EU Energy Policy: Interest Interaction and
Supranational Authority*
Svein S. Andersen**
ARENA
EU energy policy: what are the driving forces?
The struggle over a common EU
energy policy is a special case of Europeanisation of
policy-making (Usherwood 1998), and up to the 1980s it
was regarded as a spectacular failure (George 1985:100).
Energy policy is characterised by strong conflicts
between a common policy, on the one hand, and divergent
national policies, on the other. The focus here is the
emergence of a common EU energy policy during the 1990s.
Despite its inclusion in the very first treaties on the
European Community energy was until very recently more or
less unaffected by common market legislation, and few
energy policy decision were taken at the central EU level
(Schmitter 1996). The most important changes in the last
few years are related to the internal market directives
on the electricity and gas markets (Hancher 1998).
This chapter does not intend to
identify all EU regulations that affect energy. Neither
does it deal with the impact of national energy policies,
which has played a key role in the sector. Rather, it
focuses on the interrelationship between attempts to
create a common EU energy policy, on the one hand, and
the institutional development of EU (and its
predecessors), on the other hand. We can distinguish four
stages in the development of EU energy policy:
In the first, from 1946-57,
energy supply was a major problem facing the (then) six
members (of the ECSC). Energy was mostly indigenous coal
supplies. Energy co-operation fuelled wider economic and
political co-operation. In the second period, from
1957-72, energy was not regarded as an issue of great
concern. Cheap imported oil replaced coal, and although
this was a period of marked advances in European
co-operation, this was not reflected in the energy
sector. In the third period, 1972-1985, energy re-entered
the EU agenda and this time as a problem of oil prices
and supplies. Common policies largely failed. The last
stage, from the late 1980s to the late 1990s represents a
revitalisation of attempts to introduce a common EU
policy.
The EU is still far from a
common energy policy, but since the late 1980s a number
of important EU initiatives have been taken to strengthen
the supranational influence on the energy policy (Matlary
1991, Lyons 1992, 1994, Padgett 1992). Energy issues have
increasingly been linked to three general perspectives.
First, the EU's internal-market programme where
competition policy plays a major role. Second, the EU's
attempts to establish a common environmental policy with
fiscal measures as key instrument. Third, the European
Energy Charter and the Charter Treaty which were attempts
by EU to create international market regimes that could
support reform in the former East Bloc and thereby secure
EU's energy supplies.
Such initiatives all reflect the
desire to establish European policies in areas that
before were dominated by national authorities. They were
linked to the revitalisation of the EU, based on
institutional reforms and the general support for
increased EU co-operation where liberalisation was a key
element. Changing perceptions of energy in relation to
environmental concerns and with respect to the
international supply situation were additional factors.
During the early 1990s the proponents of common EU policy
dominated the agenda setting. As will be discussed in
detail later, attempts to achieve Europeanisation of
energy policy experienced serious problems, but there are
also some important successes (Matlary 1997). The new
initiatives have opened up for changes that may make it
impossible to preserve important parts of national energy
markets in the long run
One major perspective explains
the development of supranational authority and common
policy by pointing to the gradual emergence of common and
overlapping intergovernmental interests. The process is
driven by rational actors building coalitions (Morgenthau
et al 1973, Waltz 1979). This would be consistent with
the co-operation over coal (and steel) policy during the
post World War II years. The Six (who had lost the war)
saw co-operation on coal as a requisite for successful
reconstruction, but also in the new spirit of a unified
Europe.
The lack of overlapping
interests between member countries (and national energy
sectors) is consistent with the lack of a common EU
policy in the energy sector up to the late 1980s. From
the late 1950s to the early 1970s such co-operation did
not seem necessary. During the 1970s national interests
were too diverse. However, it is not possible to explain
the elements of common energy policy since the late 1980s
in terms of overlapping interests. On the contrary, such
a tendency would seem highly unlikely from this down-up
perspective since the lack of, or small degree of,
overlap is a consistent characteristic of the energy
sector.
Important new EU energy policy
initiatives have been driven by the Commission which has
exploited institutional rules to take the initiative, to
redefine the energy sector in relation to the internal
market, environmental policy and foreign policy. The
areas to which energy is linked all represent areas where
supranational institutions have been assigned tasks what
the neo-functionalists call inherently expansive (Cameron
1991: 25). This is perhaps most obvious in the case of
the internal market and in environmental policy, but also
in relation to EU's ambitions to exercise international
leadership during the dramatic transformations going on
in the former Soviet and Eastern Europe after the end of
the Cold War. The new EU initiatives in the energy policy
did not happen automatically, but seem to have been part
of a deliberate plan. Key actors in the Commission and in
some member countries wanted to exploit the momentum of
success in other areas. Such initiatives managed to
reinstate energy policy as an important concern on the EU
level.
