What energy policy for the European Union? What energy ... · holders of production capacity, as well as mechanisms for remunerated peak capacity) • Verifying that the modalities

R E P O R T M A R C H 2 0 0 7

T H E R E I S N O D E S I R E M O R E N AT U R A L T H A N T H E D E S I R E F O R K N O W L E D G E

Institut Montaigne 38, rue Jean Mermoz - 75008 ParisPhone: +33 (0)1 58 18 39 29 - Fax: +33 (0)1 58 18 39 28www.institutmontaigne.org - www.desideespourdemain.fr

10 €

ISSN 1771-6764March 2007

inst

itu

t m

on

ta

ign

eW

hat

en

ergy

pol

icy

for

the

Eu

rop

ean

Un

ion

?

What energy policy for the EuropeanUnion?

What energy policy for the European Union?“Habit is a second nature, and no less powerful.”This saying of Montaigne’s applies perfectly to Europe’s growingenergy dependency, to which we all seem to be resigned. Everyone agrees that energy is crucial – to our competitiveness, but also to our survival. And yet each Member State wants to preserve autonomous decision-making power in this field, even at the expense of weakening its own capacity for action.

This report, the product of a year’s reflection in our “European Affairs” Working Group, spells out why and how Europe must without delay give itself a common energy policy.Seven priorities for action are identified, accompanied by concrete proposals.

The Institut Montaigne is an independent, non-partisan think tank founded by Claude Bébéar at the end of 2000.Funding is entirely private and highly diversified, with no singlecontributor accounting for more than 2.5% of the total budget.It brings together business leaders, senior civil servants, academics and representatives of civil society from diversebackgrounds and with a wide range of experience. Its work focuses on three areas of research.

Social cohesion: social mobility, integration of minorities, the legitimacy of elites…

Modernisation of the public sector: State reform, education, the healthcare system…

Economic and European strategy: intellectual property, competitiveness, regulation…

The Institut Montaigne operates with associate researchers and working groups, developing and circulating concrete long-term proposals to address major issues facing society today. Using rigorous and critical research and analytical methods, recommendations are drawn up and then used to lobby policy-makers.

The Institut Montaigne, pioneering think tank in France, produces publications and organises conferences, playing an active role as a stakeholder in democratic debate.

Claude Bébéar PresidentHenri Lachmann Vice-President and Treasurer Philippe Manière Director

Nicolas Baverez Economist and lawyerJacques Bentz Chairman and CEO, Tecnet ParticipationsGuy Carcassonne Professor of Public Law, University of Paris X-NanterreChristian Forestier President, Haut Conseil d’Evaluation de l’EcoleMarie-Anne Frison-Roche Professor of Law, Institut d’Etudes Politiques, ParisAna Palacio Senior Vice-President and World Bank Group General CounselEzra Suleiman Professor of Politics, Princeton UniversityJean-Paul Tran Thiet Lawyer, partner in law firm CMS Bureau Francis LefebvrePhilippe Wahl Country Head for France, The Royal Bank of Scotland

HONORARY PRESIDENT

Bernard de La Rochefoucauld Founder of Institut La Boétie

Olivier Blanchard Professor of Economics, MITJean-Pierre Boisivon Managing Director, Institut de l’EntrepriseLaurent Cohen-Tanugi International lawyerFrançois Ewald Professor and Researcher, ParisMichel Godet Professor, CNAM, ParisHenri Hude Philosopher and Professor, ParisErik Izraelewicz Deputy Managing Editor, Les EchosJean-Hervé Lorenzi Economist and Professor, ParisElisabeth Lulin Founder and Managing Director, Paradigmes et caeteraYves Mény Political scientist; President, European University Institute, FlorenceSophie Pedder Paris Bureau Chief, The EconomistAlain-Gérard Slama Journalist and lecturer, Institut d’Etudes Politiques, Paris

ADVISORY BOARD

EXECUTIVE COMMITTEE

Institut Montaigne assures the scientific validity and the quality of the research it publishes, but the opinions and judgments expressed are the sole responsibility of the authors. They should in no case be attributed to the Institute or its governing bodies.

There is no desire more natural than the desire for knowledge

17688 Rapport energie UK 2/03/07 12:34 Page 1


What energy policy forthe European Union?Between national competences and the functioning of the markets, what place is there for a European energy policy?

M A R C H 2 0 0 7



5

SUMMARY OF PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

I - ENERGY, A CRUCIAL ISSUE AND A GROWING CONCERN FOR THE EUROPEAN UNION .....................................................................17

1.1. A crucial issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

1.2. The expectations of public opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

1.3. Growing preoccupation within the European institutions . . . . . .19

1.4. The emergence of the objective of sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

II - THE FOUNDATIONS OF A EUROPEAN ENERGY POLICY . . . . . . . . . . . . . . .27

2.1. Europe’s absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

2.2. The foundations of a European energy policy . . . . . . . . . . . . . . . . . . . . . .33

III - SEVEN PRIORITIES FOR ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

3.1. The creation of an independent Authority for the joint definition of the major European energy options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

3.2. Rethinking the decision-making process in favour of “energyconvergence pacts” limited to certain EU Member States . . . . . . . . .50

3.3. Requiring of each EU Member State that by 2050 at least half the energy sources it uses should be non-CO2-emitting which implies that by 2030, 50% of the electricity it producesshould be from non-carbon sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

3.4. Launching a very ambitious programmefor the control of energy consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

3.5. Putting competition and regulation policy effectively at the service of the three objectives of energy policy. . . . . . . . . . . . . . .65

3.6. Preparing for the future: research, development and industrial strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

SUMMARY


W H AT E N E R GY P O L I C Y F O R T H E E U R O P E A N U N I O N ?

3.7. Conducting a more determined and better co-ordinated foreign policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

3.8. In conclusion, draw up a roadmap for Europe and for France in the field of energy policy . . . . . . . . . . . . . . . . . . . . . . . . .97

ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99


7

1. Creation of an independent High Authority as a forum fordialogue and joint definition of Europe’s major energyoptions. Its purpose will be both reflection and action andit will have the task of:

• Drawing up scenarios and proposing options• Listing, on the basis of the best international practice, energy-

saving measures that might be promoted at European level• Identifying the EU’s needs in terms of storage, both for

short-term purposes and for security, of petroleum pro-ducts, gas and electricity (“storage” in the electricity casedepending on the technical reserve obligations imposed onholders of production capacity, as well as mechanisms forremunerated peak capacity)

• Verifying that the modalities for the granting of Europeanfunds – subsidies or loans – respect European priorities inthe field of energy.

2. Introducing, on the basis of clearly defined objectives,“energy convergence pacts” between Member Stateswishing to participate in them

These pacts should include measures introduced by certaincountries and capable of being progressively extended to all27 Member States:

SUMMARY OF PROPOSALS



8

• Action in the field of research and industrial developmentconcerning CO2 capture, renewable forms of energy andnuclear energy

• Integrated management of the equilibrium of the electricitytransport networks, through a common “dispatcher”

• Common guidelines for investment in production• Common measures for crisis management, specifying how

resources will be allocated in the event of shortages, inorder to maintain the vital functions of the various MemberStates

• A common position in bilateral negotiations (for examplevis-à-vis Russia) or in multilateral fora.

3. Requiring of each EU Member State that by 2050 at least halfthe energy sources it uses should be non-CO2-emitting whichimplies that by 2030 50 % of the electricity it producesshould be from non-carbon sources

4. Creation of a “citizens’ programme” for the encouragementof energy saving

• Launch a coordinated awareness-arousal programme, inclu-ding an annual “energy-saving week” to be held at the samedate throughout the European Union

• Make compulsory, notably for landlords, the installation orreplacement of doors and windows and other openings, inboth residential property and professional premises, usingproducts having a certain minimal insulation performance

• Eliminate from the existing financial incentives or taxexemptions all provisions excluding certain types of buil-ding, professional or residential


S U M M A R Y O F P R O P O S A L S

9

• Improve the exploitation of the possibilities of “induceddemand reduction” (in other words, abstention fromconsumption during a given period of high overalldemand), including for private customers

• Concerning CO2 emission quotas: – Approve each national allocation plan, economic sector

by economic sector, in order to ensure a minimum of harmonisation

– Allocate emission permits through an auction system, oncondition that there is competitive equality with otherindustrialised countries

– Include all means of transport, professional or personal,in the quota mechanism.

5. Putting European competition policy effectively at the service of the three priorities of the European energypolicy

• Encourage EU-wide trans-national mergers• Adopt a more positive attitude towards long-term contracts

or grouped purchasing• Allocate the same level of priority to combating government

practices resulting in compartmentalisation of markets as tocombating firms’ practices

• Improve the co-ordination of national regulators throughthe creation of a specific organisation bringing togetherEuropean regulators and having real powers

• Draw up a multi-year programme at European level for priority investment in infrastructure (methane tanker terminals, gas pipelines, high-voltage transmission lines,interconnections, etc.)



1 0

• Create a specific procedure for taking European interests intoaccount in examining the public utility of infrastructure invest-ments

• Improve the independence of management of operators oftransport and distribution networks, wherever this remainsinsufficient, without imposing separation of asset ownership

• Create a European dispatching centre to ensure the co-ordi-nation of exchanges between network operators

• Co-ordinate at European level national mechanisms forenergy crisis management.

6. Defining the priorities of a technological and industrialstrategy

• Develop European poles of excellence and technological mas-tery in two sectors in which the European Union has techno-logical and mineral resources: nuclear energy (safety and 4th-generation prototype) and “clean coal” (carbon sequestration)

• Revive the promotion of the development of peaceful usesof the atom, along the lines that Loyola de Palacio hadbegun to trace out.

7. Implementing a common foreign policy in the energy field

• Exert pressure on the large energy-consuming countries(United States, China, India, etc.) in the framework of directnegotiations in order to bring them to take their full res-ponsibilities in the fight against global warming

• Failing success in this respect, introduce a “compensatorytax” on products from countries that do not apply the Kyotoundertakings


S U M M A R Y O F P R O P O S A L S

1 1

• Establish partnership relations between the authorities andEuropean private operators in order to ensure proper dis-semination of the information available from all players andto prepare joint strategies for action vis-à-vis the producingcountries

• Make available European-level dissuasion measures (legis-lation of the “Scott-Rodino” type) in order to restrictinvestments by producer countries that maintain theirexploitation and/or export monopolies and refuse toopen up their deposits or their networks

• Prohibit all bilateral negotiations between EU MemberStates and third countries on energy questions, in theabsence of prior consultation with other EU Members. Thismeasure should be applied especially in the case of Russia

• Strengthen Europe’s presence, in the political, economicand even military fields, in other countries or regions suchas Turkey and the Caucasus

• In the event of failure of the co-operative approach withRussia, not to rule out the adoption of regulatory or finan-cial measures aimed at defending European interests

• Ask the WTO to include energy in its policies and use its instruments and procedures not only to promote the protection of investment but also the liberalisation of publicprocurement and the application of the principle of non-discrimination in trade matters.



1 2


1 3

To paraphrase the titles of two symposia organised recentlyby RTE (manager of the French high-voltage electricity grid),one can say simultaneously that “Europe lacks energy” and“energy lacks Europe”.

Europe lacks energy, because of the size of the doubts instil-led in its citizens’ minds regarding the reasons for which theUnion was founded, the ambitions driving it on and the objec-tives that it should be assigned.

Energy lacks Europe, because of the difficulty of giving sub-stance to a European energy policy, which for the time beingis limited to the completion of a liberalised market for gas andelectricity.

These twin shortfalls, symptomatic of Europe's current failingsand of its remoteness from the concerns of its citizens, areparticularly worrying at a time of important changes in theenergy field. Rising consumption, especially on the part ofthe emerging countries, renationalisation of sources of fossilfuels, threats to nuclear non-proliferation and increaseddependence of economic growth on energy consumption –not forgetting the challenges of sustainable development –are all evidencing that the response to these threats cannotcome from the action of a single European country.

INTRODUCTION



1 4

And yet, despite these constraints and these dangers,European Union Member States are still refusing to recognisetheir common interest and joint destiny as regards energy.The bulk of their action in the field so far has involved libera-lisation of the gas and electricity markets, the promotion ofrenewable forms of energy and the creation of a system ofquotas for CO2 emissions. Apart from this, and especiallyconcerning their choice of energy mix, each country wants toretain total independence in decision-making, even if thisweakens its own capacity for action, let alone that of Europe.

It was in order not to leave Europe stranded between thepower of the markets, on the one hand, and the responsibili-ties claimed by Member States, on the other, that the InstitutMontaigne’s European Affairs working group decided toexplore the conditions for the possible emergence of aEuropean energy policy, to identify the priorities for actionthat Europe might set itself and the constraints that have to berespected.

Given that Europe is in crisis, our proposals are based on theexisting legal framework as we do not expect a revision of thetreaties in the near future.

However, because in the minds of its founding fathers, JeanMonnet and Robert Schuman, Europe will continue to be crea-ted on the basis of pragmatic solidarity, we believe that aEuropean energy policy can be one of the catalysts for its revi-val, providing a particularly promising field for action inCommon foreign and security policy that would be based ongreater awareness of its ultimate objectives and would permit


I N T R O D U C T I O N

1 5

the emergence of common interests between our nations, ona continental scale.

Such a policy could make EU action more visible to its citizensand show them, by its concrete nature, how Europe is able toact in their direct interest.

Jean-Paul Tran ThietChairman of the Working Group



1 6


1 7

I

ENERGY, A CRUCIAL ISSUE AND A GROWING CONCERN FOR

THE EUROPEAN UNION

1.1. A CRUCIAL ISSUE

In today’s world, energy is an indispensable condition for thecreation of wealth:• it was thanks to its mastery of energy, based on coal, that

Europe succeeded in dominating the world, starting inthe 18th century,

• it was thanks to its direct or indirect control over the sourcesof oil that the Western world has intensified this domina-tion, despite two World Wars that could have been expectedto lead to its decline,

• several events are now signalling the ending – or at least thesharing – of this hegemony:– the oil-price shocks of the 1970s and the present shock, – the revival of nationalism in the countries producing

fossil fuels,– the buildup of demand for energy from China and India.

As a large consumer, but a small and declining producer, offossil fuels, Europe is increasingly dependent on imports forits supplies. Its reserves amount to less than 1% of the world



1 8

total in the case of oil, 1.5% in the case of natural gas and 4%in the case of coal. North Sea production of hydrocarbonshas begun to decline. The global energy dependency of theEuropean Union is today of the order of 50%. By way ofcomparison, the corresponding figure for North America isonly 17%.

