Course Work Energy Law and Policy (Autosaved)
Content
INTRODUCTION The European Union (EU) is highly dependent on imports to meet its energy demand. This import dependency is set to rise exponentially.1 The EU import dependency for gas is set to increase from 36% in 2003 to 84% in 2030.2 In 2006, the European Commission estimated that the gas imports in the EU would rise by 80% over the period of 25 years.3 Globally, natural gas is the fastest growing source of energy and in 2009 alone it represented 25% of energy consumed in the EU.4 In 2010 BP statistics showed that EU accounted for 18% of the world’s total natural gas consumption.5 In 2012 there has been a record decline (-11.4%) in production of natural gas in EU due to the combination of mature fields, maintenance and weak regional consumption due to the economic slowdown.6 Supply of reliable and adequate gas in EU is a pertinent issue not least due to the fact that the EU energy imports come largely from politically and economically insecure regions of the world namely Russia, Middle East and North Africa.7 In 8 March 2006 the European Commission adopted a Green Paper which embodied the Europe’s strategies for sustainable, competitive and secure energy to address the challenges of energy demand in the EU. This essay examines the progress made by the EU in enhancing its energy security in light of EU’s energy policies for gas and the Union’s legal powers in the field
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Commission of the European Communities, ‘Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy’ < http://europa.eu/documents/comm/green_papers/pdf/com2006_105_en.pdf > accessed 2 December 2014. 2 Richard Youngs, Energy Security: Europe’s new foreign policy challenge (Routledge 2009) 3 Commission of the European Communities (n 1) 3. 4 Mehmet Efe Biresselioglu, European Energy Security: Turkey’s Future Role and Impact (Palgrave MacMillan 2011). 5 BP, Statistical World Review of Energy 2010 (June, London). 6 BP, Statistical World Review of Energy 2012 (June, London) <http://www.bp.com/assets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/stati stical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_ 2012.pdf > accessed 2 December 2014. 7 Commission of the European Communities (n 1 ) 3.
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of energy. The first part of the essay provide conceptualization of energy policy and energy security. The second and third part describes the EU energy policy for gas and EU legal powers in the field of energy respectively. The fourth part comprises of a critical discussion on the progress made by EU since 2007in enhancing its energy security. The fifth part comprises of the conclusion. This essay concludes that EU have made remarkable progress in its efforts to enhance energy security since 2007 through the various cooperative initiatives which have been adopted and the efforts which have been made to develop trans-European energy infrastructure in order to increase the supply of gas from North Africa and the Central Asian region. Energy policy means the manner in which a given country or institution has decided to address issues of energy development including energy production, distribution and consumption.8 The defining features of energy policy may include legislations, international treaties, incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.9 There is no single accepted definition of energy security. In generally, the idea of energy security is relatively new and it was crystalized mainly as a result of the oil crisis in 1973-74.10 Since then several authors have attempted to put forward different definitions of energy security. David Deese defines energy security as a condition in which a country perceives a high probability that it will have adequate energy supplies at affordable prices.11 On the other hand energy security has been defined as a condition in which a nation and all, or most of its citizens and business have access to efficient energy resources at reasonable prices for
8 9
See < http://en.wikipedia.org/wiki/Energy_policy > accessed 2 December 2014. Ibid. 10 Biresselioglu (n 4) 11. 11 David Deese, ‘Energy: Economics, Politics and Security’ (1980) 4(3) International Security 140.
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the foreseeable future free from serious risks of major disruption of service.12
ENERGY POLICY FOR GAS The EU is said to be founded on the energy security. Following the end of the Second World War, in a move to build a war-ravaged Europe, the 1951 European Coal and Steel Community (ECSC)13 and the 1957 EURATOM14 treaties were signed. These two treaties provided the common legal charter defining the scope of Europe’s energy policy prior to the Maastricht Treaty in 199215or Treaty on the European Union (TEU). The ECSC Treaty was signed in Paris on 18 April 1951 and entered into force on 23 July 1952 and expired on 23 July 200, fifty years after its coming into force. The ECSC introduced the free movement of products without custom duties or taxes.16 On the other hand the fundamental objective of EURATOM Treaty is to ensure that all users in the EU enjoy a regular and equitable supply of ores and nuclear fuels.17 The TEU had five key goals: strengthen the democratic legitimacy of
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B. Barton and another, Energy Security-Managing Risk in a Dynamic Legal and Regulatory Environment (Oxford University Press 2005). 13 Europa, ‘Treaty establishing the European Coal and Steel Community, ECSC Treaty ’ < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm > accessed 3 December 2014. The ECSC Treaty was signed in Paris in 1951 and brought France, Germany, Italy and the Benelux countries together in a Community with the aim of organizing free movement of coal and steel and free access to sources of production. In addition to this, a common High Authority supervised the market, respect for competition rules and price transparency. This treaty is the origin of the European institutions as we know them today. The objective of ECSC was stipulated in its Article 2 as being to contribute, through common market for coal and steel, to economic expansion, growth of employment and a rising standard of living. 14 European Commission, ‘The European Atomic Energy Community (EURATOM), < http://ec.europa.eu/energy/nuclear/euratom/euratom_en.htm > accessed 3 December 2014. 15 Europa, ‘Treaty of Maastricht on European Union’ <http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_maastricht_en.htm> accessed 2 December 2014. 16 Europa, ‘Treaty establishing the European Coal and Steel Community, ECSC Treaty ’ < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm > accessed 3 December 2014. 17 17 European Commission, ‘The European Atomic Energy Community (EURATOM), < http://ec.europa.eu/energy/nuclear/euratom/euratom_en.htm > accessed 3 December 2014.
