2 An energy policy for Europe
| (a)
(28276)
5282/07
COM(07) 1
|
Commission Communication: An energy policy for Europe
|
| (b)
(28325)
5354/07
SEC(07)12
|
Commission Staff Working Document: EU Energy Policy Data
|
| Legal base | — |
| Documents originated | 10 January 2007
|
| Deposited in Parliament | (a) 22 January 2007
(b) 30 January 2007
|
| Department | Trade and Industry
|
| Basis of consideration | EM of 13 February 2007
|
| Previous Committee Report | None, but see footnotes 3, 11 and 16
|
| To be discussed in Council | March 2007
|
| Committee's assessment | Politically important
|
| Committee's decision | For debate in European Standing Committee
|
Background
2.1 The need for a sustainable, secure and competitive energy
supply has long been recognised within the Community, and has
been addressed on numerous occasions, notably in the Green Paper[3]
which the Commission produced in March 2006. In the light of reactions
to that Green Paper, the Commission has now produced this further
Communication, comprising a Strategic Energy Review (document
(a)). This is accompanied by a number of other related communications
(covering such aspects as the internal energy market, renewable
energy, energy technology, nuclear power, and sustainable energy
from fossil fuels), on which we are reporting separately, as well
as a Commission Staff Working Document (document (b)), which sets
out EU Energy Policy Data, relevant to all these various Communications.
The current document
2.2 The Commission says that the point of departure is the need
to combat climate change, to limit the Community's vulnerability
to imported hydrocarbons, and to promote growth and jobs, thereby
providing secure and affordable energy to consumers. It suggests
that meeting the Community's commitment to act now on greenhouse
gases should be at the centre of the new policy, in that carbon
dioxide emissions from energy account for 80% of all its greenhouse
gas emissions, and measures to reduce such emissions would both
limit its growing exposure to increased volatility of oil and
gas supplies (and prices) and result in a more competitive energy
market. It therefore proposes that the Community should seek in
international negotiations to achieve a 30% reduction in developed
countries' greenhouse gas emissions by 2020 compared with 1990,
and to reduce global emissions in 2050 by 50%, implying reductions
of 60-80% in industrialised countries by that date. In addition,
it suggests that the Community itself should in any event undertake
to achieve at least a 20% reduction of greenhouse gases by 2020.
2.3 These objectives are dealt with more fully in
a separate Communication,[4]
and the remainder of the current document addresses the means
by which this strategic objective can be achieved, which the Commission
says means transforming Europe into a highly energy efficient
and low carbon dioxide energy economy. It adds that the challenge
is to achieve this in a way which maximises potential competitiveness
gains and limits the potential costs. In particular, it suggests
that existing measures[5]
lack the necessary coherence, and that they must be taken together
as a whole. It goes on to identify a number of areas for action.
Internal Energy Market
2.4 The Commission notes that a "real"
Internal Energy Market is essential if the aims of competitiveness,
sustainability and security of supply are to be realised, but
adds that, although a series of measures have been taken, the
recent Inquiry[6] and a
separate Communication[7]
on the prospects for the internal gas and electricity market demonstrate
that these objectives have yet to be achieved. It therefore proposes
the following measures:
— Unbundling
In the light of its conclusion that discrimination
and abuse can arise when companies control energy networks as
well as production or sales, the Commission suggests that this
could be redressed, either by introducing a full Independent System
Operator (where the vertically integrated company remains owner
of the network assets and receives a regulated return on them,
but is not responsible for their operation, maintenance or development),
or by ownership unbundling (where network companies are wholly
separate from the supply and generation companies). It believes
that the latter approach is the more effective, and would also
avoid overly detailed regulation and disproportionate administrative
burdens.
— Effective regulation
The Commission believes that the powers and independence
of energy regulators need to be harmonised on the basis of the
highest, not the lowest, common denominator, and that, in addition
to promoting effective development of their national market, they
must be given the task of promoting the development of the Internal
Energy Market. The Commission adds that the technical standards
necessary for cross-border trade to function effectively need
to be harmonised, and that the best way of achieving this would
be to reinforce the activities of the European Regulators' Group
for Electricity and Gas (ERGEG).
— Transparency
The Commission notes that this is essential if the
market is to operate properly, and that at present Transmission
System Operators provide varying degrees of information, and also
place varying requirements on generators. It suggests that minimum
requirements need to be established and observed by all Community
companies along the lines of the arrangements already adopted
for telecommunications.[8]
— Infrastructure
The Commission notes that five priorities are set
out in a separate Communication.[9]
— Network security
The Commission says that recent experience has shown
the need for common minimum network security standards, and that
the new Community mechanism and structure for Transmission System
Operators should also be asked to make proposals, which would
become binding after their approval by energy regulators.