Our competitiveness and our standard of living are thereforedirectly vulnerable to price rises and to any local or geopoliti-cal crises liable to affect our supplies.

Energy is of crucial importance for Europe’s survival, compe-titiveness and, in a word, the continuation of its way of life.

1.2. THE EXPECTATIONS OF PUBLICOPINION

Public opinion is very volatile concerning what is expectedof Europe and of its Member States in terms of energypolicy.

In a survey carried out by Eurobarometer between Octoberand November 20051, a majority of European citizens (47%)thought that the most appropriate level to take decisions “inorder to respond to the new energy challenges that we haveto face for the years to come” was the European level, compa-red with 37% favouring the national level.

(1) Attitudes towards energy - Special Eurobarometer 247 / Wave 64.2 - TNSOpinion & Social.


I . E N E R GY, A C R U C I A L I S S U E A N D A G R O W I N G C O N C E R N F O R T H E E U R O P E A N U N I O N

1 9

Five months later, in March-April 20062, 42% gave preferenceto the national level, while 39% considered the European levelto be the most appropriate. The local level was preferred byonly 12% of respondents.

There is therefore support from European citizens forEuropean intervention in energy matters, although the per-centage in favour seems to have declined.

The figures for the French samples on their own are evenmore significant: 39% in favour of the European level inMarch-April 2006 compared with 50% in the previous survey;40% in favour of a national response compared with 36% inthe previous survey; 15% preferred a local response, as againstonly 10% four months earlier.

1.3. GROWING PREOCCUPATION WITHINTHE EUROPEAN INSTITUTIONS

The initial European treaties were highly concentrated onenergy. As early as 1951, the ECSC (European Coal and SteelCommunity) was aimed at pooling coal resources; Euratom(the treaty setting up the European Atomic EnergyCommunity – EAEC) set itself the objective of sharing thebenefits of nuclear energy. However, nothing very significanthas emerged: the ECSC was mainly concerned with organi-sing the decline of the coal industry and its principal successwas to solve the successive crises in the steel sector in order to

(2) Energy Issues - Special Eurobarometer 258 / Wave 65.2 - TNS Opinion & Social.



2 0

reconstruct the European steel industry; as for Euratom, whileit has succeeded in setting up a supply agency and applyingambitious standards for protection against radiation, most ofits other programmes, notably those intended to ensure theexpansion of recourse to nuclear energy, have been stillborn,partly because many countries, following the Three MileIsland and Chernobyl disasters, gave up their nuclear energyprogrammes. However, French responsibility for this relativeneglect should not be underestimated. Our country, ridinghigh on its technological and industrial advance, hasconstantly restricted the impact of the sharing mechanismsimposed by this treaty.

Since then, Europe has taken only an occasional or partialinterest in energy problems. Obviously, following the first oilshock, Member States fell in with the reflection on the part ofindustrialised countries that led to the creation of the IEA(International Energy Agency). However, nothing veryconcrete has emerged in the shape of a specifically Europeaninitiative. Admittedly, there have been a number of initiativesas regards competition policy, the development of renewableenergy and biofuels, and the harmonisation of excise dutieson petroleum products, but the main objective pursued hasbeen to favour the completion of the Single Market or torespond to the preoccupations of the “green” lobby, not to laythe foundations for a genuine common policy.

If energy as such has therefore hardly been considered a deci-sive issue, this is mainly because between the reverse oilshock in 1986 and the renewal of the price surge in 2004, afeeling of energy abundance prevailed, helped by the extre-



2 1

mely low prices of energy at the time. It is only recently thatthe level of concern regarding Europe’s energy dependencyhas increased, in line with the emergence of tensions onworld markets for fossil fuels (oil and natural gas, in particu-lar). The reversal in the market situation was all the morekeenly felt for having not been expected.

• The November 2000 Green PaperThis Commission publication recommended four main thrustsfor European action: controlling the growth of demand, diversi-fying sources of supply, developing a better-integrated internalmarket and controlling external supply by giving priority to dia-logue with producer countries (Russia and OPEC, in particular).

• The conclusions of the Hampton Court informal summitOn 25 October 2005 the Heads of State and of Government,on the invitation of Tony Blair, explicitly – and in a completelyinnovative manner at this level of responsibility – referred tothe need for a European energy policy going well beyond thetraditional target of the completion of the Single Market.

• The French memorandumThe objective of this memorandum, published in January2006, was to heighten awareness on the part of the Europeaninstitutions and to call the attention of France’s partners to acertain number of mechanisms that had been introduced inthe country with positive results (reflection on the future ofsecurity of supply, improving energy efficiency, developmentof nuclear energy, etc.). This memorandum also proposed ajoint reflection in order to improve the articulation of nationalchoices regarding the energy mix.



2 2

• The Green Paper dated 8 March 2006 and the joint com-munication from Javier Solana, High Representative for theCommon Foreign and Security Policy, and the Commissiondated June 2006These represent the first ambitious assembly of the reflectionsof the European Commission regarding energy policy. The proposals contained in the Green Paper were examinedat the European Council meetings on 23-24 March 2006 and15-16 June 2006. The Green Paper assigns three objectives to European energy policy: combating climate change, strengthening energy security and improving European competitiveness.

Through the joint communication, the Commission and theHigh Representative for the Common Foreign and SecurityPolicy sought to define a consistent foreign policy for theUnion in the energy field, with a dual objective: to strengthenthe Union’s collective security of energy supply and to respondeffectively to the strategies that might be implemented by majorexternal suppliers. The main propositions included the nego-tiation of a global agreement with Russia, the strengthening ofa dialogue with the large consuming countries (United States,Japan, India and China) with the aim of improving the transpa-rency and functioning of markets, and the integration of theEU’s energy objectives in its trade policy. The communicationalso calls for the creation of a network of energy security cor-respondents, made up of representatives of Member States, theCommission and the Council General Secretariat.

Since the launching of these initiatives, at most formal andinformal Council meetings Ministers have addressed them-



2 3

selves to the question of energy: Foreign Affairs Council(external relations and security and commercial policy),Energy Council, Competitiveness Council (internal marketand industry), Environment Council, etc.

• The “Strategic Review” of 10 January 2007 This review, presented concomitantly with the final report ofthe energy sector inquiry by the Competition DirectorateGeneral concerning the markets for gas and electricity, is inreality a global set of measures aimed at establishing a newenergy policy for Europe in order to attain the three objec-tives identified in the Green Paper (combating climatechange, strengthening energy security, maintaining andincreasing EU competitiveness).

The various documents published by the Commission dealwith a substantial number of problems facing the EuropeanUnion: energy efficiency, reduction in greenhouse gas emis-sions, liberalisation of the gas and electricity markets, installa-tion of priority interconnections, development of renewableenergies, promotion of technologies (especially those permit-ting electricity production from fossil fuels generating lowemissions of CO2), choice or rejection of nuclear energy andthe conditions in which nuclear energy is possible.

A major feature of this review is the definition by theCommission of three major objectives to be obtained by 2020:• Energy savings of 20%• 20% reduction in emissions of greenhouse gases due to

energy consumption



2 4

• Ensuring that renewable energy sources represent at least20% of the EU’s energy mix.

In the declaration by Manuel Barroso on 10 January 2007,there is, however, one objective that seems to transcend all theothers, namely the reduction in CO2 emissions. Efforts toreduce greenhouse gas emissions, regarded as being respon-sible for climate change and the subject of the main quanti-fied objectives in the Strategic Review, have been declared apriority and constitute the real “categorical imperative” pro-posed to the European Union by the Commission.

These various proposals are due to be submitted for approvalto the European Council at its summit meeting on 8-9 Marchin Brussels.

Is this multiplication of European initiatives on the subjectof energy purely a short-term phenomenon or does itreflect a real revival of interest? Are they the forerunners ofa genuine reflection or simply a passing phase? Time willtell, but encouraging signs are emerging, for example thefact that in the past two years, energy has been on theagenda of all the European Council meetings of Heads ofState and Government. Another positive signal has been theintention of the United Kingdom to make energy a real sub-ject of discussion at the European Union level. The Frenchmemorandum, the Green Paper and the reflections that followed would certainly not have been on the same scalehad the British not made energy a key subject at the informalHampton Court meeting.



2 5

1.4. THE EMERGENCE OF THEOBJECTIVE OF SUSTAINABLEDEVELOPMENT

Increasingly, for both the public and the decision-makers, sus-tainable development is becoming a major dimension of allaspects of policy, notably regarding energy.

To quote an old American Indian saying, “We have not inheri-ted the earth from our ancestors, we are borrowing it from ourchildren”.

The existence of global warming is indisputable, even thoughspecialists do not agree on its medium- and long-term effects.If the temperature rise by the end of the century amounts tothe 3° to 5° predicted in the latest scientific work, the conse-quences will be incalculable for climate catastrophes, rainfall,sea levels, desertification, etc. This prospect demands theapplication of ambitious policies for the reduction of green-house gases, in particular CO2. According to a survey carriedout by CSA on 21-22 December 2006 for Le Parisien and i-Télé,almost half the French population (49%, to be precise) regardglobal warming as the “main challenge of the century forhumanity”.

In these circumstances, no European energy policy canignore the constraints accepted when the European Unionratified the Kyoto protocol. No policy can avoid the obligationto reconcile energy objectives with objectives for controllingclimate risk. In any case, this policy choice would be oppor-tune from the economic standpoint, according to the conclu-



2 6

sions of the Stern report3: long-term stabilisation of theconcentration of greenhouse gases would cost around oneGDP point, whereas not doing so could cost around 10 pointsand have a particularly severe effect on the developing economies.

(3) The Stern Report, named after a former Chief Economist of the World Bank,was submitted to Tony Blair at the end of October 2006.


2 7

2.1. EUROPE’S ABSENCE

2.1.1. International impotence

Most of the major powers have been developing an energypolicy constituting a priority thrust of their foreign and secu-rity policies.

This is true of the producers (Gulf countries, Russia, Iran,Latin America).

It is also true of the large consumers (United States, China,India). The stated objectives of American energy policyinclude the preservation of the “American way of life” andseveral of the measures introduced in recent years by theUnited States are coherent seen from this standpoint. Chinaand India, despite their confrontation in terms of the searchfor energy sources, have from time to time chosen to co-ope-rate in order to defend what they see as their common interests as consumers: a Chinese-Indian consortium has purchased the Syrian assets sold by Petro-Canada, a Canadianoil and gas group.

II

THE FOUNDATIONS OF A EUROPEAN ENERGY POLICY



2 8

Meanwhile, what is the European Union doing in this respect?The shortcomings of its Common Foreign and Security Policyconstitute a major obstacle to defining and implementing aco-ordinated approach. Internally, the refusal to enableEurope to take a position on the energy options chosen byindividual Member States rules out any concerted policy anda fortiori any joint policy.

Certain advances, few in number, have taken place in order topromote a joint approach, notably vis-à-vis certain third coun-tries (China, India, Mediterranean countries, Kazakhstan).The installation of a network of “correspondents” at indivi-dual country level in order to respond to crisis situations,advocated in the joint communication from Mr. Solana andthe Commission, is progressing satisfactorily.

However, none of this is particularly significant and Europeremains singularly absent from the international energy scene.

2.1.2 Internal inaction

Nor has much progress been made at internal level.Admittedly, important measures have been taken concerningthe opening up of markets to competition, but their aims aregenerally limited to liberalisation for its own sake, whose rele-vance to energy policy is taken as given. It can not however onits own meet all the requirements of an energy policy.

It is probably largely because these policies were drawn up ata time when energy seemed neither scarce nor expensive that


I I . T H E F O U N D AT I O N S O F A E U R O P E A N E N E R GY P O L I C Y

2 9

it was regarded as a resource like any other, as a “utility” forwhich it was urgent to guarantee competition on the samelines as air and rail transport, postal and telecommunicationsservices, or other sectors in which State monopolies appearedto be the source of inefficiencies and to hamper the freemovement of goods. Today, everyone is agreed that energy isnot quite like other goods and that it is linked to problemareas in the field of national defence and even the defence ofour way of life and environment.

Nevertheless, the need to take these specific aspects intoaccount in no way justifies the absence of action at theEuropean level.

In fact, even the targets set by the European Council seemvery timid. Its conclusions, which are seen as guidelines foraction by the other institutions and by the Member States, aregenerally limited to the usual “tip of the hat” to the SingleMarket, to a call for the development of renewable forms ofenergy and biofuels, to a demand for the strengthening ofmechanisms for assistance in the event of breaks in supply,and to a request that the Commission draw up each year areport on the energy situation in the EU, in order to providesubstance for forthcoming discussions in the EuropeanCouncil.

This absence of decisive action stems mainly from what onemight call the “taboo” regarding exclusive national compe-tence as regards the choice of energy mix. Because of diffe-rences in approach to the nuclear risk as the result of diver-gent strategic interests – or merely for inward-looking



3 0

motivations – European countries claim total liberty in theirchoice of energy policy. This is a constant feature in all thepositions taken by European institutions (Green Paper,conclusions of the European Council, declarations by seniorCommission officials to the Council, etc.). The French govern-ment seems to share this orientation, to judge by the contentsof the French memorandum of January 2006.

This situation is paralysing policy decision-making. Theenergy mix is an essential component of security of supply, aswell as of the struggle for competitiveness and the making ofenvironment policy. In particular, it is impossible to claim tobe reducing European dependency or attacks on the environ-ment without having a concern for the choices of theEuropean countries as regards their energy mix.

A minimum of consultation at European level regarding thedefinition of the energy mix seems all the more desirable inthat this now has repercussions going beyond the frontiers ofeach Member State. Because of the ever-growing integrationof energy markets on the continent, prices are largely a function of the cost of the CO2-emitting fossil fuels, which hasbeen constantly rising in recent months. Member States thathave chosen energy mixes involving substantial emissions ofCO2 are in this way penalising consumers in countries thathave adopted more efficient strategies.

In this battle against the emergence of European responsibi-lity for energy policy, some countries are more active thanothers. Ireland and Austria, which are viscerally anti-nuclear,are among the fiercest opponents, but Germany and Italy are



3 1

not far behind, prisoners of past decisions to give up this formof energy.

On the other side of the argument, there is no country actingas a genuine driving force, not even France. Some countriesmight shift to a more open attitude, however, in a search forconsensus on common defined objectives: Finland, Sweden,Denmark, Belgium, the Netherlands and even perhaps theUnited Kingdom – not forgetting, of course, France.

In the final analysis, Europe has no energy policy. To be moreprecise, its concern with energy is entirely “through the backdoor”, via the Single Market, competition policy, the R&D framework programme and environment policy.

