January 12, 2006

Momentum Grows for Common EU Energy Policy

By Jeff Mason

BRUSSELS -- Momentum is growing in the European Union for a common policy to diversify and secure energy resources after a pricing dispute between Russia and Ukraine disrupted gas supply to Europe.

British Prime Minister Tony Blair called for a common EU energy policy last year, and Austria, which holds the bloc's rotating presidency, has said it will put the issue at the top of its list during its six-month tenure.

"Half of the energy we are using comes from abroad. That makes the European Union very vulnerable to our energy suppliers, and it needs to be tackled at a European level," said an official from the European Commission, which is drafting a policy paper on the subject for leaders to discuss in March.

The EU's dependence on foreign energy sources is increasing as its own supplies run out. The Commission forecasts import dependence could grow to 70 percent of general energy consumption by 2030 and 90 percent for certain fuels like oil.

Twenty-five percent of the EU's gas supplies come from Russia, and 80 percent of those snake through pipelines in Ukraine, highlighting the EU's vulnerability to disputes between the two, and the importance of an EU voice in such a crisis.

"I wonder whether anyone ... would believe that individual member states would be better placed to deal with this than as part of the EU setup?" Austrian Chancellor Wolfgang Schuessel said at a news conference this week.

Member states have long resisted attempts to wrest away control of energy policies but have shown support for initiatives that could range from harnessing the bloc's combined negotiating might to boosting development of environmentally friendly energy sources like solar and wind power.

"The point about a common energy policy is stability, stability, stability," said a spokesman for Spain's Industry Ministry. "The key is that it will help the stability of supply and promote greater competition in the energy sector.

What a policy would look like is up for debate. Blair said in October it would include improving the EU's internal energy market, dialogue with key suppliers at the European level, energy efficiency, and development of "clean" technologies.


The Commission's green paper is likely to touch on many of those issues, though member states will be wary of attempts to bolster the EU executive's powers.

"The difficulty will be coming up with something which fits with member states' existing responsibilities and autonomy," an EU diplomat said. "Energy policy isn't for the Commission. It's a member state competence."

The Commission official, speaking on condition of anonymity, said the paper would likely include a chapter on energy efficiency, which EU energy chief Andris Piebalgs champions and which proponents see as a win-win for reducing emissions of carbon dioxide (C02) and lowering reliance on foreign suppliers.

States will also be pressed to finish creating an internal energy market in the EU. The Commission has criticized member nations for dragging their feet on opening up electricity and gas markets to more competition.

The touchy topic of nuclear power has already entered the discussion. Britain's Blair called for a common position on the subject within the bloc, but national opinions vary widely and the Commission is officially neutral.

"It's hard enough to imagine a common policy on energy," the EU diplomat said. Consensus on nuclear was "for the birds."

New EU energy policy should tackle problems with the power grid, which does not easily move power around Europe, said Christian Egenhofer, senior fellow at the Brussels-based Center for European Policy Studies, adding a common EU grid operator would boost security and help avoid blackouts.

EU states will also push to diversify sources of supply.

"Greece is promoting energy networks such as the natural gas pipeline linking Turkey, Greece and Italy. Europe needs to secure its energy supply with more suppliers," said Nikos Stefanou, general secretary at Greece's development ministry.

The EU already has "dialogues" with OPEC and Russia, two of the bloc's biggest suppliers, which could be used as a model for talks with other partners.

The union has also committed to increase the share of renewable sources in its energy mix, though some say that can be developed further. With North Sea oil sources depleting and gas getting expensive, "renewables" like biofuels or hydro power are seen as crucial to establishing more home-grown energy supplies.

(additional reporting by Joe Ortiz in Madrid and George Georgiopoulos in Athens)