A key to understanding this
development is how the EU – as an institutional
framework and a set of central institutional actors
– interacts with underlying interests in the energy
sector in the different stages of the EU development.
This interaction demonstrates the close link between EU
decision-making, the problem of defining collective
interests and the impact of the EU's political cycles.
The development of energy – and especially petroleum
– policy during the 1990s in the EU is the topic for
the rest of the chapter. Central questions are: What
drives the development in this policy area? How is a
common EU energy policy linked to the development of EU
institutions and the movement towards The European Union?
Under what conditions can we expect a development of
supranational authority and common EU policy?
Common energy policy initiatives
New proposals for common EU
energy policy in the late 1980s and early 1990s were
closely related to the revitalisation of the EU. The
Single Act (1987) and the Maastricht Treaty (1993)
strengthened supranational authority in a number of
policy areas, although not specifically in relation to
energy policy (Wallace and Wallace 1996, Hix 1999). The
reforms did, however, create a new dynamic where actors
in other policy areas became more active in redefining
traditional energy policy issues. Such initiatives
represent a form of political spill-over, where
resourceful actors exploited new opportunities within a
new institutional framework. The new initiatives did not
get much support from traditional energy sector
interests. New EU level perspectives challenged national
policy paradigms and vested interests, and shifted issues
over to new arenas with new decision-making procedures.
Diverse national energy interests – including new
member countries – were forced to relate to new
types of games on the EU level.
One important source of change
was EU's internal market programme. This reflected not
only the internal development of the EU, but also general
policy international orientations reflected in OECD. The
latter had for some time pushed towards more liberal
arrangements in the energy sector. One important source
of change was EU's internal market programme. The
internal market opened up for a number of initiatives in
the energy sector, as part of a general deregulation
policy (COM 88 174> 1988) Matlary 1991). This was an
area covered by new rules of majority decision-making,
and where the commission had a strong role. In this
perspective the question was not whether national energy
sectors performed well in relation to various national
objectives, but whether the organisation of industries
was consistent with principles of competition policy and
detailed law.
Another major source of policy
initiatives affecting energy was environmental policy
(Iversen 1992, Bergesen 1991). Initiatives from this
sector differed from deregulation in that policies were
directed towards the realisation of specific objectives
with growing popular support. There was, however, no
agreement on what would be the best ways to achieve them,
except that environmental interests should play a key
role in formulating solutions. Also in this area, after
Maastricht (1994), it was possible to make decisions
according to majority rules, although there were
exceptions for issues involving fiscal matters. And with
respect to environmental policy relating to international
climate negotiations the Commission was empowered by
strong political signals from the European Council
(Simont and Duhot 1994).
The third policy area was
foreign policy that became linked to the wider EU
co-operation through the Maastricht Treaty. There was
some uncertainty as common foreign policy objectives were
not clear, and decisions should still be firmly
controlled by member states according to traditional
rules of international co-operation. The changing status
of this policy area was, however, reflected in ambitions
about a more active leadership role for the EU in
international matters. As it turned out foreign policy
interests wanted to use energy policy as an instrument in
relation to reforms in the former East Bloc countries.
Again, however, there was no clear idea about the way
that nergy policy could best do this. The details were
left to those usually involved in EU energy policy
formulation, reflecting the tug of war between sector
interests and general market perspectives (Dore and De
Bauw 1995).
Below we will describe new
attempts to create common EU energy policy,
distinguishing between policies of deregulation, on the
one hand, and initiatives reflecting policy objectives
relating to environmental and foreign policy.
Common energy policy as deregulation: The Single Market
The Single Act of 1987 laid the
foundation for the revitalisation of EU and for the
conclusion of the internal market before the end of 1992.
However, it contained nothing on a common energy policy.
This was no coincidence, as energy was regarded as a very
problematic area. This did not mean that energy, or any
other area of economic activity, was to be exempted from
the internal market programme. The energy objectives
adopted by the Council of Ministers (Energy) in September
1986 explicitly mentioned the need for greater
integration of the internal energy market (SPRU-report
1989, Stern 1990).
Up to this time, energy was
partly regarded as a national problem. As to oil and gas,
both security of supply and price risk related to factors
outside the control of the EU. These were traditional
concerns for the EU as well as the member states. At the
EU level they had been dealt with through stockpiling of
oil and efforts to increase energy efficiency. In member
countries oil dependency has been reduced through
taxation and comprehensive regulation – often
through oligopolistic or monopolistic arrangements –
had been instruments to reduce demands and promote
diversity of energy. Natural gas, which was mostly
imported, made it necessary to balance supplies from a
small number of sellers. Sometimes energy policy had also
been motivated by the desire to preserve regional
employment. Such regulation had a price, and this became
clear as oil prices fell in the early 1980s.
