The Security of Europe’s Energy Supply, June 2002

The issue of Europe's energy security is heating up with several decisions by the Council of the European Union on the issue as well as a European Commission report on the subject, which is to be presented to the Seville European Council on 21-22 June 2002.

The security of Europe's energy supply has been near the forefront of the European Commission's energy agenda over the last two years but the terrorist attacks of September 11 and the ensuing geopolitical uncertainties have heightened the need for the European Union to develop a policy in this area. As Loyola de Palacio commented in a speech to the World Economic Forum on Energy in New York on 1 February 2002:

"Dependence on external oil supplies is an Achilles' heel for our economies and it is more important than ever than oil consuming countries are ready to face threats to their external oil supplies".

According to De Palacio, Europe needs to improve its energy security stocks and develop an emergency preparedness system.

Background

The security of Europe's energy supply came into the spotlight towards the end of the 1990s when the price of oil rose steadily. By September 2000, fuel protests were taking place across Europe from Scandinavia to Spain, Poland to Ireland as European citizens complained about the high cost of fuel.

Currently the European Union relies heavily on third countries for its energy supply. It is a net importer of oil, which accounts for 40% of the EU's energy consumption and is the only source for several types of transport. Estimates in 2000 suggested that the EU would be importing 90% of its oil by 2020 and most of this would come from the politically volatile Middle East region unless the European Union took action.

Green Paper: Towards a European strategy for the security of energy supply

It was in this context that the European Commission published a Green Paper [COM(2000)769 final] on the 29 November 2000 on the security of Europe's energy supply aimed at counteracting such dependence by developing alternative sources of energy in Europe. The Green Paper also sought to tackle the challenges posed by climate change and the liberalisation of Europe's energy markets.

The DG Energy website provides a useful background to the Green Paper which highlights Europe's dependency on third countries and the consequent effects such as high prices. Despite the fact that Europe is responsible for nearly 15% of the world's energy consumption it has little political clout when it comes to world energy pricing.

The Green Paper outlines the key threats to the security of supply, namely:

• Permanent/temporary physical cut-off: depletion, abandonment of an energy source/strike, geopolitical crisis, natural disaster
• Economic disruption: volatility of market exchange rates
• Social disruption: all forms of disruption can give rise to social claims and conflicts
• Ecological disruption: accidental damage (oil spills)/pollutant emissions

It proposes an overall strategic approach to securing Europe's energy supply by, on the one hand reducing Europe's overall energy consumption and, on the other hand, developing alternative sources of energy. Both strategies will contribute to tackling the problem of climate change.

In order to curb the demand, the Green Paper proposes:

• Restoring the balance between transport modes: maintaining the modal proportions at their 1998 level in 2010, by:
  • revitalising rail transport
  • improving road transport
  • investing in infrastructures
  • rationalising the use of conventional private cars in town and city centres
  • promoting clean urban transport
  • applying the polluter pays principle
• Major energy savings in buildings, by:
  • Mandatory introduction of energy saving thresholds in buildings
  • Incorporating the renewable energy sources in new buildings

To reduce Europe's dependency on third countries, the Green Paper suggests:

• Development of less polluting energy sources, by:
• Mobilising support for renewable forms of energy
  • Developing nuclear energy through:
    • Research into future types of reactor, management of irradiated fuels and waste.
    • Safety standards for the applicant countries that are comparable with those of the Member States.
    • Strict adherence to the applicant States' closure commitments.

The Green Paper also outlines a strategy for maintaining access to resources, by expanding and updating the EU stocks policy, and ensuring external supplies by:

• Making our voice heard in negotiations with producer countries, by:
  • On-going dialogue, strategic partnership with Russia
  • Development of oil and gas resources
  • Strengthening the supply networks: INOGATE for example

Following the publication of the Green Paper the European Commission launched a consultation phase which lasted until 31 November 2001. The European Commission organised a number of events during this phase and provided some 14 questions concerning the Green Paper, which it called on civil society organisations to examine. Over 120 responses were received by the European Commission and these are available on a special website.

In October 2001 the European Commission produced a progress report on issues relating to the Green Paper from December 2000 up to then. The report analyses the response to the Green Paper and describes the arguments which have been put forward by contributors to the debate - both those who have submitted written responses and those who have participated in discussions with the European Commission. It also summarises discussions in the other European institutions up to that point.

