OVERVIEW OF EU ENERGY POLICY

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OVERVIEW OF EU ENERGY POLICY LAW

• PROF. DR. KURT DEKETELAERE
• Professor of Environmental and Energy Law
• Director of the Institute of Environmental and
  Energy Law
• Faculty of Law, University of Leuven
• ---------------
• Visiting Senior Fellow of EC Law
• Institute of Advanced Legal Studies, University
  of London

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The prime aim of the European Communitys
energy policy is to ensure a supply of energy to
all consumers at affordable prices while
respecting the environment and promoting healthy
competition on the European energy market.
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SURVEY

• PAST
• PRESENT
• FUTURE

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PAST

• Twentieth century Second World War
• Post-War and the 1950s
• Period of 1958 1972
• Oil crises of 1973
• Single European Act in 1987
• Treaty of the European Union (1992)
• Treaty of Amsterdam (1997)

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Twentieth century Second World War

• Before 1950 Law used as an instrument for the
  exclusion of foreign goods, products, services
  and capital
• Since 1950 promotion of free and fair trade
  subject to the rule of law law as an instrument
  of market integration

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Post-War and the 1950s

• Post-War reconstruction and its need for
• energy energy as an area for urgent
  development of common policies and coordinated
  action
• 1951 Treaty of Paris founded the European Coal
• and Steel Community (1951-2002) common coal
  policy
• 1957 EURATOM Treaty created the European Atomic
• Energy Community common nuclear policy
• 1957 Treaty of Rome established the European
  Economic Community common market

7
Period of 1958 1972

• Lack of development of an effective common energy
  policy
• Although the need of an integrated energy market
  was in the 1957 treaties
• European energy policy one of the most
• discussed topics
• increasing import dependence
• risk of fuel shortage by the mid 1970s

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Period of 1958 72

• Regime of compulsory oil stocks
• Directive 68/414/EEC
• Directive 98/93/EEC
• MS policies based on imported inexpensive oil
  supplies
• This period witnessed a retreat away from rather
  than progress towards the goal of market
  integration in the Communitys energy policy

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Oil crisis of 1973

• Response of the MS was to protect national
  interests
• Prompted the MS and the EEC to reconsider the
  urgent need for a common energy policy
• The Community and MS agreed on particular
  policies and initiatives (stocks, supply, etc)
• Directive 75/339/EEC
• Directive 73/238/EEC
• 1981 Communication Commission expressed its
  frustration at the lack of progress for an energy
  strategy for the Community (inadequacy and
  inconsistency of action)

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Single European Act - 1987

• Amended the three Treaties
• Modification of the EEC Treaty
• Aim of realization of the internal market by end
  of 1992
• Qualified majority legislation (Coop Proc EP)
• Basis for the Commission for legislative
  initiatives in the electricity and gas sector,
  and more vigorous enforcement of treaty rules on
  competition rules and free movement of goods

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Single European Act - 1987

• Inclusion in the EEC Treaty of provisions
  designed to protect the environment, calling for
  a prudent and rational utilization of natural
  energy sources

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Treaty of the European Union (1992)

• Further amended the EEC Treaty
• No specific provisions on energy were included
  except for
• Indication of measures in the spheres of energy,
  civil protection and tourism as one of the
  Communitys policies or activities
• Inclusion of competences on trans-European
  networks (financing mechanism ao for grid
  networks
• Declaration on Civil Protection, Energy and
  Tourism

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Treaty of the European Union (1992)

• Provisions on the environmental competences
• Article 2 of the EC Treaty
• The amended provisions of title VII of the EC
  Treaty
• With relevance to the energy sector, Article 175
  of the EC Treaty 2. , shall adopt
• Provisions primarily of a fiscal nature
• Measures concerning town and country planning,
  land use
• Measures significantly affecting a Member State's
  choice between different energy sources and the
  general structure of its energy supply.

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Treaty of Amsterdam (1997-1999)

• Further amended the Treaty framework
• Relevance for the field of energy (division of
  competences MS Community)
• Protocol on the principle of subsidiarity
• Services of general economic interest
• Environmental improvements of the Amsterdam
  Treaty
• Sustainable development
• Integration principle was strengthened
• Improved co-decision procedure for environmental
  legislation (bar a few exceptions)

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Treaty of Amsterdam (1999)

• Lack of a special chapter on energy in the Treaty
  has this hindered progress?
• ? different opinions (cf EU constitution !)
• The key directives for the internal energy market
  are now in place
• Process of liberalization, market and regulatory
  dynamics
• Integration of the energy markets across Europe
• Still development of new legislative proposals,
  programmes, policy documents, etc. a lot of
  work !