The internal market in energy
was to be realised through three different types of
policy instruments (Lyons 1994:5). First, through
specific energy directives removing barriers to
competition and trade, by translating general Treaty
principles into new sector regulation. Second, general
internal-market directives that would also affect energy;
like the directive on public procurement. Third, more
active application of existing competition law to the
energy area. However, the latter also faced political
limitations, and rulings could only address specific
instances of violations. The following discussion focus
is on attempts to introduce specific directives in the
energy sector. It is important to keep in mind, however,
the interaction between these three sources of change.
Energy policy was discussed in a
special White Paper on Energy Policy in 1988
(<COM 88 174> 1988). The Commission took a close
look at energy sectors in Europe within the framework of
the internal market programme. The study concluded that
the (down stream) oil industry was already, with some
exceptions, operating within a free market. In addition,
coal and nuclear sectors had since the 1950s been covered
by detailed Treaty provisions. It was primarily in the
gas and electricity sector that there was a need for new
directives.
In the coal industry the major
problem was to apply Community legislation to reduce
subsidies, while there was a need for cost transparency
for equipment and components in the nuclear sector. The
priorities for the (down stream) oil industry were
coupled to general measures of taxation and standards.
The Commission's conclusion was that existing law and
general internal market directives would solve most of
the problems in the energy sector. The exceptions were
the gas and electricity industries, and here the
Commission focused on down-stream activities. In addition
came up stream oil and oil and gas (Lyons 1994: 6/7).
Major parts of the European
energy industry were in violation of the internal market
principles. The suggestions made were not motivated by
positive objectives related to energy, they were part of
a general deregulation policy. The point of departure for
the Commission's initiative were Articles 86 and 90 in
the Treaty of Rome about state-owned and other monopolies
and abuses of market power. Such articles seemed
especially relevant in the gas and electricity sectors,
where the degree of monopolisation on the national level
was extremely high. These sectors, to a large degree,
would have to submit to market forces that would lead to
greater efficiency and lower prices. They now became the
target for the Commission through a number of directive
proposals.
The internal market programme
consisted of 279 proposals to create directives that
could remove non-tariff trade barriers and create a
single market across the EC. In the Commission the push
to link energy to the internal market came from
Directorate General IV, which was responsible for
competition, and General Directorate XVII with
responsibility for energy policy. Other General
Directorates were also involved, especially DG XXI
(General customs union and indirect taxation), DG III
(Single market and industry) and not least, DG XI
(Environment). This participation by several DGs in the
formation of energy policy, reflects two important
circumstances: Energy was being coupled to a number of EU
policy areas, and the commissioners did not have the same
degree of control within a policy area which ministers
usually have in a national ministry. The Commission
passes all motions by majority votes, and all the (then)
17 commissioners were involved in all policy fields.
The first conflicts over electricity and gas directives
The Commission had a three-stage
approach to the introduction of internal market
directives in the energy sector. The initial focus was on
the downstream side of the electricity and gas sectors,
but the plan was to move upstream as reforms progressed.
During the first stage the
Commission wanted to introduce elements of competition
into the distribution of electricity and gas. This should
be accomplished through the introduction of transparency
of prices and investment plans and transit rights for
other grid operators. Proposals for such directives were
adopted by the Commission and sent to the Council of
Ministers (Energy) in July 1989.
The price transparency directive
– covering both gas and electricity producers –
was uncontroversial. It was adopted by the Council in
June 1990 and became operative in mid 1991. The new
directive required suppliers to provide the Statistical
Office of the European Communities – SOEC –
with three types of information on a regular basis:
prices, pricing systems and break down on consumers and
consumption volumes. Based on this the SOEC would publish
statistics which would improve the information available
to market actors (Lyons 1994: 7). Such a system was
established in Great Britain already in 1988, as the new
controlling authority OFGAS pressured the privatised
British Gas by threatening to take them to court
(Andersen 1993).
Two other directive proposals
concerned transit right for other grid operators in the
electricity and gas sectors, respectively (Capouet 1992).
The aim was to ensure that a grid operator in one member
state should not impede the trade of electricity or gas
between other member states. Both proposals were short
and simple, basically focusing on procedures for handling
of transit requests. The electricity directive was passed
already in October 1990, and came into force in July
1991. In contrast to other cases the Commission found
that the electricity industry, represented by
Eurelectric, was co-operative to the proposed transit
rights. However, the industry also made it clear that the
Commission's ideal of a common carrier system was
completely unacceptable.
The proposal for transit right
in the gas sector proved more controversial. It took
almost two years before it was adopted by the Council of
Ministers (Energy) and entered into force in January
1992. Germany and the Netherlands- with their national
monopoly suppliers Ruhrgas and Gasunie – were most
actively against. However, there was widespread
scepticism against the proposal. These reactions from
affected interests may be regarded as a positioning to
fight future and more far reaching Commission proposals.
