What's New in the EU: EU focuses on reformed energy policy

Strong policy drives are underway in the EU to achieve competition in the internal energy market, increase renewable energy supply, and reduce CO2 emissions.

By ARI SYRQUIN
eu flag 88 (photo credit: )
eu flag 88
(photo credit: )
A unique entity governed by complex and almost constantly evolving structures, the EU constitutes a challenge for energy policy makers. Its energy policy has a global impact, not only because of its 16% share of world energy demand, but also because of the EU leadership in addressing climate change. Strong policy drives are underway in the EU to achieve competition in the internal energy market, increase renewable energy supply, reduce CO2 emissions and make the EU more energy-efficient. Concerns about security of supply have also led to a greater focus on improved energy relations with supplier countries, and new institutional structures are being put in place. How much progress has been made in the field of energy? And in which of these areas has the EU already implemented a fully integrated policy? The IEA Energy Policies Review addresses these questions, while also analyzing the impact of the most recent major EU policy measures, in particular the Energy & Climate Package of January 2008 and the 3rd Liberalization Package of September 2007, two highly ambitious proposals in the energy sector. The review gave a warm welcome to the Energy & Climate Package, recommending the vigorous implementation of this package while increasing energy efficiency throughout all sectors of the economy. Furthermore, the review recommended that the EU should make sure that European energy markets will be open, transparent and competitive in the future, and become more consistent in its relationship with relevant supplier nations. The review said that the level of spending for energy research and development (R&D) must be urgently augmented to reflect the importance of technology in addressing growing energy challenges. The Energy & Climate Package, passed by the EU in January, features legislative proposals on CO2 "burden sharing" and on the post-2012 period of carbon trading under the EU Emissions Trading System (ETS). The Commission claims it seeks to promote the development of carbon capture and storage (CCS), and proposes national renewable energy targets, including biofuels, for each member state. The IEA congratulated the EU for these proposals, but warned they would require sustained action and significant levels of investment to become reality. If the proposals are successfully implemented, they could result in a transformation of the way the EU produces and uses energy. EU energy market liberalization should not only provide consumers with more choice, but also ensure that costs are distributed in the most economically efficient manner. This policy could benefit the environment, by furthering integration and interconnection, thereby increasing the opportunities for clean energy sources such as wind, which will benefit from stronger cross-border interconnections. Many EU member states prefer to maintain their bilateral relationships with supplier countries, which may affect the strength of the European Union to act as a single entity. The European Commission and the other institutions of the European Union should consider creating a more central role for themselves at the Union level in these supplier relationships, to ensure that the full weight of the European Union comes to play. To address the energy and environmental challenges the world is facing, investment in energy R&D will have to increase significantly. The level of EU energy R&D spending is currently predicted to be €5.1 billion between now and 2013, compared to €9b. for information technology. R&D should furthermore be managed in a strategic manner, to ensure that it is in line with the goals that are pursued. While the EU is seriously addressing the strategic allocation of R&D money, with the enactment of the it does face serious problems. The EC proclaims that the European Union is doing well in addressing the strategic management, which it has reinforced by developing the Strategic Energy Technology Plan in 2007, a comprehensive plan to accelerate energy technologies for a low-carbon future. But it is facing a serious challenge in the area of fund availability. Also, the current Framework Program allocates €1.95b., or almost 40% of the energy funding, to nuclear fusion, a technology that is only expected to be viable around 2050. It is critical for the achievement of the EU climate change targets that this funding allocation is revised at the earliest possible opportunity, and that funding for non-nuclear energy research and development is increased significantly.