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PRESENT

• In the present energy situation, the European
  Union has to face up to many challenges
  development of renewable energy sources, opening
  up of the gas and electricity markets, reduction
  of the European Unions energy dependency and
  nuclear safety and security guarantees

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PRESENT

• The Treaty rules and the energy sector
• EC Secondary Energy legislation
• Non-sectoral Secondary EC Energy law
• Sectoral Secondary EC Energy law
• Specific issues under the EC Energy law

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The Treaty rules and the energy sector

• Free movement of goods
• Articles 28 31 of the EC Treaty
• Energy products, including electricity and gas,
  have been held to be goods, subject to these
  rules
• Right of establishment and the free movement of
  services and capital (cf acquisition of certain
  energy enterprises)
• Articles 43 60 of the EC Treaty

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The Treaty rules and the energy sector

• Rules on Competition (firms operating in the
  energy sector)
• Article 3 (g) of the EC Treaty
• Articles 81 82 and 86 of the EC Treaty
• Provisions on State aids
• Articles 87 88
• State aid rules under the ECSC Treaty (2002)
• These general rules are subject to exceptions
• Commissions practise
• Jurisprudence of the ECJ

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EU White and Green Papers on Energy

• White paper on energy policy, COM(95)682final
• White paper on renewable energy sources and
  action plan, COM(97)599final
• Green paper on security of energy supply,
  COM(2000)769final

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EC Secondary Energy legislation

• Non-sectoral Secondary EC Energy law
• Rational use of energy and energy efficiency
• Energy taxation
• Transparency
• Transit
• Procurement in the energy sector

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Legislation on the rational use of energy and
energy efficiency

• Background energy crisis
• Recommandation 77/714/EEC
• Directive 78/170/EEC
• Household appliances, commercial and other
  End-Use Equipment
• Labelling
• Directive 79/530/EC and Directive 92/75/EEC
• Energy efficiency requirements
• Directive 96/57/EC
• Proposal for a directive on establishing a
  framework for the setting of ecodesign
  requirements for energy-using products

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Legislation on the rational use of energy and
energy efficiency

• Building
• Directive 2002/91/EC
• Communitys programmes for energy efficiency
• Decision 91/565/EEC SAVE and Decision 96/737/EC
  SAVE II
• Energy Framework Programme (2000)
• Decision 1230/2003/EC Intelligent Energy for
  Europe programme (2003-2006)

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Energy taxation

• Reform of energy taxation
• Many attemps
• Proposal for a Directive COM (1992) 226 final
• Amendend proposal for a Directive COM (1995) 172
  final
• Crucial step towards the creation of a single
  market in the EU
• Taxation of mineral oils
• Directive 92/81/EEC
• Directive 92/82/EEC

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Energy taxation

• Proposal for a Directive on the taxation of
  energy products COM (97) 30 final
• Extension of the community minimum rate
• Introducing gradually the polluter pays principle
• Political agreement on 20 March 2003 to the
  proposed Directive of 1997
• Aims to reduce the distortions of competition
• Incentives to use energy more efficiently

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Transparency regulation

• Purpose
• to reveal the critirea under which industry
  operates, the organisational structure and
  functioning of integrated enterprises, the
  relationship between various industry players and
  the basis and formation of industry costs and
  prices.
• ? to make more rational decicions

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Transparency regulation

• Sources for the electricity and gas setor
• Directive 90/377/EEC
• Directive 80/723/EEC as amended by Directive
  84/413/EEC and Directive 93/84/EEC
• Communication COM (89) 123

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Transit Directives

• Purpose
• To facilitate transit of electricity and gas
  between grids and to reduce obstacles to the
  exchange of electricity and gas
• Sources
• Directive 90/547/EEC
• Directive 91/296/EEC
• Repealed with effect from 1 July 2004

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Procurement in the energy sector

