EU energy policies

The EU is putting in place an ambitious energy policy in a bid to improve security of supplies and achieve bold CO2 reduction targets. But how does the EU decision-making process function on energy-related issues? And what is the role of the industry sector and interest groups?

Europe, like many other parts of the world, finds itself under pressure to address major challenges including climate change, a growing dependence on energy imports, increasing strain on energy resources and the need to ensure access for all consumers to affordable and secure energy.

To achieve these goals, the EU is putting in place a wide-ranging energy policy, covering the full array of energy sources from fossil fuels (oil, gas and coal) to nuclear energy and renewables (solar, wind, biomass, geothermal, hydro-electric and tidal).

The bloc's aim is to put in place a low-carbon economy, whilst making energy resources more sustainable and more secure, and ensuring low prices for consumers.

The Treaty of Lisbon, which entered into force on 1 December 2009, gives energy policy a new legal basis which it lacked in the previous treaties (Article 194 of the Lisbon Treaty).

In particular, the new legislative framework provides that the Union must ensure security of energy supply in the 27-member bloc, promote the interconnection of energy networks and improve energy efficiency and energy saving.

EU energy policy is supported by market-based tools (mainly taxes, subsidies and the CO2 emissions trading scheme), by developing energy technologies (especially technologies for energy efficiency and renewable or low-carbon energy) and by Community financial instruments.

Issues

The market

Huge amounts of money, both private and public, are poured into EU energy policies. Two hundred billion euros is needed to upgrade Europe's gas and electricity grids over the coming decade, according to the European Commission's latest assessment.

Overall, the Commission's energy strategy for the coming decade calls for investment of around €1 trillion to secure the bloc's energy needs in a sustainable manner.

Most of this investment is private. The EU budget allocates only around €250 million a year to energy infrastructure (under the trans-European networks for energy, or TEN-E, programme).

To achieve the EU's climate goals, EU Energy Commissioner Günther Oettinger recently called for capital investments in renewable energies to be doubled from €35 billion to €70 billion.

The EU now has a dedicated climate commissioner, Connie Hedegaard, with whom Oettinger works closely.

Oettinger and his team in the EU's directorate-general for energy will have their hands full to make sure that EU countries implement the Third Energy Package, adopted in 2009, by a 2011 deadline.

With the latest attempt to break up large, vertically-integrated energy companies in France, Germany and other EU countries ending in a truce, the Third Energy Package aims to boost competitiveness but allows gas companies to keep their pipelines, provided that they run them as truly separate entities.

The players

Individual countries and groups of countries, political parties, business and interest groups are all very active in trying to influence the EU's energy policies.

The role of countries is highly visible in the shaping of cross-border infrastructure projects. One recent example was the 4 February 2011 EU summit, on the eve of which several prime ministers gathered to mark agreement on the North-South Gas Corridor, a project aimed at removing internal bottlenecks in gas transport.

At the same summit, France and the Czech Republic set their stalls out by launching a common position on the need to develop nuclear energy.

On other occasions, countries have teamed up to counter or to stay away from proposed transnational projects. This was the case with the Nord Stream pipeline, which now takes a route that avoids the territorial waters of Sweden, Poland and the Baltic states.

Large energy companies often team up in consortia to maximise their chances of success with large infrastructure projects. A consortium is behind the Nabucco pipeline project, and other consortia are behind its competitors, such as ITGI and TAP. A consortium is expected to take the lead on the Desertec project, which aims to develop solar energy in the Sahara Desert.

EU heads of state and government meet regularly at summits called European Councils. European Council conclusions often focus on energy issues. The 4 February 2011 EU summit was dedicated to energy and innovation and its conclusions focused on the full spectrum of energy-related issues, from investment in renewables to facilitating the development of strategic corridors for transporting gas, such as the Southern Corridor.

In the European Parliament, one possible way to measure interest in energy-related proposals is the growing number of amendments to new EU legislation adopted by co-decision procedure. Recently one such regulation, concerning measures to safeguard security of gas supplies, triggered several hundred amendments filling over 300 pages of text.

