European Energy Policy [print sheet]
Last updated: 04/03/10

Although many attempts have been made in the past to create a formal European Energy Policy, as yet the EU does not exercise control over this area. Many member states have chosen to retain control over their energy supplies and co-operation on energy has remained an intergovernmental process. However, another attempt began in 2006 to change this and create a Common Energy Policy for the whole of the European Union.

It was not until the 1973 Oil Crisis that any sort of European Community strategy was created for energy policy. In 1974 the European Council adopted a programme that prioritised getting energy from as many different sources as possible, so that no one group could hold the world to ransom over oil.

Later, in 1995 and again in 2001 and 2003, the European Commission attempted to define 'An Energy Policy for the EU'. These efforts focused on liberalising the energy market to promote competition, business transparency, and security of supply, but met with little success. France, in particular, consistently blocked moves to let foreign companies compete in internal markets.

The need to ensure energy security was highlighted when Russia stopped the flow of gas into the Ukraine in 2006 and into Belarus in 2007. Both countries act as transit states for many European countries, so these acts led to supply crises. The EU reacted with developments which could eventually lead to a Common Energy Policy (CEP). For example the European Council proposed a new Energy Plan for Europe (EPE) in April 2007, and the Lisbon Treaty (2007) emphasised 'Solidarity' on energy policy. However, the problem was not solved and Russia again stopped the flow of gas into the Ukraine in 2009, significantly reducing the supply to 18 EU states. In 2009 an EU-US Energy Council was established to strengthen cooperation on energy security and supply between the European Union and USA.

The EU's priorities under the EPE are: a common energy foreign policy; creating an internal market for energy; guaranteeing security of supply; promoting the use of renewable energy; and promoting research into energy technology. In essence the EU hopes to negotiate energy more effectively as a united bloc, while diversifying supply and promoting competition to ensure security and sustainability of energy supplies.

Negotiating a Common Energy Policy along these lines has been difficult for several reasons. The main problem is that each country has different energy priorities and uses a different energy mix. Such difficulties are exemplified by disagreements on the construction of pipelines to supply gas to Europe. Some EU states (including Turkey, Bulgaria, Romania, Hungary and Austria) support the 'Nabucco' pipeline due to supply gas from Turkey to Austria from 2014 (the EU has negotiated a deal for the pipeline to carry natural gas from Turkmenistan, currently a major gas supplier to Russia). The pipeline is expected to cost €9bn. However, Germany, France and Italy have questioned whether the EU should pay for the pipeline, as two further projects are seen to rival it. First, a 'North European Gas' Pipeline is backed by Germany but opposed by Poland and the Baltic States (it would bypass Eastern Europe). Secondly, a 'South Stream' pipeline from Turkey to Hungary is supported by Hungary (and Russia's largest energy firm, Gazprom).

The EU Commission's proposal to liberalise the energy sector have been frustrated by the more protectionist member states. A report by the Commission in January 2007 criticised France and Germany in particular for failing to separate ownership of energy production and distribution, thereby restricting competition.

Added to this is the varying commitment displayed by member states to cleaner fuels and setting standards for lower carbon emissions. At a summit in March 2007, the European Council agreed to a binding 20% target for the use of renewable energy by 2020. However, as yet no decision has been made on how to share the burden. More specifically, the EU's target for biofuels to provide 10% of road fuel by 2020 has been fiercely criticised. In July 2008 the World Bank publically criticised the biofuels target for causing a 75% increase in global food prices.

In 2009 an EU-US Energy Council was established, aiming to strengthen cooperation on energy security and supply between EU and USA.

• The EU imports 50% of its oil and gas. This will rise to 70% by 2030. Russia already provides Europe with 33% of its oil and 40% of its natural gas.
• The Commission has estimated that achieving a 20% share for renewables will cost about €18bn per year, if oil costs $48 a barrel in 2020.

For

• Declining reserves mean the EU member states must act together to effectively ensure continued supply.
• By working as a bloc, the EU can have a major impact on climate change and on available energy sources.

Against

• Energy supply is critical to future national security and should remain under the control of nation states.
• European countries' situations are too different for a common policy to make sense.

'Each country has the right to choose its energy mix' - Wolfgang Schussel, Austrian Chancellor, 2006

'[Energy and climate change] will open the door to a new dimension of European co-operation in the years to come. - Angela Merkel, German Chancellor, March 2007