For a geographic zone with almost 500 million inhabitants,with levels of GDP per head that are among the highest in theworld, suffering from extremely worrying and ever-growingenergy dependency, this lack of joint vision and joint action ishighly dangerous in today’s world.

It is impossible to continue to reconcile for any length of timethis shared destiny, in a field where the players and the stakesare clearly on a world scale, and such a wide heterogeneity ofresponse.

Putting an end to this impasse will imply Europe having toseek an equilibrium point at which Member States accept thetransfer of part of their competences, despite the fact thattheir energy balance sheets, the size of their operators andtheir national interests are extremely divergent. But this is the



3 2

only possible way forward, unless we are prepared to riskseeing the breaking of the solidarity links that unite us. Fear ofpenury and a desire to maximise individual interests createcentrifugal reflexes that tend to generalise “every man forhimself” attitudes that are destructive for Europe. This attitudespreads all the more easily in that it has populist and demago-gic underpinnings. It is very easy to justify, hand on heart, forany number of ostensibly excellent reasons: history, culturalaffinities, “the publicly-organised production model that hasproved its worth”, natural or political frontiers, “our own redu-ced dependency”, etc. etc. This is why the creation of aEuropean energy policy is a real political subject, with eachcountry having to reflect and act in contradiction to its primalreflex.

This absence of the European Union from the energy field isboth consequence and cause of its weak position on the inter-national stage, where energy questions are playing an increa-sing role. At a time when the balance of forces betweenMembers or between major economic regions is evolvingrapidly, as a consequence of the rise in the oil price, thisabsence is less and less acceptable to the citizens of Europe,who can justly regard their vital interests as not being suffi-ciently protected.



3 3

2.2. THE FOUNDATIONS OF A EUROPEANENERGY POLICY

2.2.1. The three major objectives of a Europeanenergy policy

There is a broad consensus today concerning the three threatsthat a European energy policy must make it possible to meet:

• In the first place, a threat in terms of security of supply, notablyfollowing the Ukrainian crisis and the November 2006 blackout (in succession to the Italian blackout two years previously). Regardless of whether or not these crises and incidents were exaggerated by the media, European citizenssaw in them a direct threat to their way of life. This vague disquiet is being intensified by the widespread feeling that thegeographic zones that are most important from the point ofview of energy resources and supply circuits are also thosesubject to the greatest political instability (Gulf countries, theCaucasus and Russia, Latin America) or even the scene ofopen conflict (Iraq). On top of this there is the question markhanging over the energy policy of Russia, Europe’s main supplier, which wants to use its energy wealth in order to tryto regain its place as a great power on the world stage.

The European Union today depends on imports for 50% ofits energy sources. This dependency, which is set to rise to70-75% by 2030, poses risks for the European consumer.Even on highly favourable assumptions concerning thedevelopment of renewable forms of energy (biomass, solar,wind) and control of demand for energy, it is not thought



3 4

that this figure can be brought down below 65%. By way ofcomparison, the overall energy dependency of NorthAmerica is expected to remain below 30%.

Admittedly, it has to be recognised that total energy indepen-dence is an impossibility for the European Union. Any attemptto achieve absolute autonomy risks landing Europe again inthe troubles of the Common Agricultural Policy (rememberthat the watchword at the beginning of the 1960s was “foodself-sufficiency”), which finally led to considerable depen-dence on European exports and a bottomless financial pit.Rather than evoke some utopian autonomy, it is better to talkof risk management with respect to continuity of supply andhence of diversification of energy sources and geographicimporting zones and of controlling consumption.

• Second, a threat in terms of Europe’s economic competiti-veness. Growth in world demand for energy and the inabi-lity of world supply to respond at all rapidly (because ofregional conflicts and the fact that discoveries of new depo-sits of fossil fuels have become rare, or because of meteoro-logical catastrophes like cyclone Katrina) have led to sub-stantial price rises. An increase of one percentage point inworld demand for oil has led to a doubling of its price. Initself, an upward tendency in energy prices is not necessa-rily a bad thing. It can even send out useful signals to eco-nomic agents. However, the existence of erratic and wide-amplitude movements has a substantial impact on investors’capacity for expectation and this is bound to reduce theirpropensity to take risks and, in the final analysis, tend toweaken economic growth.



3 5

This threat is all the greater in the case of the EuropeanUnion in that its energy dependence means that it shouldbe over-investing in transmission and storage infrastructurein order to improve its security of supply.

• Finally, a threat to its environment and that of the planet asa whole. The need to take into account problems related tothe emission of greenhouse gases must lead the EuropeanUnion to provide itself with an energy policy centred on thechoice of an energy mix that is consistent with its environ-mental objectives.

2.2.2. The guidelines for action

In order to cope with these three threats, the European Unionhas to implement a policy based on the fundamental prin-ciples that governed its original creation:

• The principle of solidarity: a European energy policy is a testof solidarity and this solidarity must be applied:– at geographic level, between countries and their popula-

tions – and at demographic level, between generations.

• The principle of coherence: Europe must be capable ofsimultaneously combating each of the three threats identi-fied above. In other words, it cannot give precedence to asolution that would deal with only one of the threats whileat the same time aggravating the risk involved in one ormore of the others. To take a concrete example, it would be



3 6

failing in coherence to re-stimulate coal production, despiteits contribution to improved security of supply, unless aprior solution is found to the related environmental pro-blems (increased emissions of CO2 and SO2, workers’ healthstandards, etc). Similarly, increasing the production fromalternative energy sources without taking into account thecosts involved (including the costs of infrastructure andmanagement of transmission grids) would weaken the com-petitiveness of European firms. In the end, Europe mustsimultaneously pursue three objectives that are not neces-sarily coherent. It is particularly to meet this coherence obli-gation that Europe must set itself objectives in the field of energy policy that are compatible with the aim of sustainable development. Defence of the climate requiresthe setting of a minimum level of production of non-CO2-emitting energy, a target that must apply both at Europeanlevel and in terms of the energy mix of each Member State.

• The principle of subsidiarity: it should be recalled that aproper understanding of the “principle of subsidiarity”,too often reduced to the preservation of Member States’decision-making autonomy whenever action at commu-nity level cannot be shown to provide value added, alsocovers problems for which the national dimension is insuf-ficient to provide the appropriate response and which therefore have to be treated at the level of the Union. Theprinciple of subsidiarity does not mean “east, west, home’sbest”, still less “every man for himself”, but rather “toget-her, at the most appropriate level”. In reality, therefore, it isa principle aimed at efficiency of action. In the case ofenergy, the application of the principle of efficiency



3 7

argues in favour of giving responsibility to the EuropeanUnion, even if the precise contours remain to be defined.A purely national response could not provide the capacityfor sufficiently effective action. There remains, however,the difficulty of reconciling the principle of subsidiaritywith the principle of State sovereignty. A way has to befound of getting States to accept being no longer sole masters as regards their energy choices. What is also needed –and this is at least as difficult a task – is to be able to persuadecitizens to accept the transfer to European level of entireswathes of national energy policy.

This will only be achieved if all those involved can be per-suaded that the possible responses bring into play multipleand highly complex aspects of political action, beyond thescope of a European country in isolation: – defence and security, in order to have influence outside

the European Union and especially where the energyresources and the crucial “passing points” are located

– research and technology– promotion of improved energy efficiency– mobilisation of very substantial financial resources in order to

improve the infrastructure needed for security of supply– strategic reflection concerning the necessary organisation

of European energy markets (how much liberalisation?how much regulation?)

– strengthening – and even protecting – the major pan-European firms

– ensuring global economic negotiating capacity (commer-cial, technological, financial) in order to seek out possiblepartnerships



3 8

– harmonious articulation of the action taken by each coun-try in multilateral bodies such as the IEA.

• The principle of “effectiveness”: this principle requires thatEurope must have the means needed to implement the poli-cies it deems appropriate.

Internally, this means that it must have the responsibilityand the organs needed to intervene in this new field ofaction. These competences exist and it is wrong to claimthat Europe is lacking the statutory basis for undertakingaction in the energy policy field.

As regards external policy, this principle of effectivenessimplies, as a minimum, being able to make a display offorce, even if not obliged to use it. A common foreign andsecurity policy and a joint diplomatic force are the indis-pensable preconditions for Europe to be able to enjoy thenecessary credibility in its determination to safeguard itsenergy interests on the world stage.

2.2.3. The spurious pretext of a lack of statutorybasis

It is often said, that no appropriate statutory basis exists forimplementing a European energy policy. This is clearly aspurious pretext. Admittedly, apart from the specific provi-sions in the now-defunct ECSC Treaty and the Euratomtreaty, energy has never been raised to the rank of a com-mon policy.



3 9

However, Article 308 of the Treaty establishing the EuropeanCommunity explicitly provides for the case where, in theabsence of any particular competence, the European Unionwishes to create a new policy. This Article states that “ifaction by the Community should prove necessary to attain,in the course of the operation of the common market, one ofthe objectives of the Community, and this Treaty has not pro-vided the necessary powers, the Council shall, acting unani-mously on a proposal from the Commission and after consul-ting the European Parliament, take the appropriatemeasures”.

It was in fact on this basis that there was introduced, amongother things, a European policy on the environment, a sub-ject that had not received the slightest mention in the initialversion of the Rome Treaty signed on 25 March 1957. It wasonly long after, at the end of the 1980s, that this policy wasgiven a place in the EC Treaty.

This shows that existing texts can be used as the basis for a European energy policy provided that the political will exists, not to mention the other statutory bases that are to be it found in the present provisions relating to theSingle Market (Articles 94 to 97) or to environment policy(Article 174).

Admittedly, Article 308 of the Rome Treaty requires unani-mity, making it a fairly cumbersome instrument to handle.For this reason, this report opts in point 2 of Part 3 for pro-gressive implementation of measures in favour of aEuropean energy policy in the form of “energy convergence



4 0

pacts”, concluded initially by only certain Member States.This method would make it possible to circumvent the una-nimity rule and create concrete initiatives intended to set anexample.


4 1

In this worrying, but not desperate, situation, the InstitutMontaigne’s European Affairs working group has formulatedseven major priorities for action, accompanied by proposalsfor concrete initiatives.

As a preliminary remark the group wishes to stress that thesuccess of these actions will require major efforts in the fieldof information and awareness-stimulation, in order that thecitizen and the consumer should be placed at the heart ofEuropean energy policy. Failing this, the risk of creating apurely technocratic construction would be particularly great,having as an inevitable consequence the rejection of Europe.

At the present time, European populations are expressingcontradictory desires: energy should be sure, abundant, non-polluting and cheap.

The Eurobarometer survey in October and November 2005demonstrates the irrational nature of their choices. Forexample, the belief that solar energy could constitute a majorelement in the European energy mix in the short term is uto-pian. Moreover, the views are often inconsistent (54% ofrespondents refuse to pay more for alternative sources of

III

SEVEN PRIORIT IES FOR ACTION



4 2

(4) 47 % in France.(5) 18% in France. The proportion of respondents in the EU who would accept a rise

in their energy bills of more than 10% is less than 3% (5% in France).

energy4, with the proportion saying they would be preparedto accept an increase of more than 5% in order to protect theenvironment not exceeding 14%5).

A substantial number of citizens remain reluctant to see Europetaking the decisions whether or not to use certain somewhatcontroversial sources of energy, such as nuclear power, andintend to decide the fate of these sources at national level. Thisreaction is not only the result of a certain degree of mistrust ofthe European institutions, seen as remote and bureaucratic, butalso of the classic “NIMBY” (not in my backyard) syndrome. Theinhabitants of Fos-sur-Mer, where there is a substantial concen-tration of petroleum installations campaign against methane tan-ker terminals, others against the vapour plumes from theDampierre power station or the high-voltage transmission lineslinking France and Spain, others about wind-power fields, etc. Inall cases they fear that decisions on these points will be takenbeyond the reach of the people living in the neighbourhood.

It is therefore necessary to improve the information and aware-ness of citizens who raise questions concerning certain politicalchoices, for example, the appropriateness of opening up theelectricity market even though this does not necessarily lead toreduced prices in all circumstances. It is also indispensable toassociate the public with these policies, since for many of thesesuccess will also depend on the behaviour of consumers.It will therefore be necessary to combine the will to convincewith the courage to decide.


I I I . S E V E N P R I O R I T I E S F O R A C T I O N

4 3

3.1. THE CREATION OF ANINDEPENDENT AUTHORITY FOR THE JOINT DEFINITION OF THE MAJOR EUROPEAN ENERGYOPTIONS

It will not be possible to end the situation in which theEuropean energy policy is based mainly on the rules of com-petition without breaking the taboo of exclusive nationalcompetence as regards the energy mix. As a minimum, it willbe necessary to envisage consultation, or even co-ordination,of action at national level regarding energy mix options.

The idea is not so much to indicate at this stage which energyoptions should be preferred at the European Union level, but tohighlight the fact that national authorities cannot refuse to partici-pate in the joint action, nor leave market forces on their own todefine which forms of energy to develop or not to develop.

3.1.1. Breaking the taboo of exclusive nationalcompetence

Energy management is turning into scarcity management:scarcity of resources upstream, scarcity of environment qua-lity downstream. Europe has become an instructive field forgrasping these problems of scarcity. A European energypolicy must therefore concern itself with the sharing of thesescarce resources from a dual standpoint:• sharing between individuals within Member States, between

States within Europe, between Europe and the rest of the world



4 4

• sharing between generations, since what is consumed today(fossil fuels) or deteriorated today (the environment) willnot be available for our children’s children.

No one can deny that trying to approach these questions froma strictly national viewpoint, even in the case of a largeEuropean country, is illusory. Those who make the attemptare deceiving themselves or, worse still, deceiving theiraudience.

A striking example is given by the fact that several Europeancountries include in their forecasts for energy supply anadjustment item entitled “electricity imports”. This variable issubject to increasing uncertainty. Referring to it means inpractice “relocating” abroad part of the nuclear energy that isin fact present in the energy mix but is produced in installa-tions situated outside the country’s borders. In addition, thisattitude consists of basing future energy supply on productivecapacity in neighbouring countries. Where will these electri-city imports come from and at what price? What impact willtheir output have on the environment? There is not even thevaguest reply to these questions.

Nor is any country innocent of such selfishness: France, likethe others, persists in advocating national decision-makingautonomy concerning energy mix options.

This situation is at the origin of the buildup of centrifugalforces mentioned earlier. A single example will illustrate this.An increasing number of voices are being heard in France,which has opted for the nuclear route, saying that this techni-



4 5

cal and economic “rent” should be reserved for the French,through the application for their sole benefit of price tariffs forelectricity that are uncorrelated with the markets. The harmfuleffects of such an attitude go far beyond the case of energy andcall into question the very idea of the common market that isone of the foundations of the construction of Europe.