The fourth of the first stage
proposals also signalled that there were clear
limitations to what member states would accept in the
energy sector. The aim of the investment transparency
directive was to ensure exchange of information to
achieve a better coherence of large-scale investment
projects in the Community. However, at the Council of
Ministers (Energy) meeting in May 1990 member states
voiced their opposition to this plan. The Commission was
forced to step back from the directive approach and,
instead, to make better use of existing regulations.
The second stage in the
deregulation EU's electricity and gas markets introduced
more ambitious objectives and more comprehensive
regulatory measures. This led to strong political
reactions from member countries and their industries
(Austvik 1991, Capouet 1992). The new proposals attacked
`the heart of he gas and electricity industries with
practising monopolies' (Lyons 1994:5). The Commission
wanted to introduce competition that would fundamentally
alter the relationship between suppliers, transmission
operators, distributors and consumers (Stern 1992,
Austvik 1995).
By that time, it was already
clear that many member states and affected industries
were opposed. For this reason the Commission established
working groups to be part of the Commission's preparatory
work. For each industry there was one committee of
experts and one consisting of member state
representatives. These groups met through out 1990. Based
on their reports the EU-commission prepared directive
proposals during the last half of 1991. The proposals
were presented to the Council of Ministers (Energy) in
January 1992.
The complex proposals basically
required that member states did three things (Lyons
1994:10):
- Abolish exclusive rights
regarding electricity generation and the building
of gas and electricity transmission lines
- Oblige vertically
integrated companies to unbundle their accounting
and management systems
- Introduce third party
access (TPA) rights to a limited number of high
volume gas and electricity consumers so that they
could chose suppliers from throughout the
Community
Despite all the consultations
that had taken place, more than half of the member
countries were against the proposals. On the other hand,
the Commission had strong support from big industrial
customers. During the autumn of 1992 a stalemate
developed between the Commission and its closest ally
Britain, which held the EU-presidency, on the one hand,
and almost all other member countries and their
industries, on the other hand. In an unprecedented move,
the Council of Ministers sent the proposal back to the
Commission without a comprehensive committee discussion,
with detailed political instructions for the future work.
It was a deadlock, and it was clear that an agreement on
the proposals on electricity and gas markets could not be
reached in the short run.
An early success: oil and gas licensing
By early 1992 the Commission was
well aware of the political problems involved in pursuing
an internal market for energy. The second stage faced
serious difficulties. This meant that the third stage was
delayed. However, in relation to up stream oil and gas
the Commission faced fewer adversaries than in the areas
of electricity and gas liberalisation. This opened for a
directive proposal for hydro-carbon licensing. This
directive was to regulate the granting and use of
authorisation for prospecting, exploration and
production.
The proposed directive would
introduce market principles also in up-stream petroleum
activities. It should no longer be possible to grant
special privileges to national or state-owned companies.
This would also fill a gap between the proposed
directives for gas and electricity movement, on the one
hand, and existing public procurement legislation
regulating contracts in the oil, gas (and coal)
exploration and production industries. The procurement
directive from September 1990 opened up for a simplified
procedure in the petroleum sector, if regulation
fulfilled the internal market conditions. The full
procedure could complicate certain contracts. It turned
out, however, that getting exception from it was more
problematic than foreseen (Lyons 1994: 15/16, Andersen
1995: Ch. 4).
For the Commission – and
Britain, which was its close ally in this area – the
license directive was important to keep up the political
momentum in the energy sector. The UK, which held the
EU-presidency during the first half of 1992, made the
completion of the license directive a priority. This
would be consistent with reform already carried out in
Britain during the early 1980s. The EU-parliament was
quick to give its first opinion. For this reason it would
have been possible to reach a common position in the
Council of ministers (Energy) by the end of 1992.
However, at the Council of
Ministers' meeting on November 30 1992 Denmark managed
temporarily to postpone a common position. Eventually,
the special interests of Denmark and Norway, as the two
major oil and gas producer in Western Europe except
Britain, managed to delay and alter the proposal
substantially. A key issue for Denmark was the
preservation of state participation in infrastructure
(gas transportation) and the relationship to historical
obligation entered into during the early 1960s. Norway
was the major petroleum exporter in Western Europe and
represented a strong statist tradition. It was not an
EU-member, but through the European Economic Area
agreement and later membership negotiations it became
directly involved with internal EU deliberations.
The License directive
demonstrated, again, that strongly affected minorities
might create considerable political problems for the
Commission's plans. The fact that a non-member country
could achieve access to the EU internal decision-making
was another confirmation of the political weight that
energy issues were given by member states in the EU,
although one could argue that there were special
interests at stake for Norway. The license directive was
passed in May 1994 and entered into force in mid 1995. It
was the last energy-specific directive-proposal from the
Commission. The `grand plan' from the early 1990s was
abandoned, at least for the time being. This reflected
not only the opposition in the energy sector, but also
more general political problems in the EU.