• Purpose
• Opening up the public procurement market to
  genuine cross-border competition, creating and
  securing an internal market in Europe
• Sources
• Directive 90/531/EEC amended by the Directive
  93/38/EEC
• Commissions Green Paper on public procurement
  in the European Union exploring the way forward,
  COM (96) 583 final
• GATT/WTO General Agreement on Procurement

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EC Secondary Energy legislation

• Sectoral Secondary EC Energy law
• Electricity Directives
• Gas Directives
• Legislation on renewable energy sources
• Proposed Directive on the promotion of
  cogeneration of heat and power
• Legislation on oil
• Legislation on nuclear energy

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Electricity Directives

• Electricity Directive 96/92/EC
• Background
• Broad aims
• Completion of a competitive electricity market
• Establishes common rules for the production of
  electricity and the operation of electricity
  transmission and distribution systems
• Further face phase of liberalization

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Electricity Directives

• Changes in the electricity market
• Abolished exclusive rights
• Required unbundling of network activities
• Created transparency and non discrimination
• Experience from the implementation
• Price reductions?
• Higher standards of services
• Increased competitiveness

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Electricity Directives

• Shortcomings and possibilities for improving the
  functioning of the market
• Ensure a level playing field in generation
• Reduce the risks of market dominance and
  predatory behaviour
• Ensuring non-discriminatory transmission and
  distribution tariffs
• Ensuring that the rights of small and vulnerable
  customers are protected
• Information on energy sources for electricity
  generation is disclosed

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Electricity Directives

• Electricity Directve 2003/54/EC repealed
  Directive 96/92/EC
• Purpose
• Opens the electricity market
• Non-household customers by July 2004
• All customers by July 2007
• Further measures in unbundling
• Establishes a regulator in all Member States
• Requires published network tariffs
• Reinforces public service obligations
• Introduces monitoring of security of supply
• Sets up a mandatory electricity labelling

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Gas Directives

• Gas Directive 98/96/EC
• Background
• Changes in the gas market
• Access to the market
• The operation of systems
• Common rules for the transmission and storage of
  natural gas, distribution and supply
• Abolished exclusive rights
• Created transparency and non discrimination

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Gas Directives

• Experience from the implementation
• Effiency gains
• Price reductions?
• Higher standards of services
• Increased competitiveness

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Gas Directives

• Shortcomings and possibilities for improving the
  functioning of the market
• Ensure a level playing field in generation
• Reduce the risks of market dominance and
  predatory behaviour
• Ensuring non-discriminatory transmission and
  distribution tariffs
• Ensuring that the rights of small and vulnerable
  customers are protected
• Information on energy sources for electricity
  generation is disclosed

38
Gas Directives

• Gas Directive 2003/55/EC repealed Directive
  98/30/EC
• Purpose
• Opens the gas market
• Non-household customers by July 2004
• All customers by July 2007
• Further measures in unbundling
• Establishes a regulator in all Member States
• Requires published network tariffs
• Reinforces public service obligations
• Introduces monitoring of security of supply

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Legislation on renewable energy sources

• Green Electricity Directive
• Biofuels or other renewable fuels for transport
  Directive
• Directive on the energy performance on buildings
• Community Guidelines on State Aid for
  environmental protection
• Community programmes to promote renewable energy
  sources

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Legislation on renewable energy sources

• European Union places a high priority on the
  increasing use of renewable energy sources
• Improving security of supply
• Diversification of energy supply
• Reduces the strain which is being placed by
  conventional energy on the environment (Kyoto)
• Renewable energy sectors Photovoltaic,
  Bio-energy, Solar Thermal Power, Small Hydro,
  Wind Energy, Geo-thermal energy, Solar Heating,
  Ocean Energy

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Legislation on renewable energy sources

• In 1997 the European Union agreed to double the
  share of renewable energies from 6 to 12 by
  2010
• Communication of the Commission on Energy for the
  future Renewable sources of Energy COM (97) 599

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Green Electricity Directive

• Directive 2001/77/EC
• Create a framework which will facilitate the
  development of renewable electricity (RES-E)
  and access to the internal electricity market
• Obligation for Member States to set national
  targets, with indications to 22 by 2010 (annex)

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Biofuels or other renewable fuels for transport
Directive