It should be added that the need to end exclusive nationalcompetence concerning the choice of energy mix stems notonly from improved efficiency in terms of security and com-petitiveness, but also from the need to include a genuinepolicy of sustainable development on the European agenda.

In view of the undertakings made at Kyoto and the increasingawareness of the challenge posed by climate risk, Europe willneed to have an ambitious policy for the reduction of green-house gas emissions. Energy production accounted for 32.6%of these emissions in Europe in 2003 (45.6% for the 10-mem-ber EU)6. This shows that Europe will have to take a very closeinterest in the energy mix options of Member States unless itis prepared to abandon all ambition regarding climate change.

The question remains just how to induce Member States tochoose – jointly at European level according to the solidarityprinciple mentioned above (see 2.2.2) and not individually – anenergy mix that conforms with the Union’s interests. Will thisgo no further than a simple dialogue, as advocated in theFrench memorandum? Or should more constraining measuresbe envisaged, in the form of recommendations or decisions?

(6) Source: European Environment Agency - 2005.



4 6

The Institut Montaigne’s European Affairs working group hastaken a clear position on this point by proposing the creation ofa High Authority for defining Europe’s energy options (HADEO).

3.1.2. Conferring on the High Authority a taskthat is not currently being undertaken in Europe

First, a word about its title: High Authority.

This has been chosen in preference to “Agency”, with its over-strong connotation as a purely technical agency coming underthe Commission. The terms “Board” and “Observatory” seemedto lack ambition. And, finally, was not “High Authority” thename given to the founding institution of the ECSC? The factthat the latter was merged with the Commission in 1965 shouldnot obscure the fact that it proudly performed its mission forseveral years – nearly 15, in all.

Why make it an independent Authority?

Because we thought it necessary to create a forum for exper-tise, reflection and action that would be detached from short-term political contingencies. In this respect, the Commission,despite the undeniable progress demonstrated by its recent“Strategic Review” (see point 1.3) seems too dependent, inmaking its proposals, on what it thinks will be acceptable tothe Council and the Parliament. By making itself in this waysubservient to the other institutions and national delegations,it is failing in part of its mission.



4 7

How should the High Authority be composed?

It should consist of a limited number of people (around 6 or 7) chosen for their personal qualities (perhaps two to bechosen by the Council, two by the Commission and two bythe Parliament) and appointed for a fixed term that would besufficiently long to enable them to take action (6 years wouldrepresent a good balance) but non-renewable.

This High Authority would:

• have access to independent expertise• permit confrontation between the scenarios drawn up by

Member States and by the Commission• provide a forum for consultation among all concerned –

operators, consumers’ representatives, scientists, econo-mists, politicians, NGOs, etc.

• draw up proposals or recommendations – possibly accom-panied by appropriate variants at national level – regardingstrategic options and public or private policy, includinginvestment policy.

The High Authority must have extensive powers to draw up,entirely independently, a complete European energybalance sheet, going beyond the short-term interests ofMember States and of the large public or private operators(national or transnational). It must be capable of taking aview on the balance between supply and demand for theshort, medium and long term, as well as on the risks Europehas to face in terms of security of supply, competitivenessand sustainable development.



4 8

The first task of the High Authority will be to make an inde-pendent examination, energy source by energy source, of therespective merits of each production mode, comparing theresults of its “life-cycle analysis” (LCA) with the three objec-tives of security of supply, competitiveness and managementof climate risk. Its independence will enable it to ensure thatit properly takes into account, for each energy source andeach technology, the economic and financial costs involved aswell as the social costs related to pollution and other risks, ina transparent manner. In carrying out its work, the HighAuthority should have the power to demand information,research studies and opinions from national regulators.

The High Authority will have to monitor the convergence ofEuropean policies around jointly-agreed choices. This impliesthat it will have to ensure: • that the mechanisms for the allocation of structural funds,

as well as for all other forms of community support (R&Dprogrammes, social funds, development of alternativeforms of energy, civilian nuclear research, EIB loans, etc.)include criteria for convergence with the European energyoptions for the purpose of determining financing priorities

• that the Union’s Neighbourhood policy strive, in concerta-tion with the countries concerned, to find convergence ofaction that is consistent with Europe’s priorities as regardsenergy policy.

The High Authority will in its work have to articulate with thenetwork of national regulators in such a way as to preservecoherence, both in the field of research and in the drawing upof texts and their application. One might, for example, envi-



4 9

sage setting up a consultative Council as a body for exchangesand consultation between the members of the High Authorityand the Chairmen of the national regulatory bodies.

However, for the immediate future, its role will be more oneof reflection and incitement than constraint. The option thathas been chosen to formulate proposals coherent with theexisting treaties imposes this limitation. But there is nothingto prevent the High Authority, if it is successful, from acqui-ring its own coercive powers in a more constraining statutoryframework.



5 0

3.2. RETHINKING THE DECISION-MAKINGPROCESS IN FAVOUR OF “ENERGYCONVERGENCE PACTS” LIMITED TOCERTAIN EU MEMBER STATES

No European country is capable on its own of providing a satisfactory response to all the challenges of energypolicy. No European country is capable of ensuring thatthe three major objectives, security of supply, mainte-nance of competitiveness and control of climate risk, canbe attained.

However, this observation leaves open the question of theappropriate level of response (27-member EU? Europe ‘à lacarte’?) and how it should be articulated with the compe-tences retained by Member States.

The first obvious remark to be made is that the unanimityrequirement in fact blocks progress. Unfortunately, it is onthe basis of unanimity that most of the measures recom-mended by the group have to be based. Even in caseswhere one might envisage recourse to a qualified majority,the arrangements inherited from the Nice Treaty and thebad habits that have become entrenched since the 2004enlargement (with most delegations taking positions ondecisions that do not concern them simply in the hope ofbeing able to trade them for support in other discussions)lead to virtual paralysis.

In the present political situation, it seems unrealistic tocount on a revision of the treaties.



5 1

This means that the only way of circumventing the diver-gences of interests regarding energy policy among the 27 member countries is to imagine forms of “variable geometry”.

This does not imply resignation to the fact that the defini-tion of an energy policy will bypass community institutionsfor ever and ever, merely that in the present situation ofdeadlock other routes have to be explored.

Initially, therefore, a European energy policy will notnecessarily be drawn up in the framework of the Europeantreaties. The success of the June 1985 Schengen Agreementconcerning the free movement of persons, of Eureka in thefield of technological co-operation and later audiovisualco-operation, at the same time as the June 1999 BolognaProcess on the harmonisation of the European universitysystem, have shown what can be done in the way of inter-governmental action involving certain members only. Theinitiatives – for example the one that led to the creation ofa European Defence Agency – were initially launched atintergovernmental level, before finding their place in theEU framework.

Even so, the existing statutory framework known as“enhanced co-operation” (Article 40 of the EU Treaty) istoo restrictive to constitute an acceptable alternative to thelaunching of ad hoc action in the particular sector consis-ting of energy. Enhanced co-operation can only be institu-ted at the end of a particularly long and complex institutionalprocedure. It has to be on the initiative of at least eight



5 2

Member States and has to respect the Union’s treaties andinstitutional framework, as well as the rights and obliga-tions of non-participating Member States. Moreover andabove all, enhanced co-operation can be undertaken onlyas a last resort when it has been established within theCouncil that the objective being pursued cannot be achie-ved through recourse to the normal procedures. This ple-thora of precautions leads in practice to the blocking ofany initiative in the face of the doubly negative attitude onthe part of certain countries wanting not only to retain thepossibility of not participating in the enhanced co-opera-tion but above all to prevent it seeing the light of daywithout their participation.

For this reason, the group advocates the creation, on thebasis of concrete consensuses, of “energy convergencepacts” providing not only for a reflection dimension butalso for a joint action dimension and bringing together,around clearly defined objectives, those Member Stateswho wish to take part7.

France should take the initiative in proposing such group-ings, starting with improved promotion of the ideas contained in the French memorandum by means of visits tothe capitals that are liable to be most receptive to theseideas, in order to try to find consensus on certain of these

(7) This idea also figures prominently in the Quilès - Guillet report that came out inDecember 2006: “it is the scenario of co-operation restricted to a limited numberof States – those that show a willingness to do so and want to provide themselveswith the means – that has our preference” (information report n° 3468 of the Foreign Affairs Committee of the French National Assembly, Rapporteur:Jean-Jacques Guillet, Chairman: Paul Quilès.



5 3

themes or on others that might be suggested by possiblepartners.

The emergence of a consensus of this kind would enablecountries wishing to do so to advance more rapidly, withoutexcluding the possibility that at some stage these activitieswould be extended to others, or even form part of the institu-tional framework of the EU when the time comes.

There are already several examples of themes aroundwhich convergence pacts could be organised:• industrial research and development concerning subjects

like the capture of CO2 or renewable energies, possibly inthe form of public-private partnerships (PPP)

• industrial research and development in the nuclear energyfield (fourth generation reactors)

• integrated management of the equilibrium of electricity trans-port grids through the introduction of a single “dispatcher”,acting under the control of the Regulators concerned (seepoint 3.5.5.3) in the strictly European-level set of proposals

• common guidelines concerning productive investment,possibly combined with action to incite players to conform

• common mechanisms for crisis management, on the modelenvisaged in point 3.5.5.4

• a common position in bilateral negotiations (for example,vis-à-vis Russia) and in multilateral fora

• if appropriate, this common diplomacy could lead to moreambitious measures in the field of ad hoc defence and secu-rity activities

• etc.



5 4

It is clear that a certain number of these measures would besituated at the frontiers of – or even within – zones of EU com-petence. However, Europe’s present inaction in these fieldsjustifies taking liberties with the applicable disciplines andwith the rules laid down in the Amsterdam Treaty regardingenhanced co-operation – just as when in 1984 the Beneluxcountries, Germany and France, took the initiative for theSchengen Agreement they clearly situated their action in thefield of the freedoms contained in the Rome Treaty. A littleover one year later, Jacques Delors launched the “single mar-ket” objective signalling the opening of the negotiations thatled to the Single European Act.

It is likely that in an initial stage such initiatives will take placeoutside the framework of Franco-German relations. Given therespective positions of the two countries regarding energydevelopment, the idea of joint action on this theme seemsunrealistic. However, the situation could evolve in the futureand, if these initiatives were to meet with success, it is likelythat Germany would rapidly take considerable interest inthem.

This means that initially the launching of such convergencepacts should be envisaged with partners other than Germany.These might include the United Kingdom, Italy, Spain, theNetherlands, Belgium and, further to the east, Poland,Hungary and perhaps others.

It is on the basis of such concrete initiatives that a genuineEuropean programme in the energy field could be launched.



5 5

3.3. REQUIRING OF EACH EU MEMBERSTATE THAT BY 2050 AT LEASTHALF THE ENERGY SOURCES IT USES SHOULD BE NON-CO2-EMITTING, WHICH IMPLIES THAT BY 2030, 50% OF THE ELECTRICITYIT PRODUCES SHOULD BE FROMNON-CARBON SOURCES

At a time when the threats posed by global warming are beco-ming increasingly credible and when there is every reason tobelieve that our economic model will continue to produceincreasing emissions of greenhouse gases (GHG), a vigorousreaction is indispensable, especially in countries like those ofthe European Union which, being better developed, are in aposition to mobilise the talents and resources needed to dealwith them.

This vigorous reaction must be based on deliberately ambi-tious targets for limiting GHG emissions. Energy productionin general is estimated to be responsible for 32.6% of GHGemissions in the European Union8. A report by the FrenchParliamentary Commission for the evaluation of scientific andtechnological options in 20059 put at 40% the share of theseGHG emissions accounted for by electricity production atworld level. It is therefore necessary that the European Union

(8) Figures for the year 2003 (45.6% for 10-member EU) - Source: EuropeanEnvironment Agency - 2005.

(8) Source: Office parlementaire d'évaluation des choix scientifiques et technolo-giques - rapport sur “les apports de la science et de la technologie au développementdurable” - Tome I: “Changement climatique et transition énergétique : dépasser lacrise” by MM. Pierre Laffitte et Claude Saunier, Senators.



5 6

set itself strict objectives regarding the use of non-CO2-emitting energy sources. The means exist to meet such anobjective, whether it be in the form of renewable energysources such as water or wind power, recourse to nuclearenergy or measures to capture and store the CO2 associatedwith other energy sources.

A measure of this kind has the advantage, unlike the proposalmade by the Commission in its Strategic Review dated 10 January 2007, of not being limited to renewable energysources. Concentrating on these sources is aiming at thewrong target. Renewable energy sources are indeed one ofthe means of reducing CO2 emissions, but by no means theonly one.

This target for minimum consumption of non-carbon energysources should be set at 50% by 2050. Reaching it implies thatby the same date 70% of the electricity produced in Europeshould come from non-carbon sources. To meet such anambitious target, 50% of European electricity productionshould come from non-CO2-emitting sources.

Targets of this kind must be set not only at the level of theEuropean Union as a whole but also for each Member State.They must cover all forms of energy consumption, indicatingthe level of constraint they imply for production of electricity,for which numerous non-CO2-emitting sources exist (wind,nuclear, etc.).

Setting objectives of this kind for sufficiently long time-hori-zons renders a service to our industries and hence to



5 7

European competitiveness. This is because it is much better toimpose strict measures and reasonable time-periods and, aboveall, accompany them by regulatory stability, than be permanentlydithering over the acceptable level of constraint. Operators in anindustry where payoff periods on investment are very long needvisibility for periods of a decade – or several decades – for pro-gramming their investment. This is the condition that will enablethem to participate in the indispensable reaction.

The setting of such objectives should, as a corollary, lead to areduction in the consumption of the fossil fuels (oil, gas, coal)that are mainly responsible for GHG emissions in the field ofenergy production. Even so, the mechanism advocated by theInstitut Montaigne’s European Affairs working group wouldmake it possible, unlike the setting of the maximum percen-tages for the consumption of fossil fuels, to encourage thedevelopment of industrial processes based on the use of fos-sil fuels but generating little or no emission of CO2 (“clean”coal, for example, involving innovative technological pro-cesses and the capture and sequestration of CO2).

Incidentally, the group deplores the fact that this draft mea-sure, capable of permitting a drastic reduction in CO2 emis-sions, which apparently appeared in certain preliminary ver-sions of the Commission’s “Strategic Review”, was dropped asa result of various final compromises. By dropping this pro-posal, the Commission demonstrated the limits of its ambi-tions, suggesting that it is more concerned about the accepta-bility of its proposals to national delegations and otherinstitutions (Council and Parliament) than about their intrin-sic interest for the European Union.