— Energy as a public service
The Commission notes that existing legislation already
requires Public Service Obligations to be respected, but says
that the Community needs to go further. It will therefore develop
an Energy Consumers' Charter with four key goals — to assist
in establishing schemes to help the most vulnerable to deal with
price increases, to improve the minimum level of information available
to help consumers choose between suppliers and supply options,
to reduce the paperwork involved when consumers change supplier,
and to protect consumers from unfair selling practices.
Solidarity between Member States and security
of supply
2.5 The Commission notes that the Internal Energy
Market increases the interdependence of Member States in both
gas and electricity supply, and that, even with a drive to increase
energy efficiency and renewables, oil and gas will continue to
meet over half of the Community's energy needs, with a high import
dependence continuing in both sectors. It adds that the Community
has effective energy relationships with traditional suppliers,
such as Norway, Russia and Algeria, but suggests that, although
it is confident these will continue, it is important to promote
diversity, and to put in place mechanisms needed to ensure solidarity
in the event of an energy crisis. It also believes that energy
security should be promoted in different ways. These include measures
to assist Member States which are overwhelmingly dependent on
one gas supplier to diversify (with projects being developed to
bring gas from new regions, setting up new gas hubs, making better
use of strategic storage facilities, and facilitating the construction
of new liquid natural gas terminals), and improvements in the
strategic oil stocks mechanism.
Long-term commitment to greenhouse gas reduction
and emissions trading
2.6 The Commission notes that the Community has traditionally
favoured the use of economic instruments to internalise external
costs, in order to allow the market to determine how to react
most efficiently, and it notes that it has set out in a separate
Communication[10] the
central role of the emissions trading mechanism in bringing about
reductions in carbon emissions.
Energy efficiency at Community, national, local
and international levels
2.7 The Commission suggests that energy efficiency
is the most immediate element in a European Energy Policy, and
has the potential to make the most decisive contribution to achieving
sustainability, competitiveness and security of supply. It notes
that it put forward in October 2006 an Energy Efficiency Action
Plan,[11] aimed at putting
the Community on the path to achieving a 20% reduction in global
primary energy use by 2020.
A longer term target for renewable energy
2.8 The Commission notes that the Community started
working in 1997 towards increasing the share of renewable energy
in the overall mix to 12% by 2010, but that, despite the 55% increase
in renewable energy production since then, that target is unlikely
to be met. It says that this is due largely to a lack of a coherent
and effective policy framework throughout the Community, and that
a step change is needed, building on existing instruments, such
as the Renewable Energy Directive, with the challenge being to
find the right balance between installing large scale capacity
now and waiting until research has lowered their cost.
2.9 The Commission suggests that this means taking
into account the fact that renewable energy is currently more
expensive than hydrocarbons, that economies of scale can reduce
the costs for renewables, that renewable energy helps to improve
the Community's security of supply, and the renewables emit few
(or no) greenhouse gases, and in the main bring significant air
quality benefits. In the light of these considerations, the Commission
has proposed[12] that
there should be a binding target of increasing the level of renewable
energy in the Community's overall mix from less than 7% at present
to 20% by 2020 — a target which it describes as "truly
ambitious" and requiring major efforts by all Member States,
with particular stress being laid on the development of biofuels.
A European Strategic Energy Technology Plan
2.10 The Commission suggests that there are two key
objectives for energy technology — to lower the cost of
clean energy, and to put Community industry at the forefront of
the rapidly growing low carbon technology sector. As foreshadowed
in another accompanying Communication,[13]
it intends to present during the course of 2007 a European Strategic
Energy Technology Plan, aimed at making the 20% renewables target
a reality by 2020. In addition, the production of electricity
and heat from low carbon sources and extensive near-zero emission
fossil fuel plants with carbon dioxide capture and storage would
be increased by 2030, with the switch to low carbon in the European
energy system being completed by 2050.
Towards a low carbon dioxide fossil fuel future
2.11 The Commission notes that coal and gas account
for 50% of the Community's electricity supply, and are certain
to remain an important part of its energy mix. However, it also
points out that coal produces roughly twice the level of carbon
dioxide emissions as gas, and that much cleaner coal production
and carbon dioxide abatement will be necessary — a development
which it also regards as essential at the international level.