• Directive 2003/30/EEC
• Background
• Aims at promoting the use of biofuels by largely
  ensuring a minimum proportion of biofuels and
  other renewable fuels for transport
• Member States should ensure a minimum proportion
  and as a reference value
• 2 by 31 December 2005
• 5,75 by 31 December 2010

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Directive on the energy performance of buildings

• Directive 2002/91/EC
• Objectives
• Promoting the improvement of energy performance
  of buildings within the EU through cost-effective
  measures
• Convergence of building standards towards those
  of Member States which already have ambitious
  levels

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Community Guidelines on State Aid for
environmental protection

• Community Guidelines on State Aid for
  environmental protection of 3 February 2001
• Background
• Memorandum of 6 November 1974 and its two
  prolongations
• Community Guidelines on State Aid for
  environmental protection of 10 March 1994
• Scope of the guidelines

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Community Guidelines on State Aid for
environmental protection

• The different types of aid used to promote
  renewable energy sources
• Investment aid to promote renewable energy
  sources
• Operating aid in the form of tax reductions or
  exemptions
• Operating aid for renewable energy sources

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Community programmes to promote renewable energy
sources

• ALTENER I (1993 1997) and ALTENER II (1998
  2002) programme
• Focus exclusively on the promotion of renewable
  energy sources
• Aims and scope of the ALTENER programme are
  continued in the "Vertical Key Action" of the
  same name in the Intelligent Energy for Europe
   
• The Sixth Framework Programme (2002 2006)
• creation of a European Research Area (ERA)

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Community programmes to promote renewable energy
sources

• STEER programme
• Support for initiatives relating to all energy
  aspects of transport, the diversification of
  fuels,
• COOPENER programme
• Support for initiatives relating to the promotion
  of renewables and energy efficiency in the
  developing countries
• Intelligent Energy for Europe (2003 2006)
• Decision 1230/2003/EC
• Renewable Energy Partnerships and the Campaign
  for Take-Off

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Proposed Directive on the promotion of
cogeneration of heat and power

• Proposal for a Directive on the promotion of
  cogeneration of heat and power
• COM (2002) 415 final
• Technique producing heat and electricity in one
  process
• If the electricity cogeneration share is
  increased from 11 in 1998 to 18 in 2010 ?
  the energy savings 3 4 of the total EU
  gross energy consumption

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Legislation on oil

• Reinforcement of the security of the oil supply
• Proposal for a Directive concerning the alignment
  of measures with regard to security of supply for
  petroleum products COM(2002) 488 final
• Maintain minimum stocks of crude oil and/or
  petroleum products
• Directive 98/93/EC

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Legislation on nuclear energy

• Nuclear power accounts for one-third of the
  electricity generating capacity in the EU
• EURATOM Treaty
• Nuclear safety
• Council Resolution of 22 July 1975 on the
  technological problems of nuclear safety
• Council Resolution of 18 June 1992 on the
  technological problems of nuclear safety (92/C
  172/02)
• Proposal for a Directive setting out basic
  obligations and general principles on the safety
  of nuclear installations COM(2003) 32 final

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Legislation on nuclear energy

• Waste management
• Council Directive 92/3/Euratom on the supervision
  and control of shipments of radioactive waste
  between Member States and into and out of the
  Community (under revision)
• Proposal for a Directive on the management of
  spent nuclear fuel and radioactive waste
  COM(2003) 32 final
• Council Resolution of 15 June 1992 on the renewal
  of the Community Plan of Action in the field of
  radioactive waste (92/C 158/02)
• Council Resolution of 19 December 1994 on
  radioactive waste management (94/C 379/01)

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Legislation on nuclear energy

• Transport of radioactive material
• SURE programme
• http//europa.eu.int/comm/energy/en/pfs_suredb_en.
  html SURE data base on EU legislation on
  transport of radioactive materials
• Decommissioning
• Decision 79/344/Euratom adopting a research
  programme concerning the decommissioning of
  nuclear power plants
• Decision 84/60/Euratom adopting a research
  programme concerning the decommissioning of
  nuclear installations
• Decision 89/239/Euratom adopting a research
  programme concerning the decommissioning of
  nuclear installations

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Specific issues in the EC energy law

• Long term contracts
• Essential facilities
• Cross-subsidization
• Stranded costs

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FUTURE

• Improve security of supply
• Combat climate change
• Improving Energy Efficiency