IEA urges EU to fully liberalise energy markets

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The Paris-based International Energy Agency (IEA) has published its first review of EU energy policy, endorsing controversial Commission plans to break up European energy giants and calling for greater cross-border trade in renewable energy among other recommendations.

In a visit to Brussels yesterday (4 September), IEA Executive Director Nobuo Tanaka praised the EU’s climate and energy package, proposed by the Commission on 23 January, but warned that “EU policy is less consistent” in the field of energy market liberalisation.

The comments were part of Tanaka’s presentation of the IEA’s first review of EU energy policy.

Tanaka expressed concern about some EU member states’ “resistance” to full ownership unbundling, meaning the separation of large energy firms’ production and supply infrastructures. Brussels initially proposed far-reaching plans on electricity and gas market liberalisation in September 2007, but watered down the proposal under pressure from a group of member states led by France and Germany. 

Any alternative to full unbundling is a “second-best solution”, Tanaka said in a thinly veiled reference to the compromise deal brokered by energy ministers in June (EURACTIV 09/06/08).

The IEA representative also criticised restrictions on trade in renewable energy certificates between EU member states, as this “will unnecessarily increase the cost of achieving the target for renewable energy,” he said.

Proposals designed to achieve a 20% share of renewable energy are currently being debated between Council and Parliament (see EURACTIV LinksDossier on renewable energy). The Commission sought to use cross-border trading in renewable energy certificates to stimulate an EU-wide renewables market. But the plans were poorly received by several EU countries and key members of Parliament. 

The trading push is likely to be abandoned in favour of ‘flexible’ mechanisms, such as joint renewable energy projects between member states. 

On the issue of energy security, Tanaka called for greater “dialogue” with supplier countries and urged the EU to “provide attractive conditions for internal investment in energy infrastructure”. External energy relations are “perhaps the weakest” aspect of the EU’s energy policy, he said, reflecting a long-standing criticism that EU member states pursue their own national interests with respect to supplier countries rather than speaking with ‘one voice’ on behalf of Europe.  

While Tanaka did not specifically mention Russia, Europe’s relations with its most important oil and gas supplier have been strained recently following the ‘August war’ in Georgia. There are concerns that the Georgia crisis, as well as proposals to insert a ‘Gazprom clause’ for reciprocal rules in energy market investments between the EU and Russia, will impact negatively on the bloc’s energy security.

The need for more investment in ‘clean’ technologies such as carbon capture and storage (CCS) was also highlighted by Tanaka, who called on EU member states and the private sector to cough up the necessary funds. 

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