.75% by 2010. At the spring summit, EU leaders suggested that this target could be increased to 8% by 2015, pending further impact analysis.

Biofuels also offer the prospect of further reducing CO2 emissions from cars. CO2 emissions are directly linked to fuel consumption with engine efficiency and other technological improvements regularly leading to further emissions cuts.

Before year end, the Commission will revise its current strategy with the aim to reduce average emissions of new cars to 120g CO2/km by 2010 at the latest. European and Japanese carmakers have committed to cut emissions to 140g CO2/km by 2008/9 respectively.

But progress so far has been slow, the latest Commission report in 2005 saying "major additional efforts" are needed to reach the target. "Should it become clear that the commitments made are no longer honoured, the Commission will consider measures, including legislative ones, to ensure that the necessary reductions of CO2 are delivered," said Stavros Dimas, the EU environment Commissioner.


Clean coal

As part of an 'energy package' to be tabled in December, the Commission will issue a Communication on reducing CO2 emissions from coal using carbon capture and storage technology.


Next important dates:

:: 26 September 2006: Commission to present action plan on energy-efficiency

:: 23 November 2006: Energy Council to discuss:
-Common energy policy
-Internal energy market
-Energy efficiency action plan
-Renewable energy promotion
-International relations (Russia, Balkans)

:: 24 November 2006: EU-Russia summit to focus on energy issues and WTO accession

:: 12 December 2006: Commission to table an 'energy package' which is expected to include:
-The final conclusions of the sector enquiry into the gas and electricity sector
-A proposal to revise of EU biofuels directive and fuels quality directive to allow increased blending of biofuels with petrol and diesel
-An update of the Commission's strategy to reduce CO2 emissions from cars
-A Communication on clean coal focusing on carbon capture and storage technology

:: 10 January 2007: Strategic Energy Review focusing on both external and internal aspects of EU energy policy and analysing advantages and drawbacks of different sources of energy

:: March 2007: EU heads of state and governments to adopt an Action Plan on a common European energy policy


Resources:

Euractiv dossier: Biofuels for transport

Euractiv dossier: Energy Green Paper: What energy policy for Europe?

Euractiv dossier: Liberalisation of EU electricity and gas markets