The Commission says that, in order to provide global leadership,
the Community must provide a clearer vision for the introduction
of carbon dioxide capture and storage, establish a favourable
regulatory framework for its development, and invest more in research.
It has set out in an accompanying Communication[14]
its intention to commence work in 2007 on designing a mechanism
to stimulate the construction and operation by 2015 of 12 large-scale
demonstrations of sustainable fossil fuels technologies in commercial
power generation within the Community. It also intends to provide
a clear perspective when coal and gas fired plants will need to
install carbon dioxide capture and storage, noting that all new
coal-fired plants should be so equipped by 2020.
The future of nuclear energy
2.12 The Commission notes that around one-third of
the electricity and 15% of the energy consumed in the Community
comes from nuclear power, which it observes is one of its largest
sources of carbon dioxide free energy. It also observes that nuclear
power is less vulnerable to price changes than other forms of
generation, and that the next generation of reactors should reduce
costs further. It comments that it is for each Member State to
decide whether to rely on nuclear energy, but that, if the utilisation
level reduces, it would be essential for this to be phased in
with the introduction of other low-carbon energy sources. It has
accordingly suggested in an accompanying Communication[15]
that the Community's role should be to develop further the most
advanced framework for nuclear energy in those Member States which
choose nuclear power, meeting the highest standards of safety,
security and non-proliferation, as required by the Euratom Treaty.
It also says that nuclear waste management and decommissioning
are important issues, and that there is a need to ensure that
high standards are observed internationally.
International energy policy
2.13 The Commission notes that the Community will
in future account for only 15% of new emissions of carbon dioxide,
and that it will by 2030 consume less than 10% of the world's
energy. It therefore suggests that the Community cannot achieve
its energy and climate change objectives on its own, and that
it needs to work with both developed and developing countries,
energy consumers and producers to ensure competitive, sustainable
and secure policy. It believes that the Community and its Member
States must forge effective partnerships to translate these goals
into a meaningful external policy, and moreover that energy must
become a central part of all the Community's external relations
with its international partners. It also notes that the European
Council has endorsed the Communication put forward last year,
and has agreed to establish a network of energy security correspondents
to provide an early warning to enhance the Community's capability
to reaction whenever there is pressure on external energy security.
2.14 More specifically, the Commission says that
the priorities over the next three years will be to pursue international
agreement, including the post-2012 climate regime; to build up
its relation with neighbouring countries, and with its external
energy suppliers; to develop closer relations with other major
consumers; to develop the use of financial instruments, via enhanced
cooperation with the European Investment Bank and the European
Bank for Reconstruction and Development, to develop its energy
security; and to promote non-proliferation, nuclear safety and
security, in particular through a reinforced cooperation with
the International Atomic Energy Agency. In addition, it also says
that the Community should pursue a comprehensive Africa-Europe
energy partnership, and that there should be a greater integration
between its energy and development policies, in order to support
developing countries to promote sustainable and secure energy
supply and use.
Monitoring and reporting
2.15 The Commission regards these as essential to
the progressive development of an effective European energy policy,
and will be putting forward a proposal to establish an Office
of the Energy Observatory within its Directorate General for Energy
and Transport. Its task would include the promotion of increased
transparency regarding future investment needs, and the success
of Member States in ensuring that their energy mix evolves in
a way which contributes to the Community's energy goals.
2.16 The Commission concludes by inviting the European
Council and Parliament to endorse the actions set out in this
Communication, and to welcome its intention to put forward a new
Strategic Energy Review every two years.
The Government's view
2.17 In his Explanatory Memorandum of 13 February
2007, the Parliamentary Under Secretary of State for Energy at
the Department of Trade and Industry (Lord Truscott) says that
overall the Communication is positive, in that it reflects informal
discussions which the UK has had with the Commission, and in particular
our approach to markets and the Stern Review. However, he points
out that the UK does not support the mandatory targets proposed
for renewables and biofuels, which it does not regard as consistent
with allowing Member States to determine their own energy mix
under the overall objective of reducing greenhouse gas emissions.
Likewise, although it supports the proposal for an ambitious greenhouse
gas emissions target for the Community, the language does not
make it clear whether such a target would be achieved solely through
domestic Community emissions reductions, or —
as is the UK's agreed policy
position — through
a combination of such action and contributions made by Community
companies and Member States to the efforts of developing countries
(for example, using the Clean Development Mechanism under the
Kyoto Protocol).
