Energy and Industry Council (Hansard, 29 January 2002)

§ Mr. Wilson

The Council considered several matters of interest to the United Kingdom.

An exchange of views on the internal market in electricity and gas and on the Commission's Green Paper "Towards a European Strategy for the Security of Energy Supply" formed the centrepiece of this Energy Council.

The key point to emerge from the discussion on the internal market in electricity and gas was that several member states are resisting a fully liberalised regime for gas, arguing that integrated companies should not be split and that prices for accessing pipelines should be negotiated rather than published. The UK maintained that legal unbundling of transmission system operators from the supply side was essential and that third party access to the system should be governed by "ex-ante" rules approved by the regulator and based on published prices. There was a large measure of agreement to this from other member states so far as electricity was concerned. In discussion of the draft directive's handling of public service obligations (PSOs), most member states, including the UK, were in favour of the definition of PSOs being left to subsidiarity though some argued for a more prescriptive approach.

Member states generally endorsed the proposal by ETSO (European Transmission System Operators Association) for a temporary solution to the problem of cross-border trade in electricity, but most warned that this should be seen only as an interim solution for one year. The UK expressed concern at the lack of a clear road map to reach a definitive solution, arguing that there should be a clear definition of responsibilities between ETSO, member states and the Commission.

In a brief presentation on its benchmarking study, the Commission noted that it showed a wide difference in market opening, prices and customer choice among the markets in different member states and that the study's main conclusion—that markets which had opened the most had the lowest prices and the best protection for PSOs—showed the need to move towards full market opening as soon as possible.

The views expressed on these issues will be fed into a report with the hope that the Spanish presidency will be in a position to announce significant progress at the next European Summit in Barcelona.

The Commission hoped that a final position on its Green Paper on Security of Energy Supply would be reached at the next Energy Council (6 June 2002), noting also that while there had been agreement on many points, some, such as nuclear energy and harmonising tax measures, were controversial.

The UK and other member states praised the overall analysis in the Green Paper, supporting the focus on improving demand side management. At the same time, they expressed themselves satisfied with existing arrangements for the management of emergency oil stocks, with the focus firmly on the International Energy Agency as the appropriate forum. Member states agreed on the importance of consumer/producer country dialogue; several emphasised that such dialogue should not be confined to any individual or group of supplier countries.

The UK emphasised the major contribution to security of supply that a liberalised and integrated energy market in the EU would play.

158W

All reserves were lifted on the proposal for a directive of the European Parliament and the Council on the Energy Performance of Buildings, although the Commission asked for a declaration registering its dissatisfaction with the length of the implementation timetable. A presidency compromise text has therefore been agreed as a general approach. This was a good outcome for the UK as we secured flexibility that allows for other measures to be used, such as the provision of advice, to reduce the energy consumption and limit the carbon dioxide emissions of boilers.

In their account of COP7 (7^th Conference of the Parties to the United Nations Framework Convention on Climate Change), the presidency and Commission noted that the EU had been a major player in ensuring that agreement was reached. The presidency concluded that the EU should now work towards a multilateral process for achieving the convention objectives, including targets beyond 2012 and looking at greater involvement of developing countries. The Commission noted that the overall aim of its draft emissions trading directive was to have an EU system in place in 2005 ahead of an international system scheduled to be in place by 2008. The proposed approach would take account of the overall costs of reducing emissions, with the aim of ensuring that an emission trading system should not disrupt energy markets and that market distortions be kept to a minimum. While welcoming these developments, the UK argued for a more voluntary, flexible EU approach, to allow for national circumstances, than that currently proposed, and in favour of doing more to encourage business to gain experience in emissions trading. The Commission also provided information on the European climate change programme.

On state aid to the coal industry after expiry of the European Coal and Steel Community (ECSC) treaty, only two member states supported the security of supply justification for continued aid. The UK and others opposed this justification but were nevertheless prepared to accept some further aid to the coal industry for social, regional or economic reasons, given appropriate limiting conditions. In particular, aid should be digressive and time limited. The Spanish presidency will take the dossier forward in the new year.

