EU unveils plan to tackle global warming

Posted in Other , Europe | 11-Jan-07 | Author: James Kanter| Source: International Herald Tribune

"Energy markets are not functioning properly," Neelie Kroes, EU competition commissioner, said Wednesday in Brussels. She backs breaking up some companies.

BRUSSELS: European Union officials challenged governments Wednesday to loosen their grip on national energy sectors, calling for a fresh wave of competition and investment in infrastructure and technology to ease dependence on powerful exporters like Russia and to combat global warming.

The region needs a new "post-industrial revolution," said the European Commission's president, José Manuel Barroso, announcing a number of energy proposals. "We have already left behind our coal-based industrial past. It is time to embrace our low-carbon future."

The package is one of the largest ever presented by the commission, although it was watered down by France and Germany, where governments oppose the breakup of their national electricity companies.

EU officials also backed away from earlier, more ambitious targets for cutting emissions after energy-intensive industries and workers' groups warned of threats to profits and jobs — especially if competitors in the United States and elsewhere did not follow suit.

Many of the proposals — which also aim to encourage renewable fuels for cars and to improve the energy efficiency of buildings and home appliances — are to be debated by EU leaders at a summit meeting in March. If they approve the package, many of the measures still would require the commission to draft formal legal proposals.

The plan, dubbed an Energy Policy for Europe, sought to echo the postwar integration of important industrial sectors, namely coal and steel, that eventually grew into the EU's single market. But it fell far short of proposing a unified power market, one that could be overseen by a single regulator, operate on a common grid and benefit from a common front in dealing with energy suppliers.

Christian Egenhofer, a senior research fellow at the Center for European Policy Studies in Brussels, said it was unrealistic to seek to unify energy policy in a trade bloc of 27 disparate countries, some rich, some much poorer. France, for instance, relies on nuclear power for 80 percent of its electricity, while others, like Poland, depend almost entirely on coal to generate electricity.

"In reality it would be nonsense to have a one-policy-fits-all approach," Egenhofer said. "But the EU can use its legal muscle to push member states to overcome nationalist tendencies and to boost competition within countries and across borders."

Over the past 12 months, pressure has been growing on European governments to pool their influence — in particular to negotiate with Russia, which supplies about a quarter of the gas and oil consumed by Europeans.

Underlining the urgency, President Vladimir Putin of Russia cut oil supplies through the Druzhba pipeline in Belarus this week, one year after he temporarily cut gas supplies through Ukraine. The fight over the Druzhba pipeline, which supplies 1.8 million barrels a day to Poland and Germany, has renewed the specter of fuel shortages across Europe

Recent power outages also have highlighted the need to upgrade cross-border transmission networks.

To increase new investment and promote alternative sources of supply, the EU had considered breaking up energy companies into producers and transporters, so that established operators exerted less control over wires and pipes, and so that consumers could benefit from greater choice in suppliers.

But industrialists and government officials in France and Germany fought hard in recent weeks to maintain the current structure of companies like Éléctricité de France and E.ON, which generate power as well as own vast and lucrative distribution networks.

Over the past year, Prime Minister Dominique de Villepin of France was among leaders who argued that strengthening rather than weakening national energy champions would make it easier for Europe to stand up to foreign suppliers like Gazprom of Russia. De Villepin is trying to merge Gaz de France with another French utility, Suez.

Chancellor Angela Merkel of Germany has been reluctant to take on national energy champions on the grounds that liberalization is possible without restructuring companies. Energy protectionism also has flared in Spain, where Prime Minister José Luis Rodriguez Zapatero sought to block moves by E.ON of Germany to buy Endesa, a Spanish power company.

"Energy markets are not functioning properly," the EU's competition commissioner, Neelie Kroes, said Wednesday.

"Customers are suffering as a result," she said, adding that new entrants were finding it hard to compete while incumbent power companies were investing far too little in new transmission lines.

Kroes said she still favored breaking apart some energy companies. But she left open the door to a second, weaker option: allowing for power generators to retain ownership of distribution networks on the condition that they are operated by other companies.

At the same time, Kroes insisted that she would vigorously pursue antitrust investigations after initiating surprise raids last year to look for evidence of anti-competitive practices at companies including E.ON and RWE of Germany.

"During the course of this year we will have more clarity," Kroes said, hinting that the companies that were the targets of those raids could face heavy fines or could be among the first companies ever in Europe to face a breakup.

Patrice Lambert de Diesbach, an analyst with CM-CIC Securities in Paris, said the threat of break-up orders could hurt the value of some energy companies like Gaz de France, which makes about 30 percent of its operating profit from stocking and transporting supplies for clients. "We will have to wait and see how long the French and German governments can block the process on a European level," the analyst said.

In another sign that Barroso's vision of transforming the way Europe consumes energy is meeting resistance, officials also backed away from earlier recommendations to cut emissions to levels that experts say are critical to keeping down rising temperatures.

Under pressure from industries like steel, where executives fear losing business if Europe adopts stricter regulations than the rest of the world, the EU recommended cutting emissions level by 20 percent from 1990 levels by 2020.

Stavros Dimas, the EU's environment commissioner, originally had demanded cuts of 30 percent.

Dimas said Wednesday that the EU could go beyond its 20 percent target — but only if other developed countries followed suit. Europe "cannot solve climate change by itself," Dimas said. "We need global action."

The commission pushed ahead with proposals to encourage the "capture," or trapping, and storage of carbon dioxide emissions, including possibly making it mandatory for all new coal-fired power stations after 2020 to incorporate the new, cleaner technologies.

EU officials also highlighted the benefits of nuclear energy in efforts to curb carbon emissions. But widespread public skepticism about the safety and price of nuclear technology led EU officials to back away from pushing EU states to use nuclear power as a primary weapon against climate change.