Green Paper: Follow up Action By End of 2001

The report also highlights how several strategies suggested in relation to securing Europe's energy supply moved forward by the end of 2001. For example:

• The new Renewables Directive has been agreed, which, among other things, sets national targets for the share of renewables in electricity production.
• The European Commission's White Paper on transport has been adopted.
• The European Commission adopted the biofuels package on 7 November 2001 which includes a communication on alternative fuels for transport and forecasts scenarios by 2020, a proposal for a Directive imposing a minimum share of biofuels in the overall volume of fuel for transport (diesel and gasolines) of 2% by 2005 and 5.75% by 2010 and a proposal for amending the Directive 92/81 concerning the hydrocarbon taxes allowing Member States to apply tax reduction to biofuels.
• The Commission approved on the 25 July 2001 a proposal for "Council Regulation on state aids to the coal industry with the aim of contributing to the creation by the Member States of a base of indigenous primary energy sources to strengthen the security of energy supply.
• The Commission has proposed a directive on the energy performance of buildings, aiming for a common and integrated methodology for energy performance of new and existing buildings as well as for certification of buildings and regular inspection of heating and cooling equipment.
• The draft proposal for a 6th RTD Framework Programme highlights sustainable development and energy supply.

Council agrees to key European Commission proposals on energy security

Since the progress report was published at the end of 2001 there have been more developments concerning the security of Europe's energy supply. Most notably ministers, meeting at the Energy Council on 7 June 2002, supported a number of key European Commission proposals directly related to the security of Europe's energy supply [MEMO/02/132].

Firstly, the Council agreed on a general approach to the promotion of the use of biofuels in transport. In November 2001, the European Commission proposed that the use of biofuels in transport should be promoted in order to reduce Europe's dependency on oil exporting countries and contribute to the EU's strategy on sustainable development.

The European Commission proposal foresees that by the end of 2005, biofuels should account for at least 2% of the market for petrol and diesel sold as transport fuel and this figure should increase in stages to a minimum of 5.75% by 2010. The question of compulsory objectives had provoked some controversy in the Council but ministers agreed to a compromise put forward by the Spanish Presidency which sets out indicative objectives with a review clause allowing for the European Commission to propose compulsory objectives in the future. Although the European Commission is prepared to accept this idea, it is waiting for the opinion of the European Parliament in its first reading of the proposal before outlining its official position.

In order to encourage the promotion of biofuels the European Commission has also proposed that the excise duty on them should be reduced but this is being discussed separately by the ECOFIN council.

Another agreement to be reached by the energy council concerned the multiannual programme for community action in the field of energy for 2003-2006. The Council supported the European Commission's proposal on this programme which focuses on improving the security of energy supplies as well as combating climate change and increasing competitiveness in Europe's energy sector.

The Council also adopted the Regulation on state aid to the coal industry, thereby ensuring that some coal production capacity can be maintained following the expiry of the ECSC Treaty on 23 July 2002.

With the aim of reducing Europe's energy consumption the ministers also confirmed its common position on the draft Directive on the energy performance of buildings which is set to save some 22% of the energy consumed in buildings for heating, water, cooling and lighting.

The Council must now consult their text with that of the European Parliament so that the second reading can get underway.

The Council also reached agreement on a European Commission proposal on trans-European networks which foresees 12 new projects - 7 for electricity and 5 for gas. These projects, if agreed to by the European Parliament, should achieve the objective of 10% of cross-border electricity interconnection capacity and ensure the security of gas supplies.

Results of debate on Green Paper on energy security to be presented at Seville

These Council agreements will all contribute to the security of Europe's energy supply but the overall direction of EU energy policy following the Green Paper debate will not be known until the Seville European Council when Loyola de Palacio presents a report to the summit meeting on 21-22 June 2002.