Finally, there was a brief progress report on the Energy Charter treaty and a short Commission presentation on the proposed directive on Biofuels.

Industry Council

The Industry Council held a debate and adopted conclusions on competitiveness and enterprise policy in the EU. The key themes were better regulation, the economic impact of September 11, research and development, and quantitative targets. The UK asked for the Commission to produce a better regulation action plan for Barcelona.

The Council adopted conclusions on the financing of SMEs. These recognise progress made in addressing problems for SMEs in obtaining finance, but also that more can be done. A number of initiatives have been identified, such as actions promoting entrepreneurship, and to encourage contacts between SMEs, bankers and other finance providers in order to improve their mutual understanding.

159W

The presidency introduced their progress report on modernising competition policy. A debate followed. All member states agreed the council should work towards adoption of the proposed regulation by end 2002. Most of the discussion focused on the issue of the relationship between national competition rules and EU law (Article 3). The Commission believes Article 3 is vital to ensure equal treatment across the Community and it would also simplify the Community legal structure. All member states supported the objectives of Article 3. The UK pointed to the need for consistency and sensible case allocation in the network, but noted some concerns on the regulated sectors, actions to address market failures, mergers, and criminal penalties, on which further discussion would be necessary. All member states agreed on the broad principles for co-operation between national competition authorities in a decentralised regime. The presidency concluded that work would continue.

Council conclusions were adopted on state aid which look forward to further work by the Commission and member states to reform the state aids regime. The Commission presented the Ninth Survey of State Aid in the EU, drawing Ministers' attention to the state aid Scoreboard and register that had been set up during the year to increase transparency.

The presidency noted continuing discussions on the transfer of ECSC assets. Further technical legal work was necessary. The Commission briefly presented its latest report on the Monitoring of Aid to the Steel Industry. The Commission was still considering the state aid rules to apply following expiry of the ECSC treaty. Strict rules would continue as member states and the Industry wanted.

The Council again discussed the Commission's proposals for a temporary defensive aid mechanism for shipbuilding, to be introduced in parallel with WTO action against Korea. The UK argued that the way to tackle the problem was through WTO action. The Commission's approach linking WTO action to aid had led to deadlock, from which only Korea benefited. Subsidies had not worked in the past and were further likely to weaken the WTO case. The Council was divided

Constituency	1992	1993	1994	1995
Ashton Under Lyne	306,000	145,500	25,000	0
Barrow and Furness	—	77,800	1,770,500	814,800
Birkenhead	205,000	164,500	217,000	920,000
Blackburn	322,500	755,500	461,500	2,046,000
Bolton, North-east	840,000	179,000	261,000	226,500
Bolton, South-east	0	0	894,600	945,800
Bolton, South-west	162,000	450,000	0	0
Bolton, West	444,000	231,000	1,077,500	380,000
Bootle	252,300	1,023,000	593,000	685,000
Bury, North	194,000	199,500	838,000	382,000
Bury, South	106,000	619,100	245,000	74,000
Carlisle	—	—	—	—
Chorley	90,000	23,000	0	99,000
City of Chester	18,000	7,277,000	180,000	170,000
Copeland	0	250,000	983,000	51,500
Crosby	70,000	0	75,000	90,000
Davyhulme	151,000	52,000	285,500	129,000
Denton and Reddish	27,685	97,650	0	0
Eccles	200,000	105,300	0	0
Eddisbury	50,000	855,000	175,000	43,000
Ellesmere Port and Neston	110,000	1,630,000	897,000	1,002,000
Halton	2,872,000	1,754,000	745,000	452,000
Heywood and Middleton	128,000	199,500	109,000	365,000
Hyndburn	487,000	2,191,500	9,500	0

160W

about the proposal, and the presidency concluded that no qualified majority existed for the subsidy proposal. The Spanish presidency would need to pick up the dossier.

The Commission made a short statement on sustainable development, encouraging the Council to work on its environmental integration strategy and ideally complete it in time for Barcelona.