Energy policy for Europe. Ensuring secure and low-carbon energy in the EU's internal market. Interim report

In early March 2006, the European Commission re-launched the discussion on an Energy Policy for Europe with the 2006 publication of its Green Paper 'Secure, Competitive and Sustainable Energy for Europe'. This manifests the EU's will to broaden its reflection on its future energy systems, taking into account increasing market liberalisation and globalisation, environmental pressures, technological challenges and the growing import dependency from politically unstable regions. Other major contributions to this debate include the climate change communication 'Winning the battle against climate change' (published in 2005), the Green Paper on Energy Efficiency (2005), the Energy Efficiency Action Plan (2006), the ongoing works of the High Level Group on Competitiveness, Energy and the Environment (2006) and the enquiry into the energy sector by DG Competition of the European Commission in 2006. The Spring European Council in March 2006 welcomed the Energy Policy Green Paper and committed itself adopting a prioritised Action Plan at its spring session in 2007, to be prepared by the European Commission and the Energy Council. Early next year, the European Commission will table both the EU Strategic Energy Review, accompanied by a number of sectoral policies and a Green Paper on future climate change policy for the period post-2012 when the Kyoto Protocol expires. Both the EU Strategic Energy Review and the post-2012 Green Paper will outline the European Union (EU) 'energy and climate change vision' and propose a roadmap towards achieving EU energy and climate change objectives, namely, how to ensure the competitiveness of European industries while at the same time combating climate change and ensuring security of energy supply. To contribute to this debate, the CEPS multi-stakeholder Task Force on 'energy policy for Europe' has presented this Interim Report, which attempts to develop the key elements for an EU energy policy framework. Although this report will focus mainly on the internal aspects, i.e. what the EU can implement internally, it nevertheless takes into account some of the external dimension of energy, as they are an important backdrop of EU energy policy. This Interim Report concentrates on six key areas that are discussed in sections 2 to 7. The starting point for an EU energy policy framework is to identify the European added value. The new framework needs to be more than just pasting together a number of largely isolated sector-specific policies. Putting together a package of disconnected policies risks a sub-optimal outcome, ignoring interaction between policies (section 2). The report introduces the concept of robustness of EU energy policy. At the heart of robustness is the EU internal energy market. The report makes a number of suggestions to improve robustness both by improving the functioning of the internal energy market and by complementary government action (section 3). To make progress towards a situation where the EU can speak with one voice, this report ponders the possibilities for the EU to assess member state external energy policy actions as to their EU impacts and to create more consistency and coherence between EU and member state policies. Key issues for international energy cooperation and diplomacy will be will be energy efficiency, investment in production and infrastructure, market access and climate change policies (section 4). Achieving both energy security and climate change targets while allowing for long-term competitive energy is likely to require paying a premium. How such a premium can be identified and implemented is discussed in section 5. This leaves the question on the best instrument to deal with security of supply and long-term sustainability and whether market-based or non-market based instruments are the best options (section 6). The concluding section (7) analyses the role of targets and sets out the conditions under which targets can work. It finds that EU targets are useful in expressing a vision, but they need to be backed up by credible and realistic implementation strategies. Ideally targets should define the required outcome instead of prescribing precise solutions to let the market chose the most efficient solution. To minimise the risk of a credibility gap (i.e. that targets are not fulfilled), the EU should think about EU-wide minimum targets while leaving it to member states to go beyond. Targets should be used carefully as they can reduce the efficiency of the market to choose the most appropriate solutions. Targets should steer markets, avoiding a planning approach. The Task Force will present the complete analysis including conclusions and recommendations in early 2007, ahead of the Energy Council and the Spring European Council. Objective is to concentrate on 'robustness indicators' and the European added value, next steps to ensure effective linkage between competitiveness, energy security and sustainability and long-term targets within an EU framework for renewable electricity support