5 8

3.4. LAUNCHING A VERY AMBITIOUSPROGRAMME FOR THE CONTROL OF ENERGY CONSUMPTION

Emphasising the contribution that an ambitious programmeof energy saving could make to the three main objectives of aEuropean energy policy (security of supply, competitiveness,sustainable development) has become commonplace. Andyet very little has so far been done in this field.

Admittedly, Europe is not the world’s bad boy in this respect –the average American, with a standard of living of about 20%above that of France, consumes 2 1/2 times as much energy –but still has much to learn from other foreign examples. Forexample, Japan between 1973 and 2005 reduced its energyrequirements per GDP point by 47%.

The action plan for energy efficiency published by theCommission in November 200610 is an interesting first step.The Commission proposes that Europe should economise20% of its consumption of primary energy between now and 2020, highlighting several possible lines of action, inclu-ding, among other things:• strengthening energy performance requirements for pro-

ducts, buildings and energy services• vigorous action in the field of transport (cleaner cars, labelling

showing the consumption and performance of vehicles andtyres, adoption of commitments aimed at reaching the objectiveof 120g CO2/km by 2012)

(10) Communication from the Commission dated 19 October 2006 COM(2006)545 final.



5 9

• economic and tax incentives for the introduction of PPP, inorder to permit the development of energy service companiesand encourage the financing of energy-efficiency investments

• reform of indirect taxation and energy taxation • changing energy behaviour, including through the inclusion of

the themes of energy security and climate change in educationprogrammes

• setting up international partnerships, for example throughthe adoption of worldwide standards.

The time is all the more ripe for launching a major initiative inthat more and more European citizens are taking an interestin the theme of energy saving.

Europe has to launch a major “citizens’ programme” to encou-rage energy saving.

This major programme obviously has to include a communi-cation element, but it must also comprise financial incentivesand recourse to technical harmonisation and standardisation.

3.4.1. Improved communication

A major co-ordinated programme of awareness-arousal regar-ding energy saving should be launched each year. “Co-ordina-ted” means that the resources needed will be mobilised bothfrom the European Union and from Member States.

An “energy saving week” should be introduced at the samedate throughout the European Union. This initiative could be



6 0

based on the “sustainable energy week” that has been laun-ched by the Commission but whose coverage and media fol-low-up are at present too restricted.

3.4.2. Interventions affecting individual homesand professional premises

In this field, priority will be given to recourse to industrial pro-duct standards and financial incentives.

Certain very simple measures might be envisaged:• making it compulsory at the time of installation or replace-

ment of a building’s doors and windows – in both residen-tial property and professional premises – to use productsoffering a certain minimum insulation performance

• requiring landlords – for whom such expenditure is nor-mally deductible from rental income – to carry out such installation work or renewal of equipment on request fromtheir tenants

• in all countries where financial incentives for such workexist, abolish restrictions leading to the exclusion of certainbuildings such as professional premises or secondaryhomes.

3.4.3. Optimising the management of CO2 quotas

The European Union has successfully introduced the firstmarket for carbon dioxide emissions and this is probably theforerunner of one of the most effective means of reducing



6 1

carbon intensity in the world energy balance and, given theinertia involved in industrial production processes, of provi-ding incentives for energy saving.

These arrangements could be further improved throughrecourse to certain other measures:• Their extension to the transport sector (see 3.4.4 below)• Improved monitoring of Member States’ allocation mecha-

nisms. The monitoring by the Commission, today essentiallyat global level, would be replaced by authorisation of eachallocation plan, economic sector by economic sector, insuch a way as to establish a minimum of harmonisation, inclose collaboration with the High Authority for definingEurope’s energy options (HADEO)

• The introduction of an allocation of emission permitsthrough an auction system open to all the operators concer-ned, not at national level, but at the level of the whole of theEuropean Union should also be examined. Obviously, inview of the possible repercussions of such a measure on thecompetitiveness of European firms, a solution of this kindcan only be introduced on condition that our principalcompetitors join in or that a compensatory mechanism beintroduced covering their own products (see 3.7.2 below).

3.4.4. The inclusion of transport in the Europeandisciplines

The transport sector is at this time the major absentee fromthe disciplines concerning CO2. Admittedly, targets and normsexist for cars, but the total effort remains highly insufficient,



6 2

notably with respect to the development of multimodal trans-port and incentives for the utilisation of public transport.

Certainly, the Commission has recently proposed the inclusionof transport in these disciplines11. Although initially intended toapply only to flights within the EU space, the Commission envi-sages extending their scope, starting 1 January 2012, to all flightsdeparting from or arriving at an airport located in the Union.

The objective in the short term should be to include all meansof transport, professional or personal, in the quota mecha-nism. This would make it possible to “internalise” the impacton the environment of the various forms of transport, thusbringing out clearly the contribution from each of them, notonly in terms of mobility and flexibility, but also in terms oftheir contribution to collective well-being. Private individualsthemselves would recognise a strong incentive to reduce theemissions of the vehicles they use or to make better informedtrade-offs in terms of the appropriateness of one journey oranother and of the most appropriate form of transport, in thelight of the direct and indirect costs generated.

Such a global approach would make it possible to establish (andwithout advocating any particular form of transport) a genuinepolicy of sustainable mobility, involving measures perceptible toEuropean citizens, for the improvement of energy efficiency inthe transport sector and the improvement of behaviour.

(11) Proposal for a Directive of the European Parliament and of the Council amendingDirective 2003/87/EC so as to include aviation activities in the scheme for green-house gas emission allowance trading within the Community SEC(2006) 1684 andSEC(2006) 1685.



6 3

3.4.5. Exploring all the other possible measures

One of the priority tasks for the High Authority for definingEurope’s energy options (HADEO) would consist of catalo-guing, on the basis of best international practice, energysaving measures that might be promoted at European level.

It is already possible to suggest two possible lines of reflection:• The first would consist of further exploiting the possibilities

of “induced demand reduction” (in other words, abstentionfrom consumption during a given period of high overalldemand) in both the electricity and gas sectors, for bothfirms and private customers. In the electricity sector, such ameasure would permit, first, a reduction in CO2 emissions,with the electricity production needed to meet peakdemand being met mostly from fossil fuels and, second,optimising the dimensions of the networks. In the case ofgas, improved utilisation of the capacity for enforced reduc-tion would permit a reduction in the scale of networks andstorage infrastructure. A phenomenon that has appeared, atleast on the French market, following the liberalisation ofthe sector, is the reduction of financial incentives to encou-rage induced demand reduction, in industrial contracts.Except for the very large consumers, this capacity for reduc-tion is no longer financially encouraged to any great extentby energy providers. Without wanting to minimise the tech-nical problems needing to be resolved (notably in terms ofmetering12), it is very unfortunate not to be able to use in this

(12) It would be necessary, in the case of both private individuals and SMEs, to replacemeters and generalise the tele-transmission of consumption data.



6 4

manner economic reflexes that are sound in terms ofenergy saving, and would permit a reduction in investmentin capacity for peak production and in network capacity.Extending such measures to domestic consumers wouldadmittedly imply investment in terms of metering (installa-tion of “smart” meters capable of being read from a dis-tance) but would be highly profitable, both pedagogicallyand as an incentive to modify the behaviour of private indi-viduals.

• The second would concern the various ways of incitingfirms or private individuals to modify the energy mix theyuse, notably in the field of transport and residential or pro-fessional premises. The aim of this measure would not onlybe energy saving, but also flexibility and reactivity in thedemand for energy. At a time when certain suppliers aremaking barely veiled threats to our supply, Europe has to bein a position to make a counter-threat, consisting of the pos-sibility of a substantial reduction in dependence on thesesuppliers.

3.4.6. Rethinking the tax instrument

Last but not least, the Institut Montaigne’s European Affairsworking group cannot fail to highlight how much the proposalit made in its October 2003 report “The case for a Europeantax”, consisting of making the taxation of energy one of theprincipal “own resources” of the Community budget, wouldcontribute to an audacious policy of energy saving and co-ordi-nation of national options regarding the energy mix.



6 5

Two additional instruments compared with those envisagedin the previous report might be considered. The first wouldconsist of a compensatory tax on the carbon “incorporated”in products imported from countries that fail to respect theconstraints of the Kyoto agreement (and in this way restorethe competitiveness of European firms versus those not obli-ged to respect them (see point 3.7.2). The second would be atax on carbon incorporated in products made in Europe(along the lines of the French “global tax on polluting activi-ties” – TGAP – and therefore influencing consumption).

3.5. PUTTING COMPETITION ANDREGULATION POLICY EFFECTIVELYAT THE SERVICE OF THE THREEOBJECTIVES OF ENERGY POLICY

The draft Constitutional Treaty had summarised the objectivesof the European energy policy in three points:• functioning of the market and competitiveness • security of supply• energy efficiency and new sources of energy (this third

point in fact characterising the objective of sustainabledevelopment).

Competition policy clearly has its place in the framework of thefirst objective. In other words, it cannot on its own summarisewhat a European energy policy should be. In any case, competi-tion policy has never been a policy per se, but a means of achie-ving greater efficiency of economic agents and improved allocation of resources. Competition policy is one of the instru-



6 6

ments at the service of public policy but cannot provide res-ponses to all questions that are posed, notably for the long term.It is merely one instrument for the construction of Europe –important, admittedly, since it is contained explicitly, since 25March 1957 in the preamble and in Article 3-g of the RomeTreaty – at the service of the policies of the Union. It comple-ments them, but is not a substitute for them.

In this context, it is necessary to safeguard the effectiveness ofcompetition policy and development of the internal market, incoherence with the other policies.

The efforts made since 1996 to open up to competition the gasand electricity sectors (following those undertaken a long timeearlier in the petroleum sector that led France to abolish the pro-tective regime established under the 1928 Law) have not bornethe expected fruit. In addition, competition policy seems to havebeen very badly sold, both in view of the economic situationand in terms of the communication themes chosen by theCommission, which – like many political authorities, alas – oftenstops short at expressions of self-satisfaction. Nevertheless, theobjective of opening markets and improving the functioning ofcompetition must not be called into question. Moreover, tojudge by the results of the energy sector inquiry carried out bythe Commission staff, the predominant position that continuesto be occupied by the incumbent operators makes it impossibleas yet to conclude that there is excessive competition in Europein the energy field.

Put simply, however, in such complex sectors it is indispensablethat regulation should accompany the move towards liberalisa-



6 7

tion. This regulation can include improved utilisation – even thereorientation – of the instruments used in the framework of thepolicy of competition and the internal market.

3.5.1. Adapting concentration control to thespecificities of the sector

The manifestations of nationalism (even when it is renamed“economic patriotism”) that are leading governments tooppose certain large-scale industrial operations in Europe(Endesa / Gas Natural / E-On; Suez / Gaz de France / Enel, etc.)are no accident. They reflect a worrying inward-looking ten-dency, as if each country still nurtured the hope – not to saythe illusion – of being able on its own to influence majorevents on the world stage.

These manifestations can present a real danger, to which theEuropean Commission must react:• with the existing statutory instruments (rather than through

declarations that are sometimes excessive and not followedby action)

• taking care not to assimilate all projects in the field of indus-trial strategy to manifestations of protectionism (certainoperations, even though strictly national, can make sense inindustrial terms)

• taking into account the legitimate concerns that mayemerge at the time of one operation or another: it is under-standable that, faced with the takeover of Endesa by E-On,the Spanish authorities and the Spanish people should wantto protect themselves against the risk that, in the event of a



6 8

major crisis, their supply might be sacrificed. Theconstraints that the competition authorities are entitled toimpose on firms that, on the occasion of a merger, threatento acquire or consolidate a dominant position, must include“commitments” to deal with problems of this kind.

The fact remains that, in its merger control policy, theCommission cannot ignore the tendency towards the concen-tration of operators seen elsewhere in the world. In order toface up to a giant like Gazprom, backed moreover in its ambi-tions by the power of the Russian state apparatus, Europe can-not be content with having an army of pygmies.

The creation of European “champions” in the energy fieldmust not only be envisaged but encouraged when economicchanges, notably concerning the size of markets, of suppliersand of customers, or even state intervention, make it justi-fiable. Obviously, tendencies towards concentration must notbe the pretext for so-called “economic patriotism” operations,whose demagogic content comes second only to their intel-lectual blindness. As far as possible, Europe must strive toencourage EU-wide trans-national mergers of the kind seen inmany other sectors in recent decades.

In parallel, the strategic nature of the energy sector couldmake it necessary to adopt specific safeguard arrangements.These mechanisms, based on those existing in the UnitedStates, would enable Member States to ban the acquisition bynon-European groups of certain firms active in the energyfield.



6 9

3.5.2. Reviewing the instruments for therepression of anti-competition practices

In this field, as in that of merger control, Europe must implementa policy imbued with pragmatism.

This means, among other things, that medium- and long-termcontracts must not be condemned as such, since they introducepredictability and fluidity into the market and make it possible toadapt supply to certain types of demand.

Can anyone believe that a minimum of commitment on the partof customers (notably those that are largest in terms of volume)will not facilitate the mobilisation of the resources needed tofinance the investment that is indispensable for the production of energy? Can anyone deny that the large gas consumers or theelectricity-intensive industrial firms need a minimum of predicta-bility regarding their supply commensurate with the financialresources they mobilise and the length of payback periods ontheir investment? Can anyone ignore the fact that the desireexpressed by the fossil fuel producers for ensuring security ofdemand necessitates the use of long-term supply contracts?

Already today, the supplier portfolio of the principal gas operatorsin Europe is based on long-term contracts.

Of course, care must be taken to ensure that long-term contractsdo not create a “foreclosure effect” on the market and strengthenthe position of the incumbent operators through de facto preven-tion of access by new operators. This could be done, for example,by enabling new entrants to “graft themselves onto” the market



7 0

through activities of the “gas release” or VPP (virtual power plant)type, or through grouped purchases.

However, in these conditions, it is absolutely essential for both theCommission and the national competition authorities to have apositive attitude to long-term contracts or grouped purchases.This question must be properly handled at European level.

3.5.3. Not limiting control to the actions of theoperators, but covering also governmentmeasures

If there is no real European market today, this is partly becauseof physical constraints (natural obstacles and lack of intercon-nection capacity) but also – and even especially – because of thenumerous practices in individual countries aimed at, or resultingin, the maintenance of “national exceptions”. Examples includethe persistence of regulated tariffs in certain countries, variouskinds of preferential treatment granted to incumbent operators,notably concerning public service obligations, etc.