Another way to measure the drive by stakeholders to influence decision-making is their participation in public consultations in the field of energy. Twenty-four such consultations have taken place since the beginning of 2008 on issues ranging from the energy labelling of tyres to the external dimension of the EU's energy policy.

The European Commission is working in close cooperation with bodies specialising in energy, such as the European Network of Transmission System Operators (ENTSO) for electricity, the ENTSO for gas, the Gas Coordination Group and the Oil Supply Group.

Environmental groups play an important role on energy-related issues too. They are consulted by the EU institutions as stakeholders on the same level as the business community.

Recently, the EU asked regulators to draw up a European infrastructure priority plan. And it is establishing a new 'agency for the co-operation of energy regulators' (ACER) in Slovenia.

Often the drive by environmental groups to place policy emphasis on climate protection is countered by business, which often objects that taking into account environmental considerations whatever the cost makes no sense.

Consumer organisations are also an important player in energy-related decision-making. A European Commission study recently found that EU consumers could save around €13 billion or €100 per household each year if they were to shop around for energy prices and switch to the cheapest tariff available to them.

Countries, businesses and federations also lobby the EU institutions by different means, ranging from simple correspondence to public events, conferences, dinners, debates and advertising campaigns.

The Commission often hosts conferences, special weeks and other public events dedicated to a wide variety of energy-related issues. The EU executive also produces Green Papers, which are discussion documents intended to stimulate debate and launch a process of consultation, at European level, on a particular topic, such as climate- and energy-related issues. A Commission White Paper usually follows a Green Paper and contains proposals for EU action in the respective area.

Similarly, the European Parliament organises debates and public events, and commissions surveys on climate- and energy-related issues.

The European Parliament's ITER committee (industry, research and energy) publishes working documents and reports which become the basis of proposals, and amends draft Commission legislation which de facto becomes a legislative proposal.

Learning from crises

Learning from past mistakes has been a powerful driver of decision-making. The January 2009 gas crisis served as a catalyst for improving the Commission's oversight of the sector. It led to the introduction of an EU coordination role in the event of disruption and investment in gas interconnectors (€1.440bn of unspent funds from the EU budget were reallocated to 16 such projects).

However, energy experts and the business community still disagree as to whether public money is needed to build interconnectors, and if so, how much.

The gas crisis has also been a driver for developing storage capacity and pushing forward the construction of alternative pipelines, such as the Southern Gas Corridor.

The EU also learned lessons from the Deep Horizon oil spill in the Gulf of Mexico. Urged to act by environmental groups, the Commission tabled on 13 October 2010 draft legislation on oil platforms aimed at ensuring the highest safety standards in the world. In its communication on the safety of oil and gas activities, the Commission contemplates introducing new EU standards, including criteria for granting drilling permits, rig inspections and safety control mechanisms.

Flying the flag

In situations where businesses need the help of the EU flag, the Union's institutions have been increasingly active. One good example of this is a recent visit by Commission President José Manuel Barroso to Azerbaijan and Turkmenistan.

Although the document signed by Barroso with Azerbaijan's President Ilham Aliyev was not conclusive regarding the Southern Gas Corridor, the political impetus greatly helps the decision-making process on allocating 10 billion cubic metres of Azeri gas to European clients.

External dimension

If it is to achieve its goal of securing competitive, sustainable and secure energy the EU must get involved and cooperate with other countries, be they producer, transit or consumer nations. For the sake of efficiency and consistency, the EU and its members must speak with one voice on international energy issues.

Former European Commission President Jacques Delors, who is often referred to as one of the 'fathers of Europe', advocates that the EU countries that so wish should begin without delay to embark on a common energy policy.

In a policy paper published by Notre Europe, a think-tank founded by Delors himself, he spells out the priorities for countries that wish to move forward as follows:

Developing ambitious economic instruments to finance common research and development projects on alternative energies;
deepening and structuring cooperation in Europe-wide energy networks, and;
setting up oil and gas purchasing groups to facilitate procurement from foreign suppliers, thereby strengthening and focusing EU foreign policy in this field.

