Europe moves towards a common energy policy

(BRUSSELS) - The 27 EU nations on Thursday moved toward a common energy policy, agreeing on cleaner fuel targets while watering down a proposal to force the break-up of the sector into production and distribution operators.

"We have made a breakthrough and we have now adopted a draft energy action plan," said German Economy Minister Michael Glos, who chaired the meeting of EU energy ministers in Brussels.

The European Commission, the EU's executive arm, last month proposed a raft of measures aimed at moving the bloc towards a common energy policy in a bid to tackle climate change and soaring energy prices as well as to provide a more level playing field for the industry.

The ministers' meeting paves the way for an EU summit on March 8-9 that will concentrate on the energy issue.

The EU 27 agreed here that bio-fuels should constitute at least 10 percent of fuels used in new vehicles by 2020, compared to just two percent in 2005.

"There has never been such a strong measure for protecting the climate," said Glos.

But that 10 percent target will be subject to bio-fuels being available in sufficient quantities for commercial use and for the necessary legal changes to be made.

The ministers were less bold in a move to boost the use of renewable energy to 20 percent of the EU's total energy consumption by 2020, satisfying themselves with a non-binding objective. The current level is seven percent.

The voluntary nature of the proposal will disappoint the Commission, as this was a key plank in its original proposals.

Ahead of Thursday's meeting, Denmark, Italy, Slovenia, Spain and Sweden as well as Germany had defended the idea of an obligatory rule on renewables, while Britain, France and Finland were opposed.

The ministers also stopped short of endorsing the Commission's proposal to force the "unbundling" of the electricity and natural gas industry into separate production and distribution networks, though they backed the overall objective of an "effective" management separation.

European Union regulators want to split energy utility groups, in electricity and natural gas markets, into separate production and transmission businesses so as to make networks accessible to companies without their own grids.

The proposal by the EU's executive arm divided the member states.

France, hostile to any idea of an imposed separation of its electricity company EDF and its transportation subsidiary RTE, noted that 10 fellow EU nations backed its stance.

"What is important today regarding the electricity and gas networks is the necessary investment is made," said French Industry Minister Francois Loos.

The energy ministers, in their joint statement, called on the European Commission to elaborate on its proposals "taking account of the characteristics of gas and electricity sectors and of national and regional markets."

They did however acknowledge the overall objective "where possible" of the "effective separation of supply and production activities from network operations," known as unbundling.

In some EU members the production of electricity (11 countries) and natural gas (seven countries) is already separated from the transport and distribution side.

Britain, Spain and the Netherlands are among those nations in favour of a formal split in functions.

"We didn't reject and we didn't endorse," said EU Energy Commissioner Andris Piebalgs, "we endorsed the goal."

He added that clarification was needed on what unbundling means. "Some members interpret it as (forced) privatisation," he said.

The ministers agreed, without discussion, on other general objectives including a 20 percent reduction in gas emissions by 2020, the development of a crisis management system for the energy sector and to negotiate a new energy deal with Russia.

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