It is illusory to believe that strictly national markets will make itpossible to maintain energy independence and economic com-petitiveness. What is more, such an attitude dissuades both na-tional firms and households from applying dynamic managementof their energy risk and therefore delays the indispensable introduc-tion of energy saving and the productivity gains making it possibleto surmount the current shock. Everyone has something to gainfrom presenting energy as necessarily more expensive today thanyesterday and more expensive tomorrow than today.



7 1

Instead of such measures, the Commission is contenting itselfwith having recourse to its traditional powers in virtue of Article226 of the Treaty (letter of formal notice, reasoned opinion,referral to the Court of Justice). In total, there is generally aninterval of between 5 and 6 years between the initiation of a pro-cedure and the final decision by the Court. It is indispensable toshorten this delay, unless the Commission is prepared to seeitself accused of brandishing a wooden sword.

The Commission must therefore attach the same priority tocombating government measures as it does to acting againstanti-competition practices on the part of firms. The two must gohand in hand, including in terms of rapidity.

3.5.4. What type of regulation (or regulations) of the market?

In order to ensure the maintenance of these delicate balances,effective regulation is indispensable, which in turn implieshaving regulators fully invested with the prerogatives andmeans of action needed for them to fulfil their task13. In parti-cular, this is the condition for regulators to be able to find theright balance between public service and competition and toencourage the emergence of a consensus regarding productivecapacity and the proper functioning of market mechanisms.

(13) On this point, the adoption in France of the Law dated 7 December 2006 is mani-festly a blow to independent regulation in that it contains provisions clearly inten-ded to weaken the French regulator, by reducing the number of its full-time mem-bers and withdrawing its authority for settling differences between operators. Theleast that can be said is that France, by introducing these provisions, has not increa-sed its credibility and its capacity to have its voice heard in Europe.



7 2

Homogeneous regulation at EU level implies that all nationalregulators in Member States enjoy the same prerogatives. Italso assumes that they co-operate effectively. For this purpose,rather than envisage a single European regulator, it would bebetter to improve their co-ordination through the creation ofa genuine organisation of European regulators, having realpowers, for example to impose harmonised rules for the func-tioning of the regulators, combined with the possibility ofsanctions (ERGEG +).

This organisation will have to be articulated with theAuthority, in order to maintain the coherence of reflectionand action (see 3.1.2 above).

3.5.5. Improving the functioning of markets: the question of networks and storage

3.5.5.1. Promoting investment

Developing infrastructure and encouraging investment ininterconnection, for both gas and electricity, constitute priori-ties if the aim is to disenclave the markets and create as uni-fied a space as possible within the European Union.

This implies drawing up a multi-year plan at European levelfor priority investment in infrastructure (methane tanker ter-minals, gas pipelines, high-voltage transmission lines, inter-connections, etc.). Such an exercise would make it possible todefine the priorities for financing using Community instru-ments (EIB, structural funds).



7 3

In parallel, a reflection will have to be launched concerningthe improvement of the approval procedures for infrastruc-ture of interest to Europe. The NIMBY (not in my backyard)syndrome, combined with the numerous lobbies for the pro-tection of nature, constitutes a major obstacle to the creationof new infrastructure. Without denying the importance of bio-diversity or of giving the local population the possibility ofparticipating in public utility enquiries or of holding the indis-pensable public debates, in the case of the large Europeanprojects the other parties concerned (notably the operators,the consumers and the citizens of neighbouring countries)must be able to have their say and to place their preoccupa-tions in the balance of the discussion along with those ofinhabitants who see no further than the interest of their ownlocality. This implies the drawing up of specific provisions fortaking account of the public interest in a local procedure butone that is articulated at European level.

3.5.5.2. Reinforcing the independence of management in the case of network operators

At the same time it will be necessary to strengthen transparencyand guarantee non-discrimination concerning the conditions ofaccess to this infrastructure. This must not lead to the exclusionof the possibility of reserving, on a commercial basis, capacitymaking it possible to encourage the development of transbor-der contracts for medium- and long-term supply, but these pro-cedures must be transparent and non-discriminatory.

Even so, is it necessary, as the Commission envisages, toencourage complete separation between ownership of net-



7 4

works and the exercise of a production or supply activity(through the process known as ownership unbundling)? Thegroup, after considered reflection and a wide-ranging debate,has taken the view that this was not necessarily the correct res-ponse. In the group’s view, it was far preferable to improve,wherever still necessary, the independence of management ofthe operators of transport and distribution networks. Thisimplies, in the first place, seeing that the existing arrange-ments under Community law are uniformly applied in allMember States.

The Commission, through various statements, has indicatedthat these rules are not correctly applied in several MemberStates, something which justifies further reforms. However,the Commission has so far not launched any formal proce-dure on the ground against firms liable to be involved. Thishas created a climate of suspicion regarding the organisationof networks that is hardly favourable to the functioning of themarkets. If there are cases of failure to observe the rules, theCommission must, without waiting for the entry into force ofthese new measures, arrange for the effective application inall Member States of the existing rules of dissociation, as wellas measures aimed at safeguarding the network operators’independence of management.

Looking to the future, one of the ways in which rapid andsignificant progress could be made consists of verifying thatthe representatives of the parent company in the executivebodies of the network operators are there for the sole pur-pose of opposing any serious threat to the assets and have nopowers of intervention in operational management nor any



7 5

influence over the appointment of members. Governance dis-putes would then be settled by the regulator.

3.5.5.3. Strengthening co-operation between networkmanagers

The major power failure of 3 November 2006 which blackedout – admittedly only briefly – some 10 million Europeansbrought into the open a dysfunctioning in the management ofthe electricity transport networks.

To prevent any repetition of this situation, it has becomeurgent to improve the management of the network operators’security arrangements. The following measures could beimplemented without any major statutory innovation orexcessively cumbersome bureaucracy:• Constitution of a formal grouping of the transport network

managers in order to draw up the common rules indis-pensable for the functioning of the networks, rules thatwould involve sanctions in the event of failure to respectthem

• Creation of a European dispatching centre to ensure co-ordination exchanges between network operators.

The initiatives introduced by the European Union in the“open skies” case could serve as example, with the adjust-ments needed to allow for the specific features of the sectorand its players.

In addition, groupings bringing together transport and/or dis-tribution networks at European level should be encouraged.



7 6

3.5.5.4. The creation of new storage facilities and the co-ordination of crisis management arrangements

The existence of European strategic gas stocks would make itpossible to deal with crisis situations of the kind experiencedby Europe at the time of the dispute between Russia and theUkraine or the tensions with Belarus. Similar situations couldoccur again in the future involving these same countries orothers.

Not only would such stocks improve security of supply butthey would also constitute a means of applying pressure onour suppliers. There are, admittedly, numerous technical diffi-culties (identification and installation of sites, time needed forcompletion, trade-off between the allocation of storage capa-city for strategic purposes and for seasonal smoothing). Inaddition, considerable finance will be required. These diffi-culties should not be allowed to conceal the fact that what ismost lacking is political will. If this is present, we shall at leastbe able to have a clear and objective estimate of the nature ofthe difficulties and find the necessary technical and financialresponses, including the possibility of partly private storagemechanisms of the kind seen for petroleum products.

Improved co-ordination of the utilisation of strategic stocks ofpetroleum products should also be organised at EU level, eventhough the IEA must remain the decision-making body.

Nor should reflection be limited to gas and petroleum pro-ducts. The storage concept can also be applied, suitably adap-ted, to the electricity sector. It would then take the form of the



7 7

creation of available production capacity. On this question,Europe is far from having taken the measure of the problem.The High Authority for defining Europe's energy options(HADEO) should also set itself the task of identifying the pos-sibilities for the extension of the technical reserves obliga-tions imposed on owners of productive capacity as well asthose concerning the remuneration of peak capacity, eventhough its function is not to provide electricity except in par-ticularly tense situations of supply and demand. This wouldmake it possible to tackle with greater serenity the question ofthe most appropriate size of European generating capacity.

Lastly, co-ordination of the national crisis managementmechanisms would be desirable, distinct from the “network ofcorrespondents” set up on the basis of the proposal contai-ned in the joint communication from Javier Solana and theCommission.

France, which has recently adopted a decree relating to nationalemergency measures aimed at ensuring the security of supplyof natural gas in the event of crisis, could take the initiative for a dialogue in Brussels regarding this type of emergencyplanning.

3.6. PREPARING FOR THE FUTURE:RESEARCH, DEVELOPMENT AND INDUSTRIAL STRATEGY

The energy challenges facing Europe are long-term in natureand cannot be resolved in the absence of technical innovation.



7 8

The research potential of the European Union must be allo-wed to position itself at the cutting edge of tomorrow’senergy, as it is today through “champions” like E.ON, EDF,AREVA, BP, Total, etc.

Without claiming to be exhaustive, a list can be made of nume-rous fields in which Europe should conduct a very ambitiousresearch effort. The Framework Programme for Research andTechnological Development has identified most of them(alternative energy sources, superconductivity, fuel cells, bio-fuels, nuclear energy, biomass, wind power, solar power, etc.),so there is little point in dwelling on them here.

In view of its dependence for gas and oil, Europe must givepriority to the two sectors in which it has at its disposal tech-nological and mineral resources but which both present envi-ronmental risks justifying special R&D efforts: nuclear energy,with the aim of rapidly having available a fourth-generationprototype; and clean coal. In addition, there should be R&Defforts relating to carbon sequestration (a field in which aconsiderable effort must be launched without delay atEuropean level) and circulating fluidised bed technology14.

Efforts will also have to be made in the field of biofuels.Although these are sometimes known as “green energy”, theirenvironmental balance sheet is not necessarily positive (nota-bly when account is taken of the risk of massive use of water

(14) This technique for the combustion of coal in the form of a mass of fine particles(ash, aggregates) maintained in suspension on upward-blowing jets of air makesit possible to burn more difficult types of combustible (coal slack, lignite, low-qua-lity coal, petroleum residues) and sharply reduce the emission of pollutants.



7 9

resources). This means that the policy of promoting biofuelslaunched by the Commission cannot really be effective untilthe results of R&D make it possible to improve the productionconditions and yields for these fuels.

At the same time, research must be intensified concerningenergy-saving and rational use of energy. Curiously, severalfields seem to be inadequately explored at present: auto-pro-duction (for example, energy auto-producing buildings),hybrid vehicles or vehicles running on alternative energysources.

Such a research policy at European level is indispensablebecause:• Europe is admittedly the home of great “champions”, but

these still have too much traditional energy at their dispo-sal to be really forced to innovate and to invent tomor-row’s energy. Market forces seem not to be sufficientlyeffective as regards providing incentives for innovation,the result being that technological innovations find them-selves hampered by the prosperity of the major suppliersof fossil fuels (the increased profitability in the short runis in a way an obstacle to the search for audacious long-term solutions)

• Member States (and their research organisations) do nothave the financial resources needed for building up appro-priate research programmes on all these subjects.

This research effort must be accompanied by a technologicaland industrial development effort in the energy sector. The aimwould be to create European poles of excellence and technolo-



8 0

gical mastery in branches where capacity is insufficient orwhere demand is likely to expand strongly, both inside andoutside the Union. This is the case for “clean coal” and thecapture of CO2, as well as for the whole of the nuclear energysector.

On this last point, it is in fact a matter of urgency that Europeshould break the nuclear taboo. It is impossible today to pro-nounce the word ‘nuclear’ in Community bodies with any sere-nity. Even when in the Council there is discussion of the possi-bilities of energy partnership with India, which is extremelyinterested in obtaining nuclear technology, some delegationsindicate their refusal.

Unfortunately, the more Europe declares itself wanting to relin-quish nuclear energy, the more it places itself in a situation ofdependence regarding other energy sources, notably gas.Moreover, it is almost only in Western Europe that nuclear energyis referred to negatively15. The tone in other countries, includingthe United States, is distinctly more favourable, with numerouscountries begging for technological and industrial assistance fromEurope in order to develop their own programmes.

In 2004, Loyola de Palacio had shown the way by proposing,ignoring the reluctance shown by many of her fellow-Commissioners, a plan of action to “revisit” the nuclear dossier,

(15) Despite the fact that, at the same time, fossil fuels are being shown to be amongthe most dangerous for the environment and for public health, to judge by a paperdated March 2006 from the Thomas More Institute, citing work by the PaulScherrer Institute in Switzerland, putting at more than 100,000 the number ofdeaths caused each year by explosions, accidents in mines or on drilling rigs, andby breaks in fuel pipelines, not to mention noxious fumes, acid rain, silicosis, etc.



8 1

starting with the security aspect but with the clear ambition ofgoing much further. The guidelines defined by the Commissionin its “Strategic Review” seem to confirm this revised apprecia-tion of the importance of nuclear energy.

Europe must go further still, by placing nuclear energy at thecentre of its priorities for both research and industrial strategy.

With this in mind, it is up to the Commission to indicateclearly how it sees the future of the Euratom Treaty:• Should it be sidelined and replaced by informal co-opera-

tion between the Member States most directly interested?• Should it be amended in order to adapt it to the new

ongoing realities? • Should it be maintained as it is, but with its operating moda-

lities relaxed (assuming no revision of treaties)?

Clarification by the Commission of its intentions would behighly opportune.

In a first major step forward, in fact, its role as guardian of thetreaties should lead it to remind the countries that are the fier-cest opponents that they have signed and ratified the Treaty ofRome setting up the European Atomic Energy Community,whose first article proclaims the intention to develop peacefuluses of the atom and to implement a common policy to this end.

For its part, the group advocates keeping the Euratom Treatyas it stands, pending a calmer debate on nuclear energy, thesole means of reviewing its place in the panoply of treatiesgoverning the European Union.



8 2

3.7. CONDUCTING A MORE DETERMINEDAND BETTER CO-ORDINATEDFOREIGN POLICY

In order to maintain its industrial and economic power, or even sim-ply its standard of living, Europe must ensure that it has externalsources of supply that are reliable over the long term. The relativeweakness of each individual member of the Union prevents it fromhaving access to such sources under lasting and satisfactory condi-tions at the dawn of an inevitable confrontation between its needsand those of other large consumer blocs, notably the emergingcountries.

It has in fact become clear that access to energy resources hasbecome an instrument of foreign policy, as illustrated by the disputebetween Russia and Ukraine16, the growing politicisation ofVenezuela’s use of its oil resources or Iran’s “oil and gas for nuclearenergy” blackmail, to take only the most recent examples.

Known energy evolutions suggest that Europe is going to becomemore and more vulnerable. By 2030 the European Union couldwell depend on imports for 70% of its energy needs.

