Energy/Industry Council (Hansard, 21 June 2002)

§ Mr. Wilson

My hon. Friend the Minister of State for Employment, Industry and the Regions represented the UK at the EU Industry Council held in Luxembourg on 6 June. I represented the UK at the EU Energy Council held on 7 June.

Industry

The Council held a round table debate on competitiveness and enterprise policy in the EU. This followed a Commission presentation of its Communication "Productivity: the key to competitiveness". All Member States agreed on the need for further steps to promote productivity, particularly in services, in order to meet the targets set in the Lisbon strategy. The important role of enterprise policy was noted, in particular: improving the regulatory environment, promoting entrepreneurship and enhancing competitiveness. The UK identified the key obstacles in services as being productivity underperformance by the sector, the lack of a true single market in services, the slow pace of technology diffusion, and rigidities in the labour markets.

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Council Conclusions were adopted on Competitiveness and on the e-Economy. The latter build on the Commission Communication "The Impact of the e-Economy on European Enterprises" aiming to lay foundations for a more strategic approach to EU policies and initiatives for e-business. The Presidency gave a short presentation about the Charter for Small and Medium sized Enterprises, underlining its importance as an area for the Council to focus on, and noting both the Barcelona Council Conclusions on the subject and the full discussion that had taken place at the informal Council of Ministers for Small and Medium sized Enterprises in Aranjuez in February.

The Commission set out progress on the strategy for chemicals. The first phase of a business impact study was completed, and had been largely endorsed at a conference at the end of May. Costs for business would vary a great deal depending on the details of implementation. This led into a wider Council discussion on the contribution of sustainable development to enterprise policy, on which conclusions were adopted. All Member States saw a role for the Industry Council in looking at environmental dossiers with a big impact on competitiveness. The UK pointed to environmental liability and fluorinated gases as two important current examples. Effective co-ordination between industry and environment Departments in Member States was also important.

The Commission reported on the action underway relating to the expiry of the ECSC Treaty and on the position in the steel market following the US safeguard action.

The Presidency noted the progress towards the modernisation of competition law, and wished Denmark well in completing work during 2002, as agreed at the Barcelona Council. The Commission presented its thirty-first report on competition policy noting that 2001 had been a busy year for the Commission. A record 1.8 billion euro fines had been imposed on members of cartels.

The Commission also presented the new state aid scoreboard, published on 23 May, to the Council. The document would help all concerned pursue the agreed objectives of reducing the re-orientating state aid.

The Council adopted procedural conclusions on continuing work on Biotechnology with a view to adopting a roadmap of practical actions in due course.

The Presidency reported the outcome of the Euro-Mediterranean Partnership Conference of Industry Ministers in Malaga on 9 and 10 April. This had focussed on a range of measures to open up and develop trade in the region with longer-term objective of establishing a Mediterranean Free Trade Area.

The Commission presented the report from the G10 High-Level Working Party on medicinal products. This was the first such report to bring together public health and industry issues. It had sparked a number of public debates. The UK spoke in favour of the report. This was an important sector and the report's recommendations aimed at enhancing competitiveness needed to be actioned. Swedish and Spanish Ministers also spoke in support.

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The Council held an informal discussion over lunch on the new Block Exemption Proposal for motor vehicle sales and servicing.

Possible changes were explored to the Commission's longstanding proposals to allow some state aid for shipbuilding contracts in areas where there is held to be unfair competition from Korea. The Commission remained of the view that this was needed to bolster the proposed WTO action against Korea, which all Member States support. The revised Commission proposal had reduced subsidy rates but over a longer time frame, and allowed for inclusion of Liquid Natural Gas carriers if market data for 2002 justified this. The UK and a number of other Member States maintained their opposition to a subsidy scheme and there was no qualified majority in support. The matter was referred back to the Committee of Permanent Representatives.

Energy

The Council considered several matters of interest to the United Kingdom. Energy liberalisation, a new coal state aid regulation and a Biofuels directive formed the main issues of discussion.

The key point to emerge from discussion of coal state aid was the agreement reached on a new coal state aid regulation to replace the rules in force under the ECSC Treaty, which expires at the end of July. The regulation agreement would allow for operating, closure, investment and "exceptional cost" aid to phase out gradually by 2010, and provides for simple degressivity of the total volume of operating, closure and investment aid combined in each Member State, with an end date of 2007 for closure aid and 2010 for operating and investment aid. An investment aid provision sought by the UK has been included in the agreed text. Some Member States, regretting that the level of aid would not reduce significantly and continuously, asked the Commission to ensure that the Treaty's state aid articles were respected by Member States. The Commission will enter a declaration undertaking to ensure maximum vigilance in respect of those articles.

No Presidency or Council conclusions were agreed on energy liberalisation. Member States maintained their positions on the key areas of public service obligations, unbundling, market opening and the rules governing market regulation. There was general agreement on the importance of the principle of public service obligations, particularly in respect of electricity, but disagreement on the details. Some Member States favoured a wide coverage applying to all final customers. Others, including the UK, preferred a narrower definition limited to households. Most Member States supported the inclusion of some form of labelling showing the sources from which electricity had been generated. A majority favoured legal unbundling of transmission and distribution from supply and production, though most also supported a rather high de minimis level. There was widespread support for the separation of the accounts of eligible from non-eligible customers. Most Member States expressed support for the list of duties of national regulators set out in Article 22 of the Presidency text. A progress report on cross-border exchanges in electricity was noted without discussion.

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On biofuels, the majority of Member States reiterated their opposition to mandatory targets. It was, however, agreed that the reference to possible proposals for mandatory targets in the review clause could stand, on the basis that a number of Member States supported the UK's declaration that they would not be bound to accept any such proposals. A few Member States expressed regret that the Council was rejecting the Commission's proposals for mandatory targets for use of fuels of agricultural origin for transport purposes, and that targets would now be indicative.

General orientation on Trans-European Energy Networks (TENS) was agreed on the basis of a Presidency text. The UK lifted its reserve on the Commission's proposals to amend the energy TENS guidelines—all other reserves had been lifted previously. All Member States welcomed the proposal, but some questioned its financing aspects and in particular the raising of the Community's permissible financial contribution from 10 per cent. to 20 per cent. of total project costs.

The Commission reported briefly on its recent efforts to persuade Russia to ratify the Energy Charter Treaty.

The Commission introduced its new energy programme, "Intelligent Energy Programme for Europe", as a refocused version of the existing energy framework programme, which promotes more efficient and cleaner energy use. They said that the intention was to link the new programme to security of supply and the development of the single market. There would also be emphasis on environmental projects.

The Commission emphasised the importance of security of energy supply and said that a paper for the Seville Council was almost finalised. The Commission argued that Member State responses to the Green Paper had shown the need for demand side measures and for a new approach to oil and gas stocks. The Commission paper would also address the need to double the proportion of electricity generated from renewable sources. The Commission argued that nuclear power was also important, providing the only possible option for meeting Kyoto targets; that a rational approach was needed which would include a fresh look at safety and waste management, particularly in the context of enlargement; and that it was a matter of great concern that the acquisdid not currently cover nuclear safety standards. Several Member States expressed clear anti-nuclear views; others either remained non-committal or expressed support. The UK agreed on the need to start working on the follow up to the Commission's Green Paper, but expressed scepticism about the Commission's ideas on oil and gas stocks.

The Commission made a presentation on the current state of play in the EU/Russia Energy Dialogue. The Commission agreed to Member State requests for greater transparency in the process including participation at meetings.

Finally, there was brief discussion of the issue of candidatures for the post of Executive Director of the International Energy Agency.