Although these steps may appear technical and limited in scope, they will lead to decisive changes, paving the way for greater cooperation and solidarity in the energy field, Delors writes.

Delors' ideas are widely shared by European Parliament President Jerzy Buzek. To some extent, Commission President José Manuel Barroso has expressed similar views. On a number of occasions, he has likened EU policies to address climate change and improve energy security to the Coal and Steel Community, which paved the way for European reconciliation after the Second World War.

Energy Commissioner Günther Oettinger recently said that the Energy 2020 strategy is just a first step.

"In order to transform our energy systems, we need a longer-term perspective. Under the so-called 'Energy Roadmap 2050', I want to present different paths to meet not only our greenhouse emission reduction target (80-95% compared to 1990) but also secure the provision of energy at competitive prices. Based on different scenarios, it will aim at presenting the policy measures needed in the coming years to firmly set the energy sector on the right track," he said.

Positions

A recent research paper entitled 'EU energy policy under the Treaty of Lisbon rules' argued that amidst the institutional dust settling in 2010, certain trends became apparent in EU energy policy.

According to its author, Jan Frederik Braun from the University of Osnabrueck, these trends apply to the energy policymaking process as well as to the wider area of shared competences between the Union and its member states.

The author argues that these trends include:

The revised role division/authorities;
the increasing importance of confidence building and personal relations within and between the institutions; and
the differing perceptions/interpretations within the institutions of the post-Lisbon political landscape.

Besides being a dedicated title in the Treaty, energy constitutes a horizontal policy issue, Braun writes. In his view, the EU's energy policy is a component of other policy areas, such as:

Foreign policy (e.g. linked to technological innovation and developing long-term relationships with supply and transit countries through a 'package approach');
environment/climate change (e.g. a key element in reducing CO2 and stimulating investments in renewables); and;
competition (e.g. access to affordable energy resources for ensuring the international competitiveness of European industries). Click here for more.

To ensure that no third country can engage in targeted reductions of energy supplies, the European Union must present a single interface in its relations with its external partners, both producer and transit countries, a recent study initiated by former Commission President Jacques Delors argues.

According to the policy proposal, called 'Towards a European Energy Community', its authors insist that efforts to build a coherent and effective common policy must get under way now.

According to them, this can be done by developing some elements of the policy without delay, preferably within the framework of enhanced cooperation as defined by article 20 TEU.

Some of the priority actions would be, for those states wishing to go forward:

Developing ambitious economic instruments to finance common research and development projects on alternative energies;
deepening and structuring cooperation in Europe-wide energy networks, and;
setting up oil and gas purchasing groups to facilitate procurement from foreign suppliers, thereby strengthening and focusing the EU's foreign policy in this field.

Although these steps may appear somewhat technical and limited in scope, they will lead to decisive changes, paving the way for greater cooperation and solidarity in the energy field, the policy paper says. Click here for more.

Timeline

13 July 2009: Adoption of regulation of European Parliament and Council establishing programme to aid economic recovery by granting Community financial assistance to projects in field of energy.
24 June 2010: Council adopts regulation concerning notification to Commission of investment projects in energy infrastructure within EU.
13 Oct. 2010: Commission adopted 'Offshore and gas platform standards'.
10 Nov. 2010: Energy 2020: Commission adopts a 'Strategy for competitive, sustainable and secure energy'.
17 Nov. 2010: Commission adopts 'Energy infrastructure priorities for 2020 and beyond'.
March 2011: Commission presents energy efficiency action plan.
June 2011: Commission tables draft regulation on devising an infrastructure instrument.
June 2011: Future of Southern Gas Corridor decided.
Sept. 2011: Commission presents comprehensive set of proposals on external dimension of energy policy.
Nov. 2011: Commission unveils 2050 energy roadmap.