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the institutions; improve the effectiveness of the institutions; establish economic and monetary union; develop the Community social dimension; and establish a common foreign and security policy.18 The European integration has partly grown as a result of the crises it has encountered.19As a result of the Suez Crisis in 1956-1957 and its consequent negative ramifications on the oil supplies in Europe, gave Europe a push for a creation of a Europe-wide more integrated energy security policy. Following the oil crisis of 1973, Europe pushed its agenda on the line of energy security, energy efficiency and environmental protection.20To that end a decision to introduce emergency plans for coordination of actions among states during major oil crisis was also made.21 The question of the existence of an EU energy policy however is still controversial. There are those who argue that the European energy policy is still in the process of formation.22 Academics and policy makers argue that the lack of a coherent European energy policy prevents European states from being externally effective.23 The lack of unison in energy policy in EU is attributed to the fact that energy issues have been historically regarded as a sovereign prerogative.24 The European energy policy generally has five main pillars namely, i) developing an internal market in energy; ii) developing external energy relations and ensuring security of supply; iii) managing demand; iv) diversification of sources; and v) minimizing negative impacts
18 19
Ibid. Thomas C. Hoerber, The Origins of Energy and Environmental Policy in Europe: The Beginnings of a European environmental conscience (Routledge 2013). 20 Ibid 196. 21 77/706/EEC Council Decision of 7 November 1977 on the setting of a Community target for a reduction in the consumption of primary sources of energy in the event of difficulties in the supply of crude oil and petroleum products OJ L 292, 16.11.1977, p. 9. 22 Biresselioglu (n 4) 31. 23 Jonas Gratz, ‘Common Rules without strategy: EU Energy Policy and Russia’ in Birchfeld V.L. and Duffield J.S. (Ed) Towards a Common European Union Energy Policy: progress, problems and prospects (Palgrave MacMillan, New York-2011). 24 Ibid.
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on the environment of energy use and production.25 These pillars were stated in the Green Paper presented in March 2006, which also proposed the following: a strategic EU Energy Review with regular follow ups of political discussions; a network of energy correspondents to facilitate coordination among Member states; a better integration of energy markets into broader relation with third countries; coordinated response in relation to crisis in energy supplies; and development of interconnecting energy systems between different geographical areas.26 Ensuring the supply of affordable and reliable natural gas to EU consumers is a major objective of the EU. It is acknowledged this will be achieved through creating efficient and wellfunctioning internal markets for gas. This will ensure both energy security and reduction in the global warming.27As a way to implement a strategy for creation of a single European market for electricity and gas the Decision on the conditions for access to the natural gas transmission networks applies since 3 March 2011.28
THE EU LEGAL POWERS IN THE FIELD OF ENERGY The EU legal powers are provided in treaties, legislations, regulations and directives. The Treaty on the European Union (TEU) was signed in Maastricht on 7 February 1992, entered into force on 1 November 1993. Under TEU, both the European Council and the European Parliament have legislative powers.29 TEU empowers the European Commission to draft legislations and
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Biresselioglu (n 4) 32. Richard Youngs, ‘Foreign Policy and Energy Security: Markets, Pipelines and Politics’ in V.L. Birchfeld and J.S. Duffield (Ed) Towards a Common European Union Energy Policy: progress, problems and prospects (Palgrave MacMillan, New York-2011). 27 European Commission, ‘Market observatory & Statistics’ < http://ec.europa.eu/energy/observatory/gas/gas_en.htm > accessed 3 December 2014. 28 2010/685/EU: Commission Decision of 10 November 2010 amending Chapter 3 of Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks Text with EEA relevance < http://ec.europa.eu/energy/gas_electricity/gas/gas_en.htm >accessed on 2 December 2014. 29 TEU art 16 (1).
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proposals and submit the same to the European Council and the European Parliament.30 In the context of energy policy, the Treaty of Lisbon which came in force on 1 December 2009 empowered Europe to design an energy policy. The Treaty further empowers the EU, inter alia, to establish internal market, and carry out measures to ensure sustainable development of the Union and quality of environment.31 The Treaty of Lisbon amends the EU's two core treaties, the TEU and the Treaty establishing the European Community. The Treaty establishing the European Community is rechristened as the Treaty on the Functioning of the European Union (TFEU). Under its Article 194 the TFEU made energy issues as one of the official policies of Europe. The said Articles states that: In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member States, to: (a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; (c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and (d) promote the interconnection of energy networks.32
30 31
Ibid. Treaty of Lisbon art 2 <http://europa.eu/lisbon_treaty/full_text/index_en.htm > accessed 2 December 2014.
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TFEU art 194; also see Europa, Consolidated Version of the Treaty on the Functioning of the European Union < http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0047:0200:en:PDF > accessed 2 December 2014. 6
This Article gives Europe powers to adopt energy directives or regulations. Paragraph 2 of Article 194 preserves the right of Member States to choose between sources of energy or the general structure of its supply. Article 345 provides that ‘Treaties shall in no way prejudice the rules in Member States governing the system of property ownership’.33 This means, if Article 194 (2) and 345 of TFEU are read in tandem, States have capacity to control energy matters to achieve certain objectives such as carrying out obligations to structure energy supply guarantees in the national interests. Another important EU instrument is the Single European Act which was signed in Luxembourg on 17 February 1986 and entered in force on 1 July 1987.34This legislation amends the rules governing the operation of European institutions and expands community powers.35 Pursuant to the powers vested in it under the above mentioned instruments, in 1990 and 2000s the EU passed several directives geared at, inter alia, promoting the liberalization of European energy markets, especially electricity and supply of gas markets. During that time most national natural gas markets were still monopolized and the EU decided to open the markets to competition gradually.36 To that end, the EU decided to: make a clear distinction between competitive parts of the industry and non-competitive parts; require operators of non-competitive parts of the industry to allow third parties to have access to infrastructure; free up the supply side of the market; remove gradually any restrictions on customers from changing their suppliers; and introduce independent regulator to monitor the sector.37 The first liberalization directives for gas were adopted in 1998 and Members
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TFEU art 345. Europa, The Single European Act of 1986 < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_singleact_en.htm > accessed 1 December 2014. 35 Ibid. 36 European Commission, < http://ec.europa.eu/competition/sectors/energy/overview_en.html > accessed 4 December 2014. 37 Ibid.
