Future Energy Policy

12 August 2009
by inadim -- last modified 12 August 2009

In the autumn of 2005, the Hampton Court summit of EU leaders discussed the need for an overall stocktaking of Europe’s energy policy options. There was a rising concern regarding high oil and gas prices and Europe’s dependency on just a few external suppliers. Warning signs on the worrying effects of climate change were also increasingly evident. To answer the call of the summit, the European Commission opened a wide-ranging debate on a future European energy policy with the publication of a Green Paper in March 2006.

The stocktaking lead to a wide-ranging package of energy and climate change proposals: In January 2007, the European Commission released the Communication: An Energy Policy for Europe, an ambitious plan to deal with the joint issues of dwindling energy supplies and climate change. The goal of the Commission was to "set the pace for a new global industrial revolution" with the essential aim of keeping average global temperature to no more than 2 degrees C above pre-industrial levels.

In March 2007, the European Council endorsed the plan and agreed to an Action Plan 2007-2009 Energy Policy for Europe (EPE) (Annex I, Pg. 16) to create a European Common Energy Policy by 2009. The plan called for, by the year of 2020:

• a 20 percent binding target for reducing greenhouse gas (GHG) emissions (compared with 1990 levels)
• a goal of 20 percent share of renewables in the electricity mix
• a 20 percent increase in energy efficiency
• at least a 10 percent share of biofuel supplement in petrol.

The summit also committed to reduce emissions by 30 percent, if other industrialised nations, including the US, commit themselves to comparable emission reductions and that "advanced developing countries" (i.e.: China and India) contribute as well in the framework of a post-2012 agreement.

The need for an integrated energy and environmental policy was reinforced in Part III of the March 2007 Presidency Conclusions. It was agreed that measures for a common energy policy and market, both external and internal, must be completed. Environmental and energy policies must be fully integrated with those of transport, city-planning and economy. Power grids, energy infrastructure and energy regulation must be reconfigured to enable the rapid introduction of renewable energy and the removal of market barriers to innovative, energy-efficient technologies. The European Strategic Energy Technology Plan would be developed to focus research and development efforts on low carbon technologies. On nuclear, the Commission chose to take an "agnostic" stance, leaving it up to member states to decide.

A number of European business organisations (UNICE, Eurochambres) as well as the European Chemicals industry (CEFIC) criticised the Commission's unilateral CO2 reduction targets as undermining Europe’s competitiveness. Environmental organisations (WWF, Friends of the Earth, Greenpeace, EEB) accused the package of “lacking teeth” and having little substance.

Internal Energy Market

The internal energy market is part of the wider EU goal of removing trade barriers and enabling free movement of goods, people, services and capital. When the single European market was created in 1992, it did not include energy, but by 2000 most member states were gradually introducing competition to the energy sector. As of 2007, EU citizens and industry are, in theory, free to choose their energy supplier.

Further measures to complete the internal energy market involve:

Market Liberalisation - In September 2007, the Commission issued the 3rd Energy Liberalisation Package, with provisions for the final separation of supply and production activities from transmission networks, independent national regulators, energy transmission system cooperation and increased transparency, security and a long-term framework for the establishment of a retail market. Many elements of the package were supported by the Energy Council in December 2007.

However, the unbundling of energy production from supply received strong opposition from France, Germany and several other EU member states. Commissioner Neelie Kroes said gas and electricity markets still reflect the “old market structure of national or regional monopolies.” Fall 2007 allegations of a German energy “cartel” that may have fixed energy prices and efforts by Austria's OMV to take over Hungary's Mol, are demonstrative of this.

The Commission will work with the European Parliament and the Slovenian Presidency to reach an agreement on the Internal Energy Market package in the first half of 2008.

Interconnectivity is mostly defined by Trans-European Networks Energy (TEN-E) policy under DG TREN. Energy distribution and integration requires vast networks of pipelines, electricity infrastructure and the integration of renewables. The TEN-E budget is used to determine which projects receive priority funding.

The EU Emissions Trading Scheme began in 2005, allowing thousands of high-energy industries in Europe to buy and sell shares of the roughly 40% of CO2 emissions they create. Plants exceeding their targets are fined, and plants coming in below their targets can sell the excess. The first trading period ends in 2007, and the 2nd trading period goes from 2008-2012, the year the Kyoto Protocol ends. The new cap on emissions EU-wide is set at 2.08 billion tonnes, a 10% reduction from the previous cap. The Commission is expected to put forth a post 2013 proposal for emissions trading in January 2008.

Taxation should reflect the actual cost of energy production, including the external and environmental costs involved in securing and transporting fossil fuels, especially as they compare to renewables.

After 2009

By 2009, the EU will have in place a Common European Energy Policy that is fully integrated with environmental policy.

By 2012, the Kyoto Protocol will expire and need to be replaced by a new strategy, which should include a commitment by all major industrial nations to drastically reduce GHG emissions (the EU has proposed a collective goal of 30%

By 2020, the 20/20/20/10 goals should be achieved, there will be lower cost renewable energy, including advanced, off-shore wind farms and 2nd generation biofuels, clean-coal technology and widespread hybrid vehicles.

By 2030, the energy industry, including fossil-fuel power and heating, should be almost fully decarbonised. The transport sector should be fully penetrated by 2nd generation biofuels and hydrogen fuel cells.

By 2050, there will be an energy “paradigm shift,” utilising advanced, sustainable renewables, hydrogen and coal and gas, and Generation IV nuclear fission and fusion energy.

Source: eu4journalists