Counter mobilisation and limited success
The license directive was one of
the few directives influencing the structure of the
industry, which was actually passed during the first half
of the 1990s. The price transparency and transit
directives had limited effects in this respect. There
were, however, other directives that affected the energy
sector. Such directives were mostly related to general
efforts of the internal market. The procurement directive
has already been mentioned. Another was the harmonisation
of (minimum) excise taxes for mineral oils in 1992.
Parallel to the introduction of directives, the energy
sector had been under pressures to change due to the
application of existing competition law. For political
reasons the Commission had to exercise caution, but a
number of cases eliminated deviations from the internal
market.
Competition law was, for
instance, used to push for liberalisation of down-stream
oil markets in Greece, Portugal and Spain. However,
practises in a number of other countries, involving
different sectors were targeted by the Commission.
Sometimes the threat to raise a case was enough to bring
about changes. In other cases changes were enforced
through Court rulings (Lyons 1994: chapter 3). Such
decisions differ from the directive approach in that they
limit themselves to the issues at hand, and do not
attempt to formulate new general regulations. However, in
the long run they create precedence that may open up for
and influence new directives. This interplay between the
directive approach and the use of competition law is
important in the long run (Stern 1992, Noreng 1994).
The focus for efforts to change
EU's energy markets – through political initiatives
or through court decisions – had mainly been
transportation systems and concession regimes. National
consumer prices vary considerably (figure 2.3), and this
is likely to be the case for a long time to come.
The process from radical
Commission proposals to complicated negotiations,
watering down original intents, reflects the duality of
the Commission's role in the EU decision-making process.
On the one hand, it is supposed to be a radical supporter
of the EU's visions. On the other hand, it shall try to
reach complicated political compromises. There were
strong forces at the EU level dissatisfied with national
industries and with national authorities defending
arrangements on a collision course with EU visions. On
the other hand member states and national industries had
strong vested interests. This meant that the Commission's
suggestions often would be changed considerably during
the lengthy process towards a final passing of a
directive.
The formal changes in the EU
institutions and decision-making procedures since the
late 1980s had been limited, but important. Among other
things, the door was opened for majority decisions in the
Council of Ministers. The lobbyists swarmed to Brussels
and laid siege to EU institutions. This indicates that EU
institutions and general EU policy were in the process of
being strengthened compared to national interests. The
Council of Ministers was still important, but energy
policy was no longer the exclusive domain of member
countries and national industry. The Commission was on
the offensive, not only because of DG XVII and its
responsibility for energy matters. DG IV, responsible for
competition policy, was often pushing the Commission.
The failure of common CO2 tax
Another tendency in the
development of EU energy policy started parallel to
ongoing deregulation efforts of the internal market.
Again it was not the traditional, national energy actors
who were on the offensive. Just like in the area of
deregulation the initiatives came from political forces
outside the energy sector also at the EU level. Energy
was increasingly coupled to the environmental protection
and foreign policy. Environmental impact from energy had
top priority with DG XI (Environment) as well as in a
number of member countries (Lyons 1990, Matlary 1991,
Andersen 1995).
Around 1990 environmental policy
was one of the most important forces behind a new energy
policy in the EU (Bergesen 1991, Iversen 1992). The EU
had been occupied with environmental policy since the
early 1970s. The focus of the first environmental
programmes had been special problems of pollution. By
1990 two important changes had taken place. First,
environmental policy, in contrast to energy policy, had
become part of the Treaty of Rome through the Single Act
reform in 1987. Second, environmental protection had been
defined as a horizontal policy area; a general concern to
be taken into account in other policy areas. These
changes gave the environmental policy greater weight.
The Single Act established a
foundation for environmental policy in the EU
constitution, namely articles 130R, 130S and 130T.
The goal of Article 130R is to
preserve, protect and improve the environment, and to
contribute to better health and a rational use of natural
resources.
Article 130S concerns decision
procedures, and states that in the Council of Ministers
motions are to be passed by unanimity. This was changed
to qualified majority after the treaty conference in
Maastricht, effective from January 1, 1993.
Article 130T states that the
introduction of EU regulations in this field shall not
deprive member countries of the right to introduce
stronger measures.
In addition, Article 100A
concerns the creation of uniform and effective
regulations in the EC. It states that regulations shall
be based on a high level of protection of health,
environment and consumer interests. EU environmental
policy comprises air pollution, changes in the climate,
water quality, waste disposal, control of chemicals and
noise. Pollution and the climate are the fields that
until now have had the greatest impact on energy policy.
Demands for reduced pollution
were not solely linked to use of energy, but burning of
fossil fuels was a serious source of pollution. Energy
efficiency and alternative energy had been on the EU
agenda for some time. Some directives have been passed to
reduce emission from cars and industry. However, the
climate policy, which surged to the top of the political
agenda around 1990, created a new context for EU energy
policy (<COM 92 226> 1992, Lyons 1994: 53). This
led to new demands for cleaner energy forms and
regulations. There were strong coalitions outside the
energy sector that drove the process onwards, even though
the atomic industry had nothing against stronger rules
for CO2 emissions.
