Energy Policy in the European Union

24 August 2006
by eub2 -- last modified 24 August 2006

We take energy for granted. Fuel shortages and power cuts are rare but timely reminders that we rely on energy for transport, for heating our homes in winter, cooling them in summer and running our factories, farms and offices. But many energy resources are finite. In addition, energy use is often a source of pollution. Environmental sustainability and the need to maximise security of supply and remain internationally competitive as the price of scarce conventional fuels rises means using less fossil fuel, using it more intelligently and developing alternatives.

Some 80 per cent of the energy the EU consumes comes from fossil fuels - oil, natural gas and coal. A significant and increasing proportion of this comes from outside the EU. Dependence on imported oil and gas, which is currently 50 per cent, could rise to 70 per cent by 2030. This will increase the EU's vulnerability to supply cuts or higher prices resulting from international crises. The EU also needs to burn less fossil fuel in order to reverse global warming.

The European Commission identifies the way forward as being a combination of:

• energy savings through more efficient energy use,
• alternative sources (particularly renewables within the EU),
• more efficient use of gas-fired co-generation plants, which also produce steam and heat, more use of biomass from organic matter in energy production and biofuels in transport, better integration of EU energy markets,
• better integration of EU energy policy with other policies, such as agriculture and trade, and more international cooperation.

Imports remain essential

Long-term security of supply also means not being over-dependent on a few countries for supplies, or compensating for that dependence by close cooperation, with countries such as Russia (a major source of fossil fuels and potentially of electricity), and with the countries of the Gulf region. Cooperation with developing or emerging economies includes investment and transfer of know-how in production and transport in the interests of both sides.

The EU, Bulgaria, Romania, and seven countries of southeast Europe have set up a single Energy Community across the 34 countries, so that in due course energy market rules will be the same across the whole zone. The EU will benefit in particular from greater security for the supply of gas and power transiting these countries. The non-EU countries' energy markets will operate more efficiently by applying EU rules and their consumers will benefit from more competitive markets and the targeting of subsidies where they are most needed.

Changing the fuel mix

None of this will be enough. Ultimately, the EU must become a low-carbon economy using less fossil fuel in industry, transport and the home, and making use of renewable energy sources to generate electricity, heat or cool buildings, and fuel transport, particularly cars. This presupposes an ambitious switch to wind (particularly offshore wind), biomass, hydro and solar power and bio-fuels from organic matter. The following step could be to become a hydrogen-based economy.

Caring for the environment

Caps on the amount of emissions of carbon dioxide (CO2) EU industry can spew into the atmosphere now apply in order to halt global warming. Companies exceeding their emissions allowance trade with others who have not used up all their allowance. This encourages more efficient energy use, cuts pollution and keeps the promises the EU has made in the Kyoto Protocol on climate change.

The European Commission has proposed extending these rules to airlines. The growth in emissions from planes threatens to cancel out more than a quarter of the 8% reduction in total greenhouse gas emissions compared to 1990 levels that the Kyoto Protocol imposes on EU-15 energy-intensive industries by 2012.

Saving energy by using it more efficiently

In order to cut fossil fuel use, the EU is committed to obtaining 15% of its energy from renewables by 2015. Member states have also undertaken to save 1% of their final energy consumption each year for nine years from 2007 by expanding the use of energy-efficient and cost-effective lighting, heating, hot water, ventilation and transportation.

Road transport is a heavy fuel user. In addition, traffic jams and commuting waste fuel, and vehicle exhausts pollute, so more efficient use of transport (thanks to better traffic management and urban planning), and a faster switch to greater use of public transport and bio-fuels are crucial. The EU has set a target of 8% for biofuels of total energy consumption by 2015.

Moreover, the EU has agreed energy performance standards and certification requirements for buildings, compulsory regular inspections of boilers and air-conditioning systems, and standards for energy-using equipment, such as household appliances - all of which help save energy.

Using energy more intelligently

Technology will play a key role in using energy more rationally. The EU's framework programmes for research and technological development fund energy research, and the EU's Intelligent Energy Executive Agency is spending EUR 200 million from its Intelligent Energy for Europe programme between 2003 and 2006 to support research into energy saving, energy efficiency, renewable energies and the energy-related aspects of transport in the EU, Bulgaria, Croatia and Romania.

The single energy market

A competitive energy market helps efficient energy use. In the past, national gas and electricity markets were separate 'islands' within the EU, where supply and distribution were in the hands of monopolies. Now, markets have been opened up to competition and national borders in energy markets are disappearing.

The EU facilitates competition with funding to connect isolated networks and improve cross-border interconnections, both within the EU and with supplier countries. For their part, all suppliers have guarantees under single energy market rules that they can have access to the distribution grid and pipeline networks of other EU countries, and that access charges will be fair.

All businesses and many consumers are already free to choose their own supplier of gas and electricity. All other consumers will be by mid-2007. The additional competition comes with additional protection. There are safeguards to protect consumers against their lights going out or their heating going cold. These ensure that cost-cutting by competing suppliers does not result in under-investment, that consumers in remote areas or on low incomes are not regarded as too small or too far away to bother about, and that there will always be someone to step in immediately if a supplier goes out of business.

EU Energy policy web links

European Commission Energy policy DG
EU funding opportunities in the field of Energy
"Intelligent Energy Europe" Programe
Summaries of EU Legislation in Force: Energy Policy
Recent case-law of the Court of Justice and the Court of First Instance : EU Energy policy
Further information on EU Energy Policy on Europa


Source: European Commission
Last updated: March 2006