2.18 As regards other aspects of the Review, the
Minister comments:
- that the UK welcomes the proposals
to strengthen the development of the internal market, and
believes that full unbundling is the only certain way to secure
non-discriminatory network access and to provide incentives for
network investment: it also agrees that the powers of energy regulators
should be enhanced, favouring the strengthening of the European
regulators group, but considers that, rather than simply establishing
minimum transparency requirement, there should be new legislation
on "comprehensive" transparency requirements;
- that the UK has some concerns that the Commission
sees new infrastructure as a panacea, and would like to
influence which projects are built;
- that the UK agrees on the need for common binding
network security standards;
- that the UK supports the proposal to enhance
Member State solidarity regarding security of supply by
strengthening the existing Gas Coordination Group and by new Energy
Correspondents Network, provided the latter does not entail storage
of confidential information, and it welcomes the Commission's
intention to undertake a thorough cost/benefit analysis in this
area;
- that, as regards Strategic Energy Technology,
the UK agrees that there is a need to go beyond least-cost abatement
of emissions using existing technologies, and that energy policy
should be based on research excellence and innovation: however,
it also believes that the Community's efforts should be focussed
on those research areas where there are benefits from action at
Community level over and above those which can be achieved by
Member States alone, and that any increase in funding in this
area should come from a reprioritisation of existing resources;
- that this Communication adds little on international
relations to the one produced by the Commission in 2006,[16]
and that it will remain difficult to ensure that all Member States
"speak with one voice", when individual countries are
tempted to negotiate arrangements with producer countries which
ensure their own security of supply in a manner which may not
be in the Community's best interest: it will also be necessary
to balance a unified Community approach with retaining the right
of individual Member States to speak bilaterally with producer
and other third countries;
- that the Commission's "laudable" emphasis
on its neighbourhood policy will remain of limited value
as long as Russia refuses to ratify the Energy Charter Treaty;
and
- that the proposed Energy Observatory will
provide a useful function in collecting and making available comprehensive
data and monitoring the demand/supply balance, but that it will
be necessary to clarify how this body would relate to the Energy
Correspondents Network and Gas Coordination Group.
Conclusion
2.19 As is evident, this is a wide-ranging document
which deals with an issue of major topical interest, and one which
forms an integral part of the measures needed to achieve the climate
change objectives set in the further Communication which we have
also considered today (paragraph 1). Like that document, we are
recommending this Communication for debate in European Standing
Committee, and, whilst it will of course be for the Government
to determine the necessary arrangements, we would see some merit,
given the relationship between the two documents, in their being
considered together, if this is possible.
2.20 In any event, we have drawn attention to
the fact that this document is accompanied by a considerable number
of other Communications, each dealing with an aspect of energy
policy, and, although we do not propose to recommend these for
debate in their own right, we do regard them as relevant to the
debate on this Communication. We therefore hope that any specific
points arising on them can be dealt with during that debate.
3 (27343) 7070/06: see HC 34-xxvi (2005-06), para 2
(26 April 2006) Stg Co Deb European Standing Committee
27 June 2006. Back
4
"Limiting global climate change to 2 degrees Celsius - The
way ahead for 2020 and beyond " (28275) 5422/07 + ADDS 1-2:
see paragraph 1. Back
5
In areas such as renewable electricity, biofuels, energy efficiency
and the Internal Energy Market. Back
6
"Inquiry into European gas and electricity sectors (Final
Report) " (28277) 5236/07: see paragraph 19 below. Back
7
"Prospects for the internal gas and electricity market"
(28278) 5232/07: see paragraph 19 below.
Back
8
Directive 2002/19/EC. OJ NO. L.108, 24.4.02, p.7. Back
9
"Priority interconnection plan" (28282) 5237/07:
see paragraph 16 below. Back
10
See footnote 4. Back
11
(27944) 14349/06: see HC 41-ii (2006-07), para 8 (29 November
2006). Back
12
"Renewable Energy Roadmap"
(28289) 5374/07: see paragraph 20 below. Back
13
"Towards a European Strategic Energy Technology Plan"
(28279) 5240/07: see paragraph 15 below. Back
14
"Sustainable power generation from fossil fuels" (28291)
5239/07: see paragraph 18 below. Back
15
"Nuclear Illustrative Programme"
(28290) 5391/07: see paragraph 17 below. Back
16
(27907) 14011/06: see HC 34-xlii (2005-06), para 11, (7 November
2006). Back
|