The question Europe has to resolve is therefore simple: how can itexert its full weight in a world of energy that is increasingly imper-vious to the influence of its Member States?

(16) Even though, in this connection, it can be noted that Russia has made known itsconcern to bring back progressively into line with market prices all the prices itpractises vis-à-vis its CIS partners, it is impossible to ignore the fact that it is makinghighly political use of this declared intention, favouring docile Armenia and pena-lising more severely Ukraine and Georgia.



8 3

3.7.1. Many initiatives but few concrete results

The European Union has been at the origin of several initia-tives intended to strengthen international co-operation in theenergy field:• the energy partnership with Russia• the Euro-Mediterranean Partnership (the Barcelona process)• the European Neighbourhood Policy and the negotiations

with countries that are candidates for accession• the European Energy Charter and the Protocol on Energy

Efficiency• the EU Energy Initiative launched in 2002 at the

Johannesburg Summit meeting on sustainable development• the “energy facility” granted to the African, Caribbean and

Pacific (ACP) Group of States.

It is nevertheless possible to question whether these initia-tives have given rise to concrete results.

3.7.2. What new initiatives?

Defining a European-level global external policy on energyquestions can only take place in parallel with the intensifica-tion of the EU’s Common Foreign and Security Policy.

Europe must ensure that its diplomatic interests are bettertaken into account in the energy sector as in the case of secu-rity, on the lines of the question of the application by Iran ofthe Nuclear Non-Proliferation Treaty. The European Unionmust be in a position to exert its geopolitical weight at world



8 4

level in the energy field, basing itself, in particular, on itsconsumption potential and its diplomatic presence, articula-ting concrete claims and presenting itself as a genuine playeralongside the giants of the sector, whether consumers or pro-ducers, like Russia, the United States, China and Saudi Arabia.

In energy as in other sectors, “cheque-book and verbal diplo-macy”17 must be replaced by more determined action.

Within this framework, the European Union should set itselfthe following principal objectives:• Exerting pressure on the large energy-consuming countries

(United States, China, India, etc.) in the framework of directnegotiations in order to bring them to take their full res-ponsibilities in the fight against global warming.

• Failing success in this respect, introducing a “compensatorytax” on products from countries that do not apply the Kyotoundertakings (these countries being the principal emittersof greenhouse gases) in order to induce them to mend theirbehaviour or, in the event of their refusal, to re-establishcompetitive equilibrium between European firms and theirmain competitors, in accordance with WTO rules.

• Engaging in bilateral negotiations to ensure that there is a“level playing field” as between, on the one hand, producerswanting access to the European market while maintainingtheir exploitation of export policies and refusing to open up

(17) See the reports “Europe: defining an exacting political project” and “Europe: res-toring an institutional coherence”, published by the Institut Montaigne inJanuary 2003.



8 5

their own networks and, on the other, European companiesthat can only with difficulty have access to certain upstreamstages of production.

• Encouraging partnership relations between the authoritiesand European private operators in order to ensure properdissemination of the information available from the playersand to prepare joint strategies for action vis-à-vis the produ-cing countries. This measure implies the installation of astructure permitting the organisation of this dialogue. Thesenior staff responsible for the ESDP (European Securityand Defence Policy) could provide the necessary structure,in co-operation with the High Authority for definingEurope's energy options.

Looking beyond this influence-based strategy, it will be neces-sary to have available European-level dissuasion measures:effective strategic stocks, or legislation similar to the “Scott-Rodino” Law enabling the United States, at its discretion, tooppose foreign shareholdings in certain firms, exemplified bythe refusal of the purchase of UNOCAL by the Chinese firmsCNOOC in the summer of 2005.

Such a policy must also propose a balanced response to theproducer countries, which in turn must lead Europe to acceptthe opening of dialogue regarding what is meant in practiceby their claims with respect to ensuring “security ofdemand”18. It is undeniable that the OPEC countries, to takethis one example, have little incentive to carry out large-scale

(18) Cf. the OPEC report published in January 2006 entitled “OPEC long-term strategy”.



8 6

investment, partly because current prices are highly remune-rative but also because they do not have sufficient guaranteesregarding the durability of the demand. In working out its stra-tegy, Europe cannot ignore this question.

3.7.3. The Middle East, present and future focusof world energy challenges

Many of the world’s gas- or oil-producing regions are of majorinterest to Europe. Examples include Latin America, especiallyVenezuela, or the Gulf of Guinea, where European companieshave a massive presence in the exploration and productionsectors.

However, no region of the world seems in a position toreplace the Middle East for the production of hydrocarbonsbetween now and 2030. This region is estimated to have 63%of the known oil reserves and 35% of the gas reserves.

The aim of the American intervention in Iraq in 2003 was,among other things, to relaunch the production of Iraqi crudeoil following the collapse of Saddam Hussein's regime and toreach a level of output of 6 to 7 million barrels per day by 2010(Iraq has roughly 11% of the world’s oil reserves). It is nowclear that this latter target will not be met, given the state ofcivil war reigning in the country.

Recent European experience in the Middle East has not beena great success, either. The funds paid by the EU for thereconstruction of the Palestinian territories, including Gaza,



8 7

have been largely wasted as the result of the launching of thesecond Intifada after 2000 and the scale of the Israeli reprisalsthat followed. Negotiations between the European Troika(Germany, France, United Kingdom) and Iran on the questionof uranium enrichment have not so far had the desired results.

And yet Europe is going to be obliged, whether it likes it ornot, to involve itself strongly and in different fashion in theMiddle East in the near future. The stability of the Middle Eastand especially of certain key producers (Saudi Arabia, Iraq,Iran, Kuwait, Qatar) is vital for the supply of the world marketand the stability of prices over the long term.

Europe must therefore take itself in hand and propose apolicy different from that of the United States. The percep-tion of the role of the Western world in the eyes of publicopinion in Turkey, Iran and many Arab countries is quitecatastrophic and could in fact lead at some stage to a formof self-fulfilling prophecy regarding the clash of civilisa-tions19. Europe must be capable of proposing alternativeoptions to help resolve the Israeli-Palestinian conflict andhave at its disposal its own military capacity for, amongother things, ensuring security of shipping routes in theStrait of Hormuz or the Strait of Bal-El-Mandeb and beingable to apply credible instruments of the “carrot and stick”type in order to be taken seriously and make an effectivecontribution to the stability of a region that is a major pro-ducer of hydrocarbons.

(19) Cf. Samuel Huntington, The clash of civilizations and the remaking of world order,Touchstone, London, 1997.



8 8

If Europe fails to set itself these objectives, others will take its place(China or India, initially) and it will have lost for good its access tothe world’s energy hub. What is at stake, therefore, is nothing lessthan Europe’s capacity to influence the new world energy order.

3.7.4. The special case of Russia

Russia’s policy of regaining control of national firms in theenergy sector and the “trial of strength” it has been wagingwith certain customers since 2004 (especially those that for-merly lay within its sphere of influence) are reasons for givingRussia a special place in the European Union’s foreign policy.As a neighbour of the Union and an energy giant, this woun-ded former great power, which is seeking to regain a majorrole in the world, is and will remain an unavoidable partnerfor Europe. It is both our closest neighbour since the 2004 and2007 enlargements and one of our principal suppliers.

At the same time, however, Russia is a partly unpredictableand difficult partner, the latest illustration of this being the gasand oil crisis with Belarus in December 2006.

Why is Russia so important for Europe?

• Russia has 25% of the world’s gas reserves, the same shareas the Middle East. It will therefore be in a dominant posi-tion on the world gas market for 30 years to come.

• Russia provides almost 50% of the EU’s imports of naturalgas and 20% of its oil consumption.



8 9

• The European Union remains by far the principal exportmarket for Russian energy. More than 90% of Russian gasexports and 75% of its oil exports go to EU countries. TheRussian authorities are reported to have announced theirwillingness to export 200 billion m3 of gas to Europe(excluding the Baltic states) in 2008/201020, out of a totalvolume of 245-275 billion m3, compared with totalEuropean annual requirements of close to 500 billion m3

in this period.

• In their dealings with Europe, the Russians show a consis-tent attitude, involving the regain by the state of controlover their energy sector. Following the elimination ofYukos, the buildup of the importance of Gazprom and,through Transneft, their control of the oil pipeline network,the Russians say they want to find customers other thanEurope for their products. They want to avoid any situationof dependence and, as a consequence, are turning both tothe Asian countries and possibly in future to the UnitedStates, with which they are considering an enormous gasliquefaction project in Murmansk aimed at exporting LNGto the American continent. This position remains somewhatambiguous, however, as shown by the decision taken in2006 to give priority – at least in the short term – to Europeas the outlet for the gas from the Barents Sea (theStockmanovskoye field, as distinguished from the LNG pro-ject involving the United States).

(20) Source: Les évolutions de la stratégie d’exportation gazière de la Russie L’Europecontre l’Asie? Catherine LOCATELLI - September 2004. Laboratoire d’Economie dela Production et de l’Intégration Internationale - Département Energie et Politiquesde l'Environnement (EPE) - Cahier de recherche LEPII - Série EPE n°38.



9 0

• The Russian financial crisis in 1998, which was closely lin-ked to the fall in energy prices, no doubt explains a sub-stantial part of the Kremlin's current attitude and its claimsfor ensuring security of demand. Put simply, the Kremlinwants to wipe out the political and territorial humiliation itsuffered in the 1990s. The rent from oil and gas has enabledit to achieve a spectacular financial recovery, but this hassharpened its ambition of achieving independence vis-à-visthe Western countries, especially concerning the exploita-tion of its energy and mineral wealth.

• In February 2005 Russia imposed a total ban on the acquisi-tion by foreign firms of majority holdings in the country’shydrocarbons sector. European firms present on theRussian market such as BP, Shell and Total have beenencountering growing difficulties as the result of continualchanges made by the Russian authorities in the taxation,regulatory and political fields.

• Russian diplomacy is once more highly active.Agreements with Germany are intended to lead to theconstruction of the North European gas pipeline underthe Baltic. Agreements at industrial level have been signedbetween Gazprom and ENI in order to guarantee the secu-rity of Italian gas supplies in exchange for technologicaltransfers. Under these agreements, Gazprom will start tosell gas on the Italian market in 2007, with the volumeamounting to 3 billion m3 starting in 2010 and continuingat that level until the expiry of the contract in 2035. Closerrelations have been established with China and India inthe energy field. In June 2005 the Foreign Ministers of the



9 1

three countries expressed the wish to strengthen their co-operation concerning energy resources. Russia has tried tomake the G-8 the preferred forum for discussions onenergy (it was the major topic under the Russian G-8 chair-manship in 2006). Russia has introduced a more nationa-list stance in its relations with its “nearest foreigners”,accompanied by threats of reprisals vis-à-vis recalcitrantcountries like Ukraine and Georgia. An agreement withAlgeria, signed in August 2006, brings together Gazprom,Lukoil and Sonatrach and encourages the export of themost modern equipment – including military equipment –to that country.

• The Russians cherish the idea of setting up a “gas OPEC”under their own leadership, along with Iran and Algeria. Vis-à-vis Europe, Russia, like OPEC, wants to ensure security ofdemand and, more recently, has been declaring its industrialambitions concerning supply activities and the exploitationof networks.

• Finally, returning to the classic themes of Soviet policy,Russia has resumed its strategy of chess grandmaster, inwhich positional play, offensive pressure and systematicanticipation of “next moves” form an integral part of diplo-matic activity.

Europe therefore has much at stake. What can the EU do toestablish lasting relations of confidence with Russia?

• First of all, it must do away with any temptation along the linesof “every man for himself”. Russia must be pleased to see the



9 2

return of economic nationalism in Europe and the relative failure of the European energy market. Vladimir Putin willalways prefer to talk to divided countries, just as Gazprom willalways prefer to do business with a large number of groups, ofessentially national dimensions, that it can play off againsteach other rather than confront European giants that arerepresentative of the totality of interests of the Union.

• It must prohibit any bilateral negotiations at country levelon energy questions without prior consultation with theother EU members. This ban must apply also to other bila-teral negotiations between EU members and third coun-tries, but is especially important in the case of Russia. Thisprior consultation could be ensured under the aegis of theHigh Representative for Common Foreign and SecurityPolicy, Javier Solana. It is indispensable that all countries –notably France, but also Italy, Germany, the UnitedKingdom and Poland – agree to talk with one voice to theKremlin and that they be, at the very least, severely repri-manded in the event of bilateral negotiations without priorconsultation.

• Envisage strengthening storage capacity, but without imita-ting the American model of reserves that are cumbersomeand costly to manage, and pursue a policy of diversificationof supply through the development of the LNG market andthe infrastructure needed to import this type of energy,such as methane tanker terminals.

• Extend the range of possibilities by strengthening Europe’spolitical, economic and even military presence in other



9 3

countries/areas such as Turkey and the Caucasus in order topermit direct access to energy resources from Central Asiaand perhaps, in the longer term, from Iran by proposing theconstruction of alternative gas and oil pipelines from theseregions. Europe – in practice, European firms – could in facttry to obtain, possibly in association with Russia, responsi-bility for the construction and management of the Nabuccoproject, intended to connect the Iranian fields to CentralEurope via Turkey and the Balkans.

• Lastly, in the event of failure of the co-operative approachwith Russia, not rule out the adoption of regulatory or finan-cial measures aimed at limiting the possibilities for Russianfirms of increasing their presence on the European marketat a time when Russia is trying to become a “national” playeron this same market.

In theory, the proximity to Europe of the world’s principalgas resources is fortunate, just as the proximity of a solventmarket as large as the European one is fortunate for Russia.On the basis of objective economic criteria, the long-terminterests of Russia and Europe are convergent.

However, the present political context means that it is neces-sary to remain cautious. As long as Russia behaves in a waythat is perceived as threatening and as long as it continues touse its resources as an instrument to gain concessions fromEurope, it is clear that the objective convergence of econo-mic interests will be of little weight in the balance against theabsence of political confidence. Europe must not hesitate todemonstrate great firmness vis-à-vis Russia if the latter shows



9 4

itself to be menacing or seeks to destabilise some EU mem-bers that are particularly dependent on Russian gas and oil(especially the Baltic states, Slovakia, Hungary, the CzechRepublic, Bulgaria and Romania).

These are probably the only conditions on which it will bepossible to engage in serious negotiations and establish afertile partnership.

3.7.5. The role of multilateral fora

In its diplomatic action, Europe will also have to choose, in itsbest interests, the multilateral fora to which it wishes to givepreference. Its attitude will have to be dictated by theinfluence it exerts, or could exert in the future, in the variousmultilateral organisations liable to be concerned.