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States were to transpose them into their national law by 2000, except Finland, Greece and Portugal which were granted derogations.38The second liberalization directives for gas were adopted on 26 June 2003 and the EU Members were required to transpose into their national law by 2004.39 Following the first liberalization directive concerning the common rules for the internal market in natural gas, the EU noted that there were need for ensuring security of supply of natural gas in the European liberalized market.40In that regard, the Security of Supply Directive was adopted for the purposes of providing legislative powers to EU and Member States to ensure maintenance of security of supply.41 Article 4 of the said Directive requires Member States to ensure that supplies for household customers inside their territory are protected to an appropriate extent especially in the event of partial disruption of natural gas supplies; extremely cold temperatures; and period of exceptionally high demand. The third energy package of legislative proposal for electricity and gas was adopted on 19 September 2007 by the European Union.42 The third package set out new rules to solve some structural failings that were still in existence after the first and second package. Two types of regulations were introduced namely, regulations on conditions for access to the natural gas transmission networks and regulations establishing an Agency for the Cooperation of
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Nadine Haase, European gas market liberalization: Are regulatory regimes moving towards convergence? (Oxford Institute for Energy Studies, May 2008) < http://doc.utwente.nl/67281/1/Haase08european.pdf > accessed 2 December 2014.
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Ibid 28. Ibid 29. 41 Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply Preamble Recital 5 < http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0067:EN:NOT > accessed 4 December 2014. 42 European Union, ‘Third package for Electricity & Gas markets’ < http://ec.europa.eu/energy/gas_electricity/legislation/third_legislative_package_en.htm > accessed 4 December 2014.
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Energy Regulators.43 The main elements of this package were: a high standard of public service obligations and customer protection; structural separation between transmission activities and production or supply activities of vertically integrated companies (unbundling); and stronger power and independence of national energy regulators.44The objectives of the third package were: to enable new companies wishing to enter the gas market by using existing gas networks; enhance independence of national regulators to carry out their duties and address shortcomings which were identified in the course of implementation of the second package.45 These new measures were expected to ensure substantial improvement in security of supply. The third package requires operators to cooperate not only to make access to the European networks easier but also to make the operation of the networks less vulnerable to interruptions and emergency situations.46 PROGRESS MADE SINCE 2007 IN ENHANCING ENERGY SECURITY In March 2007, the European Union adopted an Energy Policy for Europe which comprises of three fundamental principles: competitiveness, security of supply and sustainability. Implementation of the European energy policy to ensure energy security has encountered several challenges. Most noticeably, the challenge has been due to the many EU members being concerned with transferring their sovereignty as energy issues are considered as issues of domestic policy given their importance in national economic growth. Most EU members have long held that energy policy
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Europa, ‘The entry into force of the EU third energy package’ < http://ec.europa.eu/energy/gas_electricity/legislation/doc/20110302_entry_into_force_third_package. pdf > accessed 5 December 2014. 44 Ibid. 45 Europa, Questions and answers <http://europa.eu/rapid/press-release_MEMO-07362_en.htm?locale=en > accessed 2 December 2014. 46 Ibid.
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should be the realm of the State jurisdiction.47 Until 2008 several EU states continued with the protection of national industries, including countries like Germany, France and Spain.48 Despite the attractiveness and significance of energy policy objectives, its implementation has been wanting. The 2011 communication of the European Commission stated that the internal market was still fragmented and that did not achieve its potential for transparency, accessibility and choice.49 There are still restrictions to the free movement of energy supply in the region. By 2011 a total of 40 infringement procedures were underway in respect of the second internal energy market package since 2003, showing lower level of achievement in the implementation of internal market legislation.50 Most striking is the lack of a common approach towards partner, supplier or transit countries regardless of the recurrent crises that have befallen the region. However, as it is discussed in the following paragraphs, it is the author’s opinion that the EU has made substantial progress in ensuring energy security since 2007. By 2010, Europe had one of the most developed energy market in the world.51 This has been able to happen thanks to deliberated and well
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Paul Belkii, ‘CRS Report for Congress, The European Union’s Energy Security Challenges’ (January 30, 2008) <https://www.fas.org/sgp/crs/row/RL33636.pdf > accessed 5 December 2014. 48 Ibid 25. 49 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Energy 2020 - A Strategy for Competitive, Sustainable and Secure Energy (2011) 59 Renewable Energy Law & Policy Review 59 < http://www.heinonline.org.ezproxy.rgu.ac.uk/HOL/Print?handle=hein.journals/relp2011&div=11&collect ion=journals&set_as_cursor=9&men_tab=srchresults&terms=progress|on|energy|security|EU&type=m atchall > accessed 3 December 2014. 50 Ibid. 51 Alena Zieniewicz, ‘External Dimension of the EU Energy Security’ (2010) Yearbook of Polish European studies 205 <http://www.heinonline.org.ezproxy.rgu.ac.uk/HOL/Print?handle=hein.intyb/ypolestu0013&div=15&coll ection=journals&set_as_cursor=5&men_tab=srchresults&terms=progress|on|energy|security|EU&type =matchall > accessed 5 December 2014.