International research
co-operation led to strong and united report in 1990
where climate change was viewed as a major international
political challenge. Without a rapid stabilisation of
climate gas emissions the results would be serious
negative and irreversible effects. The report gave
momentum to the proponents of environmental policy in the
EU, in the Commission as well as in a majority of member
states. As a result the EU introduced a stabilisation
target in 1990 and a radical proposal for a common EU CO
2 (later CO2 /energy) tax in 1992 (<COM 92 226>
1992). The EU also hoped to win support for such a tax
from all OECD (and other) countries on the Rio Conference
in 1992.
A CO2/energy tax would have
introduced substantial energy price increases and also
two new price formulas for different energy sources.
However, once more the complex decision-making process
surrounding the directive proposal ran into difficulties.
This was partly because international trading partners
were reluctant to support EU's proposal about a tax, but
also due to complex interests within the EU. Political
visions that dominated the first years were eventually
undermined by the opposition representing energy and
general industry interests. In December 1994 it became
clear that a common EU CO2/energy tax could not be
achieved.
The set back for a common
CO2/energy tax does not, however, mean that environmental
policy in EU is dead. A number of less radical measures
have been introduced. In relation to the CO2 issue the
new monitoring mechanism strengthen those who want to
keep up the pressures for action. Also, a number of
member countries are actively supporting new initiatives,
although it seems that fiscal measures will be introduced
on the national level. The new emphasis on unemployment
and other economic problems have, to some extent,
weakened the commitment to environmental policy. The
attempt to link the solution of unemployment and improve
environmental protection though a new tax structure was
not successful in the short run. However, environmental
concern, with strong popular support, may well be an
important challenge to energy policy in the years to
come.
On the other hand, it is
important to keep in mind that taxation of energy is also
linked to fiscal interests of the member states. As
Austvik (1996, 1997) has pointed out since the mid-80's
there has been an increase in consumer taxes on energy,
in particular oil products. This has two important
implications. The first is that it reduces the import
bill, since all member countries, except Britain and
Denmark, are dependent on import. The second is that the
profits are transferred from exporting to consuming
countries. The import of both oil and gas into the EU is
expected to increase significantly over the next 20
years. This means that the CO2-tax initiative is partly
realised through other instruments, although not
consistently in relation to CO2-emissions. In some cases
the worst polluter in this respect, namely coal, is even
subsidised. Tensions of this nature are also reflected in
the proposal for a directive on Restructuring the
Community Framework for the taxation of energy products (Com
97: 30 Final 97/ 0111).
The Energy Charter Treaty
Another consideration that has
increasingly influenced EU energy policy over the last
years was foreign policy. This was a result of the Gulf
War and, especially, the events in the former Soviet and
Eastern Europe after the end of the Cold War. In both
cases the security of supplies was a central concern.
However, the foreign policy concerns also go further than
the energy implication. This was most obvious in the case
of the European Energy Charter and Treaty (Dore and De
Bauw 1995, Andersen 1997).
The Gulf War created an
increased understanding of the fact that war in the
Middle East was not a dramatic one-time event, but a
symptom of underlying problems which may flare up again
any time. In short: the problem is not a lack of
stability in the oil market, but that the Middle East
“does not work”. Such preoccupation
strengthened the view that energy is a strategic
commodity. This perspective has always been central for
the Commission's General Directorate XVII with
responsibility for energy questions.
In the short run, the answer to
the uncertainty in the Middle was to create a crises
depot corresponding to 90 days' consumption, as in the
US. In a further perspective, creating economic ties
between some Arab countries and the EU could have a
stabilising effect. The general idea behind the latter is
that increased interdependency will strengthen a
communality of interests and increase stability. Such
efforts came in addition to the work done on a more
effective use of energy in the member countries.
Earlier, EU's energy risk
related to the Soviet Union's stemmed from dependency on
gas import (Moe 1988). This could, in principle, be used
to exert political pressure. Now the situation was quite
different. The gas industry in Russia had huge
infrastructure problems. There had been several great
leakages in the pipelines to Western Europe. (Some have
argued that as much as 30 per cent was lost before the
gas reached the market). Through the Energy Charter and
the Treaty, the EU wished to strengthen the framework for
market-based solutions and to offer security to foreign
investors. In addition, Russia has large oil resources
that could reduce dependency on the Middle East (Ebel
1994).
The point of departure was a
somewhat unclear political initiative sent to the
European Council, the so-called Lubbers Plan in 1990.
During the Commission's work on this plan, focus was
placed on a mixture of foreign policy, aid programs and
energy policy, which, in the long run, could contribute
to lasting and cheap access to energy for the EU. Energy
was also one of five sector programs aimed at assisting
the changes in Russia. The last program aimed at using
105 million ECU. About 50 percent would be spent on
strengthening security in the atomic industry, 20 percent
would be spent on reducing energy consumption, and the
electricity and gas sectors would each get around 15
percent.