Four of these deserve particular attention: the G-8, the WTO,NATO and the IEA.

• The G-8 is probably relevant inasmuch as it permits anexchange of views between the industrialised countries andRussia. This body has in fact set up, under the title of E8, aforum for consultation between energy companies in itsmember countries.

• The WTO is a forum that has not been given sufficient prio-rity in the past and which should now be moved up the list.An organisation that sets itself the target of liberalisation oftrade should be a natural place for discussion concerning a



9 5

sector where protectionist and discriminatory measures arebecoming more numerous. Asking the WTO to includeenergy in its policies should therefore be a European prio-rity. In so doing, Europe should request not only the pro-tection of investment but also the liberalisation of publicprocurement and the application of the principle of non-discrimination in trade matters. The aim would be to makethe energy market progressively more open to competitionin all its segments and to use the instruments and proce-dures of the WTO in dealing with countries that refuseinternational investment or reciprocity of trade (SouthAmerica, Middle East, Russia, etc.).

• Some EU members, such as Poland, are talking of the needto create an “energy NATO” to deal with the problem ofEurope’s energy independence. In the energy field andexcept in periods of crisis, NATO is competent as regardsthe management of oil pipelines in the direction of CentralEuropean countries as part of the organisation of the mana-gement of NATO oil pipelines in the region throughCEPMO, which has seven members including France,Germany, the United Kingdom, the United States andCanada. However, certain countries would like to extendthis competence. The reflection in NATO on this subject is aresponse to concerns similar to those of the EuropeanUnion: ensuring proper supply of the markets through thecreation of networks and create preferential and securepartnerships with producer countries. Some NATO mem-bers would like the organisation to be the guardian ofenergy security for the whole Western world, which wouldimply, for example, that in the event of a serious security cri-



9 6

sis in a producer country the organisation would have totalfreedom to intervene. However, this vision is not in confor-mity with the letter or the spirit of the Washington Treaty of4 April 1949. Such a strengthening of NATO’s role in thefield of energy security could perhaps ensure improved co-ordination of European strategies towards problem produc-tion zones, but entrusting this role to NATO would also leadto a major extension of its geographic and technical com-petences and, as a result, would send out a negative signal tothe rest of the world and to new consumers like China, tothe effect that the Western world is in the course of “batte-ning down” its energy security, even though the factorsinducing such changes are in fact the direct associationmade by numerous emerging countries between energysecurity and defence. In these circumstances, it is clear thatthe European Union would have very little room formanoeuvre, given the predominant influence of the UnitedStates in this body.

• The IEA is a forum that the European countries know wellfor having participated in its creation. They try to use it intheir best interests, for managing petroleum stocks or dis-cussing scenarios of energy production and consumption.The IEA will be able to maintain this privileged role, provi-ded that it can suitably articulate the competences of emer-ging Europe, “old” Europe and the Agency itself, in their res-pective best interests.

Finally, it will be indispensable for the European Union to pre-pare for the post-Kyoto period, i.e. 2012-2050. This will involvepreparation both of a conceptual nature (what level of



9 7

constraints will European countries be prepared to acceptover the long term) and of a diplomatic nature in order toensure that all countries agree to make efforts on the samescale and that the emerging countries rapidly become partici-pants in this action.

3.8. IN CONCLUSION, DRAW UP A ROADMAP FOR EUROPE AND FOR FRANCE IN THE FIELD OF ENERGY POLICY

A European energy policy can contribute to relaunching theconstruction of Europe by means of action that is both preciseand well understood by its citizens. It is in fact the type of stra-tegy that has regularly served to advance the Union. However,political resistance will be strong, both at the level of theCommunity institutions and that of the Member States. Thismakes it all the more urgent to provide Europe with a road-map containing the seven priorities for action mentioned earlier and articulated around the concrete propositions contained in this report.

France must be a driving force in this movement, meaningthat it has to accept the constraints implied by leadership byexample. Acting as a driving force means not only promotingthe ideas in its January 2006 memorandum but also, throughcontact and persuasion, trying to establish the “energyconvergence pacts” mentioned in point 3.2. Accepting theconstraints imposed by exemplarity also means participatingwholeheartedly in the move towards liberalisation, abstaining



9 8

from adopting mechanisms that are incompatible withEuropean rules (such as the permanence of regulated tariffs),ceasing to try to weaken the national regulator and insteadrestoring his full prerogatives and means of action. Finally, itmeans putting an end to the manifestations of protectionism.


9 9

The Institut Montaigne especially wishes to thank the mem-bers of the working group who have worked on this report, aswell as the people who agreed to be interviewed.

Composition of the “European Affairs” workinggroup – energy policy

Chairman

• Jean-Paul Tran Thiet

Rapporteur

• Vincent Jaunet

Members of the group

• Laurent Catenos• Dominique Chauvin• Fabien Choné• Michel Derdevet• Albert Diena• Eric Dyèvre• Thierry Grimaux• Didier Houssin• Cédric de Lestrange• Christophe-Alexandre Paillard• François-Xavier Priollaud• Laetitia Puyfaucher• Philippe Rincazaux • François Scheer • Didier Sire • Henri Tcheng

ACKNOWLEDGEMENTS



1 0 0

N.B. All the members of the group participated in a personalcapacity and their opinions or proposals can in no way betaken to represent those of the bodies to which they maybelong.

Persons interviewed

• Fabrizio Barbaso, Deputy Director General in the European Commission

• Pierre Boissieu, Deputy Secretary General of the Council of the EuropeanUnion

• Jean-Paul Bouttes, Executive Vice President, Prospective & InternationalAffairs, EDF

• Alain Bucaille, Senior Vice-President in charge of Research andInnovation, Areva

• Fadhil J. Chalabi, Executive Director, Centre for Global Energy Studies

• Francis Delon, Secretary General for National Defence

• Nicole Fontaine, Member of the European Parliament

• Jean-Jacques Guillet, Member of the French Parliament

• Christopher Jones, Deputy Head of Cabinet to M. Piebalgs, EuropeanCommissioner for energy


A C K N O W L E D G E M E N T S

1 0 1

• Dominique Maillard, Director General for Energy and Raw Materials, Ministryfor the Economy, Finance and Industry

• André Merlin, Chairman of the RTE Executive Board

• Pierre Radanne, former Chairman of ADEME, independent expert

• Paul Quilès, Member of the French Parliament

• Pierre Sellal, Ambassador, Permanent Representative of the FrenchRepublic to the European Communities



1 0 2


1 0 3

• Breaking free from French social immobilityAnna Stellinger(November 2006, French )

• Enabling French universities to become leaders in worldcompetition (October 2006, French)

• How to save the French daily newspaper industry(August 2006, French)

• Why French SMEs fail to grow Anne Dumas (July 2006, French)

• Globalisation: reconciling France with competitiveness(June 2006, French)

• How best to finance social welfare…Jacques Bichot (May 2006, French)

• What firms can do to curb poverty and exclusion(February 2006, French)

• Diversify selection for elite higher education(January 2006, French)

• Government real estate: what to sell, why and how(December 2005, French)

• 15 ways – among others – of modernising the public sector (November 2005, French)

• Ambition for farming, freedom for farmers(July 2005, French and English)

• Hospitals : the invisible modelDenise Silber with Laurent Castra, Pascal Garel and Ahmad Risk(June 2005, French)

INSTITUT MONTAIGNE

PUBLICATIONS



1 0 4

• The case for a Comptroller General for public finances(February 2005, French)

• Globalisation and democratic dispossession: the gyroscope syndromeLuc Ferry(December 2004, French)

• Five years after Lisbon: how to make Europe competitive(November 2004, French)

• Neither quotas nor indifference: firms and positive equality Laurent Blivet(October 2004, French)

• Reforming the French justice system (September 2004, French)

• Regulation: what Brussels should really be doing (June 2004, French)

• Universal health coverage (May 2004, French)

• The non-profit sector and the public good (April 2004, French)

• The outcasts from equality of opportunity (January 2004, French)

• Reinventing the hospital (January 2004, French)

• The case for a European tax(October 2003, French)

• Ageing and competitiveness (September 2003, French)

• From “lifelong learning” to employability (September 2003, French)

• Improving corporate governance (March 2003, French)


INSTITUT MONTAIGNE — PUBLICATIONS

1 0 5

• Europe (volume 1): defining an exacting political project(January 2003, French)

• Europe (volume 2): restoring an institutional coherence(January 2003, French)

• 25 proposals to promote foundations in France(November 2002, French)

• The case for universal sickness insurance (October 2002, French)

• How to improve the working of Parliament(October 2002 – out of print)

• How better to articulate research and innovation (September 2002, French)

• The French sport model: transformation or crisis? (July 2002, French – out of print)

• French national security in the light of the new strategic risks (May 2002, French)

• Mankind and climate change (March 2002, French)

• The case for autonomous schools (November 2001, French – out of print)

• Public management and zero tolerance (November 2001, French – out of print)

Reports can be ordered from the Institute’s secretariat on +33 1 58 18 39 29 or downloaded from our website: www.institutmontaigne.org


1 0 6

SUPPORT THE WORK OF THE INSTITUT MONTAIGNE

SuezDexia

bioMérieuxThe Boston Consulting Group

AxaH. de Clermont-Tonnerre – ERSA

CarrefourAreva

Renault sasRallye – Casino

AGFServier Monde

GroupamaBouygues

BNP ParibasUrbania & AdyalErnst & Young

BolloréSNCF Groupe

Aegis Media FranceMcKinsey & Company

Lazard FrèresCS Communication & Systèmes

J Walter ThompsonA.T. Kearney

AccentureEADS

Pierre & VacancesLVMH – Moët-Hennessy – Louis Vuitton

Schneider ElectricExperianSerono

Caisse des DépôtsAPC – Affaires Publiques Consultants

Groupe DassaultAmgen

IDIEurazeo


1 0 7

SUPPORT THE WORK OF THE INSTITUT MONTAIGNE

PfizerRTE Réseau de Transport d’Electricité

HSBC FranceTecnet Participations

CNP AssurancesHDF

GL TradePricewaterhouseCoopers

Rothschild & CieSodexho

VINCIJeantetAssociés

BearingPointVeolia Environnement

Janssen-Cilag, groupe Johnson & JohnsonCapgemini

GE Money BankAdom

MicrosoftVivendi

Média-ParticipationsEuronext

KPMG S.A. sia conseil

TilderM6

Wendel InvestissementTotal

Hameur3i France

august & debouzy avocatsJT International

FacomMercer

WordAppealRicol, Lasteyrie et Associés


Printed in FranceISSN : 1771-6764

English edition printed March 2007


The Institut Montaigne is an independent, non-partisan think tank founded by Claude Bébéar at the end of 2000.Funding is entirely private and highly diversified, with no singlecontributor accounting for more than 2.5% of the total budget.It brings together business leaders, senior civil servants, academics and representatives of civil society from diversebackgrounds and with a wide range of experience. Its work focuses on three areas of research.

Social cohesion: social mobility, integration of minorities, the legitimacy of elites…

Modernisation of the public sector: State reform, education, the healthcare system…

Economic and European strategy: intellectual property, competitiveness, regulation…

The Institut Montaigne operates with associate researchers and working groups, developing and circulating concrete long-term proposals to address major issues facing society today. Using rigorous and critical research and analytical methods, recommendations are drawn up and then used to lobby policy-makers.

The Institut Montaigne, pioneering think tank in France, produces publications and organises conferences, playing an active role as a stakeholder in democratic debate.

Claude Bébéar PresidentHenri Lachmann Vice-President and Treasurer Philippe Manière Director

Nicolas Baverez Economist and lawyerJacques Bentz Chairman and CEO, Tecnet ParticipationsGuy Carcassonne Professor of Public Law, University of Paris X-NanterreChristian Forestier President, Haut Conseil d’Evaluation de l’EcoleMarie-Anne Frison-Roche Professor of Law, Institut d’Etudes Politiques, ParisAna Palacio Senior Vice-President and World Bank Group General CounselEzra Suleiman Professor of Politics, Princeton UniversityJean-Paul Tran Thiet Lawyer, partner in law firm CMS Bureau Francis LefebvrePhilippe Wahl Country Head for France, The Royal Bank of Scotland

HONORARY PRESIDENT

Bernard de La Rochefoucauld Founder of Institut La Boétie

Olivier Blanchard Professor of Economics, MITJean-Pierre Boisivon Managing Director, Institut de l’EntrepriseLaurent Cohen-Tanugi International lawyerFrançois Ewald Professor and Researcher, ParisMichel Godet Professor, CNAM, ParisHenri Hude Philosopher and Professor, ParisErik Izraelewicz Deputy Managing Editor, Les EchosJean-Hervé Lorenzi Economist and Professor, ParisElisabeth Lulin Founder and Managing Director, Paradigmes et caeteraYves Mény Political scientist; President, European University Institute, FlorenceSophie Pedder Paris Bureau Chief, The EconomistAlain-Gérard Slama Journalist and lecturer, Institut d’Etudes Politiques, Paris

ADVISORY BOARD

EXECUTIVE COMMITTEE

Institut Montaigne assures the scientific validity and the quality of the research it publishes, but the opinions and judgments expressed are the sole responsibility of the authors. They should in no case be attributed to the Institute or its governing bodies.

R E P O R T M A R C H 2 0 0 7

T H E R E I S N O D E S I R E M O R E N AT U R A L T H A N T H E D E S I R E F O R K N O W L E D G E

Institut Montaigne 38, rue Jean Mermoz - 75008 ParisPhone: +33 (0)1 58 18 39 29 - Fax: +33 (0)1 58 18 39 28www.institutmontaigne.org - www.desideespourdemain.fr

10 €

ISSN 1771-6764March 2007

inst

itu

t m

on

ta

ign

eW

hat

en

ergy

pol

icy

for

the

Eu

rop

ean

Un

ion

?

What energy policy for the EuropeanUnion?

What energy policy for the European Union?“Habit is a second nature, and no less powerful.”This saying of Montaigne’s applies perfectly to Europe’s growingenergy dependency, to which we all seem to be resigned. Everyone agrees that energy is crucial – to our competitiveness, but also to our survival. And yet each Member State wants to preserve autonomous decision-making power in this field, even at the expense of weakening its own capacity for action.

This report, the product of a year’s reflection in our “European Affairs” Working Group, spells out why and how Europe must without delay give itself a common energy policy.Seven priorities for action are identified, accompanied by concrete proposals.

What energy policy for the European Union? What energy ... · holders of production capacity, as well as mechanisms for remunerated peak capacity) • Verifying that the modalities

Documents