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concerted efforts of the European institutions. In the effort to implement the objectives of its energy policies the EU has taken several initiatives. In 2011 the EU proposed an energy strategy towards 2020 with main focus in the following: achieving an energy efficient Europe; building a truly panEuropean integrated energy market; empowering consumers and achieving the highest level of safety and security; extending Europe’s leadership in energy technology and innovation; and strengthening the external dimension of EU energy market. In order to achieve these policy objectives, EU has promoted integration of energy markets through regional cooperation initiatives52 and the development of energy infrastructure. To this end, steps have been taken and financing has been made by the EU with the view to enhance diversification of energy supply and energy security.53 In line with the European Neighbourhood Policy (ENP) various cooperative initiatives have been launched by the European Commission since 2007.54 ENP main objective is to advance economic integration in the EU. Between 2007 and 2013, the sum of Euro 12bn were given to ENP related projects.55 Various cooperation initiatives includes the launching of the EuroMediterranean Partnership56 which had the aim of removing barriers to trade and investment between both the EU and Southern Mediterranean countries and between the Southern Mediterranean countries themselves and the Black Sea Synergy57 which aim at enhancing cooperation in the region around Black Sea. Also, in May 2009 the Eastern Partnership was
52 53
Zieniewicz (n 51) 213. Ibid. 54 European Neighbourhood Policy (ENP) Overview, < http://eeas.europa.eu/enp/index_en.htm > accessed 5 December 2014. 55 Ibid. 56 European Commission, < http://ec.europa.eu/trade/policy/countries-and-regions/regions/euromediterranean-partnership/ > accessed 5 December 2014. 57 European Commission, <http://eeas.europa.eu/blacksea/index_en.htm > accessed 4 December 2014.
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established in Prague to connect Eastern Europe and the South Caucasus that is Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.58 Other cooperation initiatives adopted are, the Union for the Mediterranean or EuroMediterranean Partnership (EUROMED)59, the Barcelona Process and the Black sea Synergy which was launched in April 2007 with the aim of coordinating different regions initiatives and EU policies in the respective regions.60 On the sphere of gas infrastructure development, the EU have also made headway in enhancing energy security. On 12 September 2011 the EU adopted a mandate to negotiate legally binding treaty between EU, Azerbaijan and Turkmenistan for construction of trans-Caspian pipeline system.61 This pipeline is a major project in the Southern corridor which will bring new sources of gas to Europe from Central Asia submarine pipeline connecting Azerbaijan and Turkmenistan.62 On 14 October 2013, the European Commission adopted a list of 250 key energy infrastructure projects, among them 100 being gas related projects.63 These projects have been selected by twelve regional groups established by new guidelines for trans-European energy infrastructure known as ‘Projects of Common Interests (PCI)’. PCI will benefit from faster and more efficient permit granting procedures and improved regulatory treatment.64 PCI may be
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See at < http://www.enpi-info.eu/maineast.php?id=506&id_type=2 > accessed 5 December 2014. It represents the Eastern dimension of the European Neighbourhood Policy (ENP) and strengthens bilateral relations between the EU and its partners. 59 European Union,’ Euro-Mediterranean Partnership (EUROMED)’ < http://www.eeas.europa.eu/euromed/index_en.htm > accessed 5 December 2014. 60 Zieniewicz (n 51) 216. 61 Europa, ‘Security of supply and international cooperation’ < http://ec.europa.eu/energy/international/security_of_supply/cooperation_en.htm > accessed 5 December 2014. 62 Ibid. 63 European Commission, ‘Energy: Commission unveils list of 250 infrastructure projects that may qualify for €5,85 billion of funding’ (Press release Brussels, 14 October 2013) < http://europa.eu/rapid/pressrelease_IP-13-932_en.htm > accessed 5 December 2014. 64 Ibid.
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eligible for the Connecting Europe Facility with Euro totaling 5.58bn set aside for financing trans-European energy infrastructure for the period 2014 to 2020.65 Upon completion of these project, it is expected that they will enable EU members to integrate their energy market and thus benefit consumers in terms of lowering prices, diversify their energy sources and thus protecting the EU from volatile energy supplies such as Russia and also more members will be brought into the energy supply network. EU has also taken steps to boost production of unconventional gas in the continent so that to enhance energy supply. The International Energy Agency estimates that unconventional gas may meet over 40% of the increased global demand for gas by 2035.66 EU acknowledge the potential for unconventional gas to enhance security of supply in the region and for that reason in its 2013 Programme the European Commission had included a Framework to enable safe and secure exploitation of unconventional gas.67 CONCLUSION The development of the EU energy policy has been slow. This has partly been caused by EU States reluctance to bring their jurisdiction on national energy policies within the EU mandate. However, several crises beginning with the Suez Crisis of 1956-57 and then the Oil Crisis of 1973-74 have reminded EU of a need for a common European energy policy. In 2007, the EU adopted an energy policy which had three pillars namely
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In order to fit under the PCI financing the project must, benefit at least two EU states; contribute to market integration and promote competition; enhance security of supply and reduce CO2 emissions. 66 ‘Unconventional Gas: Potential Energy Market Impacts in the European Union ’ (A Report by the Energy Security Unit of the European Commission’s Joint Research Centre) < http://ec.europa.eu/dgs/jrc/downloads/jrc_report_2012_09_unconventional_gas.pdf > accessed 5 December 2014. 67 Europa, ‘Environmental Aspects on Unconventional Fossil Fuels’ (2011) < http://ec.europa.eu/environment/integration/energy/unconventional_en.htm > accessed 4 December 2014.
