Power firms offer ‘green’ pact to head off energy tax

Date: 26/03/1998

By Chris Johnstone

THE EU's electricity industry is working on a pact with the European Commission to improve its environmental performance in return for a Commission promise to drop all plans for new energy taxes.

Electricity lobbies Eurelectric and Unipede have already sketched the outlines of a possible deal with the Commission's Directorates-General for environment and energy.

But details of the precise commitments industry would have to make in return for a cast-iron guarantee that no energy taxes will be imposed have still to be finalised. Officials say it is far from certain whether the Commission will agree to such a "blunt quid pro quo".

The industry believes that proposals drawn up by Single Market Commissioner Mario Monti to harmonise excise duties on energy and electricity - which it describes as a disguised energy tax - are doomed because of hostility from national governments led by France. Progress on the plan has been stalled for more than a year.

But while industry representatives are convinced that Monti's ideas are dead, they are still waiting for them to be formally buried. The Commissioner has so far steadfastly refused to give up on what he regards as an essential single market measure.

The electricity industry's offer of a voluntary agreement to improve its environmental performance is a pre-emptive strike designed to avoid fresh Commission proposals for energy taxes once the institution concludes that Monti's current plans are going nowhere.

Although the industry's suggestions have until now only been discussed with energy and environment officials, the electricity producers want to be sure that a final agreement would tie Monti's hands as well.

As a first step, the power companies have set aside 400,000 ecu to identify what energy efficiency measures they could undertake to deliver substantial cuts in the amount of carbon dioxide being pumped into the atmosphere. That initial research should be completed within a few weeks.

"We must prove to the energy and environment directorates that what we can come up with as an industry is more effective than other ways and means; that the environment will benefit from the measures we propose," said Eurelectric President Niek Ketting.

Preliminary studies by the industry suggest that a package of measures could help to reduce carbon dioxide emissions by an additional 5% by 2020. "We are aiming at a thrifty energy society," added Ketting.

Many believe that swift agreement on a voluntary pact would be in the interests of both the electricity sector and the Commission.

Energy and environment officials would like to include the industry's offer to cut emissions in the EU's strategy to reduce greenhouse gases in line with the commitments it made at the climate change conference in Kyoto last December.

The Commission wants to have a clear idea by June of the mixture of measures needed to meet its pledge to bring down greenhouse gas emissions by 8%.

Electricity companies also warned this week that Europe's energy infrastructure was not being developed quickly enough to create a market in which power could be traded between EU countries, as envisaged by liberalisation measures.

Permits to build high-voltage networks are not being given by governments. The billions of ecu needed for their construction have also not been forthcoming because question marks remain over how much companies will be able to charge for power transmission. "The regulatory situation is still unclear," said Ketting, who pointed out that one kilometre of overhead cable costs just under 1 million ecu, and added: "If you have to pay back a cable or high-level line over 20, 30 or 40 years, that appears to be a very risky venture."