Through these programs, the EU
wished to secure its own future supply. By helping Russia
in the energy sector, an important contribution would
also be made in relation to the dramatic changes taking
place in that country. If the EU program could contribute
to a successful transformation in the oil and gas sector,
it could also function as a model for new institutional
solutions in the rest of the economy. The oil and gas
sector was also one of the few sectors where Russia had
export potential, making it a source of much-needed
foreign currency incomes.
One element of the Energy
Charter was that, to a certain extent, there were
over-lapping interests between national industries and
the EU-commission, in contrast to the adversary
orientation which was evident in other fields of energy
policy. The Charter and Treaty was meant to strengthen
the market framework prevalent in the West, but there was
room for solutions with elements of Western European
traditions, i.e. power concentration around large
companies. Also, it was unrealistic to imagine pure
market solutions in the energy sectors in the former East
Bloc countries. This provided room for a communality of
interests between parties that in other areas are strong
adversaries.
The preparations for the Energy
Charter Conference took about a year. The Charter was
concluded within 6 months after the conference opened and
signed in December 1991. The negotiations over the Treaty
were a time consuming process, and there were major
changes in perspectives and ambitions along the way. The
Treaty was signed in December 1994. Important issues were
too complicated to deal with in the short run, and had to
be taken out of the Treaty to reach an agreement. These
outstanding issues were the subjects for a new round of
negotiations that started immediately after the signing
of the first treaty. The implementation and effects of
the Charter Treaty is still uncertain.
The increased weight of foreign
policy was related to institutional changes in a context
of radical changes. Foreign policy became formally linked
to the wider EU co-operation through the Maastricht
Treaty, but without room for Commission activism or
majority decisions. However, political ambitions about a
more active role for the EU in international politics
played an important role. For this reason the European
Council – the regular meetings by EU's heads of
state – has been active. Such initiatives have
played a major role in connection with Eastern Europe.
The late 1990s: break through for electricity and gas
market liberalisation
The fist round of the
decision-making procedure on the liberalisation of the
European electricity and gas markets had demonstrated
that these were very controversial issues. In May and
November 1993 the Council discussed the proposal which
the Commission has introduced already in 1990. Although
almost all countries were against the present proposal,
the Council stated that electricity and gas markets had
to become more open. However, it was not clear how this
could be achieved. In this situation the European
Parliament – through its energy committee –
took an active role in finding a compromise acceptable to
both the Council and the Commission. This active role of
the Parliament reflected not only that the two major EU
institutions were unable to find a workable compromise.
It was also linked to a more general struggle for
increased influence in the EU. The Parliament's proposal
(CERT 1993) was the basis for a new Commission proposal
presented to the Council of Ministers in December 1993.
The Commission had invested
considerable prestige in the proposal, and went a long
way to find compromises that could solve the political
stalemate. Compared to the first proposal changes were
substantial. Most importantly the idea of public service
obligation was strengthened, and third party access
should be voluntary. The latter meant that the Commission
had to settle for a solution which was not very different
from the existing practice of the industry, although the
burden of proof now shifted to the industry when access
was denied due to lack of `free capacity'. The first
results were, therefore, a long way from the ambitious
objective of common carrier, or free access to the
transport systems for everyone (Austvik 1995).
In early 1994, the Commission
re-sent a revised version of its proposal. It took into
account some of the inputs from by the Council and the
Parliament. The changes are reflected in the final
directive, and they were related to two areas. The first
opened up for gas producers also being able to negotiate
access to transmission lines. The other established a
framework for liberalisation providing the member
countries with various options. In addition, criteria for
third party access to transmission lines were suggested.
The following process was complicated, reflecting that
member countries had quite different interests at stake
reflecting resource base, energy mix, sector arrangements
and attitudes to state roles and regulation (Matlary
1997, Eldevik 1999). The Commission therefore chose to
focus on the electricity first, since this politically
easier.
By the end of 1995 there was a
Commission agreement to include the French proposal for a
so-called single buyer model (where the company
responsible for power procurement and/or transmission
system operation to carry out both tasks). The French
were also instrumental in the introduction of public
service obligation that, in some countries, may be
necessary to ensure security of supplies and consumer and
environmental protection (Hancher 1998:5/7). The Council
and Parliament finally adopted the directive concerning a
single market for electricity in December 1996, entering
into force on February 1, 1997. It implies a deregulation
of both production and transport of electricity. From
February 1999, all countries must open at least 25.3 per
cent of their market to free competition, increasing to
28 per cent in 2000 and 32 per cent 2003, and so on
(Nylander 1998).