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competitiveness, sustainability and security of supply. In order to achieve these objectives, through its existing powers, EU passed various directives regarding integration of its energy markets. Three energy liberalization packages have been adopted from 1998 to 2007. In general EU has made remarkable progress in its efforts to enhance energy security since 2007. The main EU efforts in this respect include, the various cooperative initiatives which have been adopted and the efforts which have been made to develop trans-European energy infrastructure in order to increase the supply of gas from North Africa and the Central Asian region. It is expected that, in the long run these efforts will bear fruits in terms of enhancing EU energy security. WC 3062
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Commission of the European Communities, ‘Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy’ < http://europa.eu/documents/comm/green_papers/pdf/com2006_105_en.pdf > accessed 2 December 2014. 2 Richard Youngs, Energy Security: Europe’s new foreign policy challenge (Routledge 2009) 3 Commission of the European Communities (n 1) 3. 4 Mehmet Efe Biresselioglu, European Energy Security: Turkey’s Future Role and Impact (Palgrave MacMillan 2011). 5 BP, Statistical World Review of Energy 2010 (June, London). 6 BP, Statistical World Review of Energy 2012 (June, London) <http://www.bp.com/assets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/stati stical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_ 2012.pdf > accessed 2 December 2014. 7 Commission of the European Communities (n 1 ) 3.
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of energy. The first part of the essay provide conceptualization of energy policy and energy security. The second and third part describes the EU energy policy for gas and EU legal powers in the field of energy respectively. The fourth part comprises of a critical discussion on the progress made by EU since 2007in enhancing its energy security. The fifth part comprises of the conclusion. This essay concludes that EU have made remarkable progress in its efforts to enhance energy security since 2007 through the various cooperative initiatives which have been adopted and the efforts which have been made to develop trans-European energy infrastructure in order to increase the supply of gas from North Africa and the Central Asian region. Energy policy means the manner in which a given country or institution has decided to address issues of energy development including energy production, distribution and consumption.8 The defining features of energy policy may include legislations, international treaties, incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.9 There is no single accepted definition of energy security. In generally, the idea of energy security is relatively new and it was crystalized mainly as a result of the oil crisis in 1973-74.10 Since then several authors have attempted to put forward different definitions of energy security. David Deese defines energy security as a condition in which a country perceives a high probability that it will have adequate energy supplies at affordable prices.11 On the other hand energy security has been defined as a condition in which a nation and all, or most of its citizens and business have access to efficient energy resources at reasonable prices for
8 9
See < http://en.wikipedia.org/wiki/Energy_policy > accessed 2 December 2014. Ibid. 10 Biresselioglu (n 4) 11. 11 David Deese, ‘Energy: Economics, Politics and Security’ (1980) 4(3) International Security 140.
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the foreseeable future free from serious risks of major disruption of service.12
ENERGY POLICY FOR GAS The EU is said to be founded on the energy security. Following the end of the Second World War, in a move to build a war-ravaged Europe, the 1951 European Coal and Steel Community (ECSC)13 and the 1957 EURATOM14 treaties were signed. These two treaties provided the common legal charter defining the scope of Europe’s energy policy prior to the Maastricht Treaty in 199215or Treaty on the European Union (TEU). The ECSC Treaty was signed in Paris on 18 April 1951 and entered into force on 23 July 1952 and expired on 23 July 200, fifty years after its coming into force. The ECSC introduced the free movement of products without custom duties or taxes.16 On the other hand the fundamental objective of EURATOM Treaty is to ensure that all users in the EU enjoy a regular and equitable supply of ores and nuclear fuels.17 The TEU had five key goals: strengthen the democratic legitimacy of
12
B. Barton and another, Energy Security-Managing Risk in a Dynamic Legal and Regulatory Environment (Oxford University Press 2005). 13 Europa, ‘Treaty establishing the European Coal and Steel Community, ECSC Treaty ’ < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm > accessed 3 December 2014. The ECSC Treaty was signed in Paris in 1951 and brought France, Germany, Italy and the Benelux countries together in a Community with the aim of organizing free movement of coal and steel and free access to sources of production. In addition to this, a common High Authority supervised the market, respect for competition rules and price transparency. This treaty is the origin of the European institutions as we know them today. The objective of ECSC was stipulated in its Article 2 as being to contribute, through common market for coal and steel, to economic expansion, growth of employment and a rising standard of living. 14 European Commission, ‘The European Atomic Energy Community (EURATOM), < http://ec.europa.eu/energy/nuclear/euratom/euratom_en.htm > accessed 3 December 2014. 15 Europa, ‘Treaty of Maastricht on European Union’ <http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_maastricht_en.htm> accessed 2 December 2014. 16 Europa, ‘Treaty establishing the European Coal and Steel Community, ECSC Treaty ’ < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm > accessed 3 December 2014. 17 17 European Commission, ‘The European Atomic Energy Community (EURATOM), < http://ec.europa.eu/energy/nuclear/euratom/euratom_en.htm > accessed 3 December 2014.