Issues relating to energy have been a highlight of the Spanish Presidency with the deal on the liberalisation of electricity and gas markets secured at the Barcelona European Council in March 2002. Before Spain prepares to hand the presidency over to Denmark, the Seville European Council will provide an opportunity for leaders to consider the political orientations for a future European energy strategy

Further information within European Sources Online:

European Sources Online: Topic Guides
	Energy Policy

European Sources Online: In Focus
	OPEC decision on oil production highlights EU concerns over energy security, June 2002
	Barcelona European Council agrees compromise deal on the liberalisation of electricity and gas markets, March 2002
European Sources Online: European Voice
	26.10.00:	Commission bids to reduce the risk of future energy crises
	20.09.01:	Special energy report
	14.02.02:	EU risks getting caught over a barrel
	28.02.02:	Energy agency poised for price talks with EU

Further information can be seen in these external links:
(long-term access cannot be guaranteed)

European Commission
EU Institutions
DG Press and Communication
	Press Releases
	29.11.00:	Commission launches an overall debate on a future European energy strategy with a Green Paper on the energy security supply [IP/00/1368]
	04.02.02:	Loyola de Palacio favours European security energy stocks [IP/02/186]
	09.04.02:	Intelligent Energy for Europe: European Commission proposes a new energy action programme [IP/02/524]
	03.05.02:	Energy G-8 in Detroit: Vice-President de Palacio stresses the role of demand-side policies and energy emergency preparedness[IP/02/653]
	06.05.02:	Loyola de Palacio stresses the importance of Euro-Mediterranean energy and transport networks at the Tunis Conference on security of energy supply in the Mediterranean region [IP/02/660]
	11.06.02:	Security of gas supplies: Loyola de Palacio stresses the importance of the Putin/Kuchma declaration [IP/02/843]
	Memos
	20.08.01:	Odessa Brody Oil Pipeline, supported by the European Union's INOGATE Programme, constitutes a major progress in the Ukraine's and EU's security of energy supplies [MEMO/01/285]
	07.06.02:	Towards greater energy security: the Council reaches agreement on several crucial Commission proposals [MEMO/02/132]
	Speeches
	23.10.00:	Future European energy and security of supply issues (Loyola de Palacio) [SPEECH/00/398]
	23.11.00:	Security of energy supply in a liberalised and global energy market (Loyola de Palacio) [SPEECH/00/469]
	04.02.02:	Energy Market Liberalisation: Pitfalls and benefits (Loyola de Palacio) [SPEECH/02/39]
	08.02.02:	Opening up the energy market and securing energy supply in Europe [SPEECH/02/53]

DG Energy and Transport
	Homepage
		Green Paper: Towards a European strategy for the security of energy supply
		Commentary and Contributions to Green Paper 'Towards a European strategy for the security of energy supply'
		Intelligent Energy for Europe
Committee of the Regions
	Homepage
		Opinion of the Committee of the Regions on the Commission's Green Paper 'Towards a European strategy for the security of energy supply' [May 2002]
Economic and Social Committee
	Homepage
		Opinion of the Economic and Social Committee on the 'Green Paper - Towards a European strategy for the security of energy supply' [August 2001]

Environmental Organisations
Climate Network Europe
	Homepage
		Security of Energy Supply in Europe
			Security of supply green paper - CNE response [May 2001]
Energy Organisations
International Atomic Energy Agency
	Homepage
		The security of energy supply: The European Commission's Green Paper stimulates debate
European Wind Energy Association
	Homepage
	Press Releases
	10.12.01: Brussels is transported to a sustainable energy future
	EWEA Response to the European Commission Green Paper on the security of energy supply [November 2001]
International Network for Sustainable Energy
	Homepage
		EU Energy Policy
COGEN Europe (The European Association for the promotion of Cogeneration)
	Homepage
		Common Position Paper of Erec, Eufores, Fedarene and COGEN Europe on the Green Paper of the European Commission "Towards a European Strategy for the Security of Energy Supply" (November 2001)
Eurogas (The European Union of the Natural Gas Industry)
	Homepage
		Eurogas comments on the Green Paper on Security of Energy Supply
Euroheat & Power
	Homepage
		Statement on the Commission's Green Paper on security of energy supply (November 2000)
Think Tanks
The Centre for European Policy Studies
	Homepage
		Working party on EU policy options to improve the security of energy supply in Europe
			EU policy options to improve the security of energy supply - Prospectus for a CEPS working party [June 2001]
			Europe needs a new approach to securing its energy supply [March 2002]

Further and subsequent information on the subject of this In Focus can be found by an 'Advanced Search' in European Sources Online by inserting 'security of energy supply' in the keyword field.

Helen Bower
Compiled: 15 June 2002

A European Commission report on the security of Europe's energy supply was presented to the Seville European Council on 21-22 June 2002.