The electricity directives paved
the way for key elements in the gas directive. However,
the Council (Energy) had to meet four times before all
countries could agree. In addition the working group for
energy and the COREPER had intense meetings to clarify
issues of a legal and technical character. In the spring
1997 the Dutch presidency discovered that important
political issues still remained where countries were
still far apart. Under the Presidency of Luxembourg the
member council finally managed to agree, in December
1997. The directive came into force on June 22,1998, and
it is to be implemented from 1999. Within two years the
member countries must make the necessary changes in
national law to open for changes. Just as in the
electricity directive the liberalisation is to be
implemented gradually over a number of years. In
addition, even more than in the case of electricity, the
gas directive is really a framework for national
adaptation. To a large extent it is up to the member
countries to decide on how fast and effective reforms are
to be carried out (Stern 1998).
The content of the electricity
and gas market directives in some ways differ
dramatically from the Commission proposals introduced in
1992. It has been a long and torturous process, but it
has lead to a transformation of the European electricity
and gas markets. The changes in member state and industry
perspectives are in some ways dramatic, and may have
radical consequences in the long term. An important
precondition for the continued efforts towards
liberalisation, despite frustrations and conflicts, has
been the renewed dynamics of the EU in the late 1990s.
Energy and European integration
This chapter has described the
development of a common EU energy policy. When common
energy policy finally emerged, it was partly because the
traditional energy actors were loosing their exclusive
control over the energy arena. In this sense the
emergence of a common energy policy has demonstrated the
momentum of European integration. Initiatives relating to
the internal market and environmental protection have
been based on supranational authority, which the
Commission and its allies have tried to extend into the
energy sector. The premises for the energy policy were
also introduced in two new ways. Firstly, `in from the
side' stated by other parts of the Commission than DG
XVII, the DG XI (Environment). Secondly, `from above'
through general political summit meeting decisions in the
case of CO2-tax and the Energy Charter initiative.
One may characterise the
development in the energy sector as political spill-over,
but not in the neo-functional sense. In the latter theory
spill-over is based on a concept of interest group
politics, where rational actors pursue their interests
and there is little concern with contextual factors. The
recent development of EU energy policy, on the other
hand, demonstrates how interests in a sector have been
overwhelmed by actors invoking different policy context
within a general framework of EU development, based on
broader and more robust supranational authority. It is
the dynamic interaction between several policy contexts
and the impetus of the more general development that
explains the direction of EU energy policy.
Energy is not covered by the
Treaty of Rome. The tension between national interests
and the EU is the main reasons why energy did not
formally become a field of common policy during the
treaty revisions in Maastricht and Amsterdam. When it was
proposed during the negotiations over the Maastricht
treaty, Britain was against it as part of strategy to
limit the scope of supranational authority. This happened
despite the fact that Britain had already gone further in
the direction of liberalisation than the Commission has
proposed. This also illustrates the lack of a common
vision for a positive energy policy at the EU level.
In this situation the Commission
has a certain freedom as to how directives affecting
energy should be defined. As `energy' directives may be
handled though the decision-making procedure laid down in
the Treaty, which requires unanimity. However, it may
also be defined in relation to the internal market and
the majority rule of decision-making (article 100a)
introduced with the Single Act reform, and further
developed in the Maastricht and Amsterdam treaties. Given
the high degree of monopolistic tendencies in the energy
sector and the barriers to trade between countries, the
Commission here has a strong case for the internal
market.
It has been argued that the
completion of the internal market seriously undermine the
role of the DG XVII (Energy), and that energy policy in
the future will be dominated by environmental interests
(Evans 1998). The position of environmental policy has
been strengthened in the Maastricht and Amsterdam
treaties. These treaties also strengthened the basis for
joint EU foreign policy. Indirectly this may increased
the capacity of the Community to deal with supply issues.
The EU is highly dependent upon import of oil and gas,
and that this is likely to increase even more in the next
decade (Lord 1997).
It is, however, important to
keep in mind that EU policy is not the only source
of change. Policy initiatives will interact with other
factors which have more piecemeal effects, but which may
be less vulnerable to the political cycles in the EU. The
first stems from the interaction between policy-making,
the role of the EU court and market strategies. Such
interaction is most likely to have an effect on
deregulation efforts. However, the Court can also play a
role in environmental matters. The other reason is the
increased emphasis on subsidiarity, which opens up for
more active national strategies within the framework of
general EU principles. The other source of change is that
some private companies may pursue strategies that can
alter existing market structures. Together such forces of
change can open up for and support new policy
initiatives, as has already happened in relation to the
electricity and gas market directives. This also means
that issues will not necessarily come back on the
political agenda in the same way.
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Footnotes
[*]
To be published in: Making Pokicy in Europe,
Andersen, S. S. & Eliassen, K. A. (eds.) Sage London
2000
[**] Professor, ARENA
[Date of publication in the ARENA
Working Paper series: 15.02.2000]
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