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the institutions; improve the effectiveness of the institutions; establish economic and monetary union; develop the Community social dimension; and establish a common foreign and security policy.18 The European integration has partly grown as a result of the crises it has encountered.19As a result of the Suez Crisis in 1956-1957 and its consequent negative ramifications on the oil supplies in Europe, gave Europe a push for a creation of a Europe-wide more integrated energy security policy. Following the oil crisis of 1973, Europe pushed its agenda on the line of energy security, energy efficiency and environmental protection.20To that end a decision to introduce emergency plans for coordination of actions among states during major oil crisis was also made.21 The question of the existence of an EU energy policy however is still controversial. There are those who argue that the European energy policy is still in the process of formation.22 Academics and policy makers argue that the lack of a coherent European energy policy prevents European states from being externally effective.23 The lack of unison in energy policy in EU is attributed to the fact that energy issues have been historically regarded as a sovereign prerogative.24 The European energy policy generally has five main pillars namely, i) developing an internal market in energy; ii) developing external energy relations and ensuring security of supply; iii) managing demand; iv) diversification of sources; and v) minimizing negative impacts
18 19
Ibid. Thomas C. Hoerber, The Origins of Energy and Environmental Policy in Europe: The Beginnings of a European environmental conscience (Routledge 2013). 20 Ibid 196. 21 77/706/EEC Council Decision of 7 November 1977 on the setting of a Community target for a reduction in the consumption of primary sources of energy in the event of difficulties in the supply of crude oil and petroleum products OJ L 292, 16.11.1977, p. 9. 22 Biresselioglu (n 4) 31. 23 Jonas Gratz, ‘Common Rules without strategy: EU Energy Policy and Russia’ in Birchfeld V.L. and Duffield J.S. (Ed) Towards a Common European Union Energy Policy: progress, problems and prospects (Palgrave MacMillan, New York-2011). 24 Ibid.
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on the environment of energy use and production.25 These pillars were stated in the Green Paper presented in March 2006, which also proposed the following: a strategic EU Energy Review with regular follow ups of political discussions; a network of energy correspondents to facilitate coordination among Member states; a better integration of energy markets into broader relation with third countries; coordinated response in relation to crisis in energy supplies; and development of interconnecting energy systems between different geographical areas.26 Ensuring the supply of affordable and reliable natural gas to EU consumers is a major objective of the EU. It is acknowledged this will be achieved through creating efficient and wellfunctioning internal markets for gas. This will ensure both energy security and reduction in the global warming.27As a way to implement a strategy for creation of a single European market for electricity and gas the Decision on the conditions for access to the natural gas transmission networks applies since 3 March 2011.28
THE EU LEGAL POWERS IN THE FIELD OF ENERGY The EU legal powers are provided in treaties, legislations, regulations and directives. The Treaty on the European Union (TEU) was signed in Maastricht on 7 February 1992, entered into force on 1 November 1993. Under TEU, both the European Council and the European Parliament have legislative powers.29 TEU empowers the European Commission to draft legislations and
25 26
Biresselioglu (n 4) 32. Richard Youngs, ‘Foreign Policy and Energy Security: Markets, Pipelines and Politics’ in V.L. Birchfeld and J.S. Duffield (Ed) Towards a Common European Union Energy Policy: progress, problems and prospects (Palgrave MacMillan, New York-2011). 27 European Commission, ‘Market observatory & Statistics’ < http://ec.europa.eu/energy/observatory/gas/gas_en.htm > accessed 3 December 2014. 28 2010/685/EU: Commission Decision of 10 November 2010 amending Chapter 3 of Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks Text with EEA relevance < http://ec.europa.eu/energy/gas_electricity/gas/gas_en.htm >accessed on 2 December 2014. 29 TEU art 16 (1).
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proposals and submit the same to the European Council and the European Parliament.30 In the context of energy policy, the Treaty of Lisbon which came in force on 1 December 2009 empowered Europe to design an energy policy. The Treaty further empowers the EU, inter alia, to establish internal market, and carry out measures to ensure sustainable development of the Union and quality of environment.31 The Treaty of Lisbon amends the EU's two core treaties, the TEU and the Treaty establishing the European Community. The Treaty establishing the European Community is rechristened as the Treaty on the Functioning of the European Union (TFEU). Under its Article 194 the TFEU made energy issues as one of the official policies of Europe. The said Articles states that: In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member States, to: (a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; (c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and (d) promote the interconnection of energy networks.32
30 31
Ibid. Treaty of Lisbon art 2 <http://europa.eu/lisbon_treaty/full_text/index_en.htm > accessed 2 December 2014.
32
TFEU art 194; also see Europa, Consolidated Version of the Treaty on the Functioning of the European Union < http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0047:0200:en:PDF > accessed 2 December 2014. 6
This Article gives Europe powers to adopt energy directives or regulations. Paragraph 2 of Article 194 preserves the right of Member States to choose between sources of energy or the general structure of its supply. Article 345 provides that ‘Treaties shall in no way prejudice the rules in Member States governing the system of property ownership’.33 This means, if Article 194 (2) and 345 of TFEU are read in tandem, States have capacity to control energy matters to achieve certain objectives such as carrying out obligations to structure energy supply guarantees in the national interests. Another important EU instrument is the Single European Act which was signed in Luxembourg on 17 February 1986 and entered in force on 1 July 1987.34This legislation amends the rules governing the operation of European institutions and expands community powers.35 Pursuant to the powers vested in it under the above mentioned instruments, in 1990 and 2000s the EU passed several directives geared at, inter alia, promoting the liberalization of European energy markets, especially electricity and supply of gas markets. During that time most national natural gas markets were still monopolized and the EU decided to open the markets to competition gradually.36 To that end, the EU decided to: make a clear distinction between competitive parts of the industry and non-competitive parts; require operators of non-competitive parts of the industry to allow third parties to have access to infrastructure; free up the supply side of the market; remove gradually any restrictions on customers from changing their suppliers; and introduce independent regulator to monitor the sector.37 The first liberalization directives for gas were adopted in 1998 and Members
33 34
TFEU art 345. Europa, The Single European Act of 1986 < http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_singleact_en.htm > accessed 1 December 2014. 35 Ibid. 36 European Commission, < http://ec.europa.eu/competition/sectors/energy/overview_en.html > accessed 4 December 2014. 37 Ibid.
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States were to transpose them into their national law by 2000, except Finland, Greece and Portugal which were granted derogations.38The second liberalization directives for gas were adopted on 26 June 2003 and the EU Members were required to transpose into their national law by 2004.39 Following the first liberalization directive concerning the common rules for the internal market in natural gas, the EU noted that there were need for ensuring security of supply of natural gas in the European liberalized market.40In that regard, the Security of Supply Directive was adopted for the purposes of providing legislative powers to EU and Member States to ensure maintenance of security of supply.41 Article 4 of the said Directive requires Member States to ensure that supplies for household customers inside their territory are protected to an appropriate extent especially in the event of partial disruption of natural gas supplies; extremely cold temperatures; and period of exceptionally high demand. The third energy package of legislative proposal for electricity and gas was adopted on 19 September 2007 by the European Union.42 The third package set out new rules to solve some structural failings that were still in existence after the first and second package. Two types of regulations were introduced namely, regulations on conditions for access to the natural gas transmission networks and regulations establishing an Agency for the Cooperation of
38
Nadine Haase, European gas market liberalization: Are regulatory regimes moving towards convergence? (Oxford Institute for Energy Studies, May 2008) < http://doc.utwente.nl/67281/1/Haase08european.pdf > accessed 2 December 2014.
39 40
Ibid 28. Ibid 29. 41 Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply Preamble Recital 5 < http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0067:EN:NOT > accessed 4 December 2014. 42 European Union, ‘Third package for Electricity & Gas markets’ < http://ec.europa.eu/energy/gas_electricity/legislation/third_legislative_package_en.htm > accessed 4 December 2014.
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Energy Regulators.43 The main elements of this package were: a high standard of public service obligations and customer protection; structural separation between transmission activities and production or supply activities of vertically integrated companies (unbundling); and stronger power and independence of national energy regulators.44The objectives of the third package were: to enable new companies wishing to enter the gas market by using existing gas networks; enhance independence of national regulators to carry out their duties and address shortcomings which were identified in the course of implementation of the second package.45 These new measures were expected to ensure substantial improvement in security of supply. The third package requires operators to cooperate not only to make access to the European networks easier but also to make the operation of the networks less vulnerable to interruptions and emergency situations.46 PROGRESS MADE SINCE 2007 IN ENHANCING ENERGY SECURITY In March 2007, the European Union adopted an Energy Policy for Europe which comprises of three fundamental principles: competitiveness, security of supply and sustainability. Implementation of the European energy policy to ensure energy security has encountered several challenges. Most noticeably, the challenge has been due to the many EU members being concerned with transferring their sovereignty as energy issues are considered as issues of domestic policy given their importance in national economic growth. Most EU members have long held that energy policy
43
Europa, ‘The entry into force of the EU third energy package’ < http://ec.europa.eu/energy/gas_electricity/legislation/doc/20110302_entry_into_force_third_package. pdf > accessed 5 December 2014. 44 Ibid. 45 Europa, Questions and answers <http://europa.eu/rapid/press-release_MEMO-07362_en.htm?locale=en > accessed 2 December 2014. 46 Ibid.
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should be the realm of the State jurisdiction.47 Until 2008 several EU states continued with the protection of national industries, including countries like Germany, France and Spain.48 Despite the attractiveness and significance of energy policy objectives, its implementation has been wanting. The 2011 communication of the European Commission stated that the internal market was still fragmented and that did not achieve its potential for transparency, accessibility and choice.49 There are still restrictions to the free movement of energy supply in the region. By 2011 a total of 40 infringement procedures were underway in respect of the second internal energy market package since 2003, showing lower level of achievement in the implementation of internal market legislation.50 Most striking is the lack of a common approach towards partner, supplier or transit countries regardless of the recurrent crises that have befallen the region. However, as it is discussed in the following paragraphs, it is the author’s opinion that the EU has made substantial progress in ensuring energy security since 2007. By 2010, Europe had one of the most developed energy market in the world.51 This has been able to happen thanks to deliberated and well
47
Paul Belkii, ‘CRS Report for Congress, The European Union’s Energy Security Challenges’ (January 30, 2008) <https://www.fas.org/sgp/crs/row/RL33636.pdf > accessed 5 December 2014. 48 Ibid 25. 49 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Energy 2020 - A Strategy for Competitive, Sustainable and Secure Energy (2011) 59 Renewable Energy Law & Policy Review 59 < http://www.heinonline.org.ezproxy.rgu.ac.uk/HOL/Print?handle=hein.journals/relp2011&div=11&collect ion=journals&set_as_cursor=9&men_tab=srchresults&terms=progress|on|energy|security|EU&type=m atchall > accessed 3 December 2014. 50 Ibid. 51 Alena Zieniewicz, ‘External Dimension of the EU Energy Security’ (2010) Yearbook of Polish European studies 205 <http://www.heinonline.org.ezproxy.rgu.ac.uk/HOL/Print?handle=hein.intyb/ypolestu0013&div=15&coll ection=journals&set_as_cursor=5&men_tab=srchresults&terms=progress|on|energy|security|EU&type =matchall > accessed 5 December 2014.
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concerted efforts of the European institutions. In the effort to implement the objectives of its energy policies the EU has taken several initiatives. In 2011 the EU proposed an energy strategy towards 2020 with main focus in the following: achieving an energy efficient Europe; building a truly panEuropean integrated energy market; empowering consumers and achieving the highest level of safety and security; extending Europe’s leadership in energy technology and innovation; and strengthening the external dimension of EU energy market. In order to achieve these policy objectives, EU has promoted integration of energy markets through regional cooperation initiatives52 and the development of energy infrastructure. To this end, steps have been taken and financing has been made by the EU with the view to enhance diversification of energy supply and energy security.53 In line with the European Neighbourhood Policy (ENP) various cooperative initiatives have been launched by the European Commission since 2007.54 ENP main objective is to advance economic integration in the EU. Between 2007 and 2013, the sum of Euro 12bn were given to ENP related projects.55 Various cooperation initiatives includes the launching of the EuroMediterranean Partnership56 which had the aim of removing barriers to trade and investment between both the EU and Southern Mediterranean countries and between the Southern Mediterranean countries themselves and the Black Sea Synergy57 which aim at enhancing cooperation in the region around Black Sea. Also, in May 2009 the Eastern Partnership was
52 53
Zieniewicz (n 51) 213. Ibid. 54 European Neighbourhood Policy (ENP) Overview, < http://eeas.europa.eu/enp/index_en.htm > accessed 5 December 2014. 55 Ibid. 56 European Commission, < http://ec.europa.eu/trade/policy/countries-and-regions/regions/euromediterranean-partnership/ > accessed 5 December 2014. 57 European Commission, <http://eeas.europa.eu/blacksea/index_en.htm > accessed 4 December 2014.
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established in Prague to connect Eastern Europe and the South Caucasus that is Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.58 Other cooperation initiatives adopted are, the Union for the Mediterranean or EuroMediterranean Partnership (EUROMED)59, the Barcelona Process and the Black sea Synergy which was launched in April 2007 with the aim of coordinating different regions initiatives and EU policies in the respective regions.60 On the sphere of gas infrastructure development, the EU have also made headway in enhancing energy security. On 12 September 2011 the EU adopted a mandate to negotiate legally binding treaty between EU, Azerbaijan and Turkmenistan for construction of trans-Caspian pipeline system.61 This pipeline is a major project in the Southern corridor which will bring new sources of gas to Europe from Central Asia submarine pipeline connecting Azerbaijan and Turkmenistan.62 On 14 October 2013, the European Commission adopted a list of 250 key energy infrastructure projects, among them 100 being gas related projects.63 These projects have been selected by twelve regional groups established by new guidelines for trans-European energy infrastructure known as ‘Projects of Common Interests (PCI)’. PCI will benefit from faster and more efficient permit granting procedures and improved regulatory treatment.64 PCI may be
58
See at < http://www.enpi-info.eu/maineast.php?id=506&id_type=2 > accessed 5 December 2014. It represents the Eastern dimension of the European Neighbourhood Policy (ENP) and strengthens bilateral relations between the EU and its partners. 59 European Union,’ Euro-Mediterranean Partnership (EUROMED)’ < http://www.eeas.europa.eu/euromed/index_en.htm > accessed 5 December 2014. 60 Zieniewicz (n 51) 216. 61 Europa, ‘Security of supply and international cooperation’ < http://ec.europa.eu/energy/international/security_of_supply/cooperation_en.htm > accessed 5 December 2014. 62 Ibid. 63 European Commission, ‘Energy: Commission unveils list of 250 infrastructure projects that may qualify for €5,85 billion of funding’ (Press release Brussels, 14 October 2013) < http://europa.eu/rapid/pressrelease_IP-13-932_en.htm > accessed 5 December 2014. 64 Ibid.
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eligible for the Connecting Europe Facility with Euro totaling 5.58bn set aside for financing trans-European energy infrastructure for the period 2014 to 2020.65 Upon completion of these project, it is expected that they will enable EU members to integrate their energy market and thus benefit consumers in terms of lowering prices, diversify their energy sources and thus protecting the EU from volatile energy supplies such as Russia and also more members will be brought into the energy supply network. EU has also taken steps to boost production of unconventional gas in the continent so that to enhance energy supply. The International Energy Agency estimates that unconventional gas may meet over 40% of the increased global demand for gas by 2035.66 EU acknowledge the potential for unconventional gas to enhance security of supply in the region and for that reason in its 2013 Programme the European Commission had included a Framework to enable safe and secure exploitation of unconventional gas.67 CONCLUSION The development of the EU energy policy has been slow. This has partly been caused by EU States reluctance to bring their jurisdiction on national energy policies within the EU mandate. However, several crises beginning with the Suez Crisis of 1956-57 and then the Oil Crisis of 1973-74 have reminded EU of a need for a common European energy policy. In 2007, the EU adopted an energy policy which had three pillars namely
65
In order to fit under the PCI financing the project must, benefit at least two EU states; contribute to market integration and promote competition; enhance security of supply and reduce CO2 emissions. 66 ‘Unconventional Gas: Potential Energy Market Impacts in the European Union ’ (A Report by the Energy Security Unit of the European Commission’s Joint Research Centre) < http://ec.europa.eu/dgs/jrc/downloads/jrc_report_2012_09_unconventional_gas.pdf > accessed 5 December 2014. 67 Europa, ‘Environmental Aspects on Unconventional Fossil Fuels’ (2011) < http://ec.europa.eu/environment/integration/energy/unconventional_en.htm > accessed 4 December 2014.
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competitiveness, sustainability and security of supply. In order to achieve these objectives, through its existing powers, EU passed various directives regarding integration of its energy markets. Three energy liberalization packages have been adopted from 1998 to 2007. In general EU has made remarkable progress in its efforts to enhance energy security since 2007. The main EU efforts in this respect include, the various cooperative initiatives which have been adopted and the efforts which have been made to develop trans-European energy infrastructure in order to increase the supply of gas from North Africa and the Central Asian region. It is expected that, in the long run these efforts will bear fruits in terms of enhancing EU energy security. WC 3062
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