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Energy policy

The importance of energy policy at European level has grown steadily since the early days of the European Community. In the 1950s, co-operation in the coal sector through the European Coal and Steel Community, and on nuclear energy through the Euratom Treaty, fuelled wider economic and political European co-operation. Security-of-supply issues became more important from the 1970s onwards as a result of the oil crises.

The need for a more integrated and competitive energy market became clear in the late 1980s. Today, a true internal market for gas and electricity in the EU is still under development, although substantial progress has been made.

Environmental issues, such as air quality and acid rain, also began to influence European energy policy in the 1980s. The interaction between climate change and energy production and consumption demanded closer links between environmental policy and energy policy. Moreover, these links brought a global dimension to energy policy.

An energy policy for Europe

The increasingly European dimension to energy issues and the growing threats to a sustainable and competitive energy system led to the Spring 2007 meeting of the European Council adopting a new ‘Energy policy for Europe’. The policy highlights the urgency of the issues at stake and the need for a forceful policy reaction to them. Its objectives are to:

  • Increase the security of energy supply;
  • Ensure the competitiveness of European economies through the availability of affordable energy;
  • Promote environmental sustainability and combat climate change.

A milestone in the creation of the Enegy policy for Europe was the European Council’s adoption of a comprehensive Energy Action Plan that fixes highly ambitious targets:

  • To improve energy efficiency to reduce EU energy consumption by 20% by 2020, relative to a baseline;
  • To increase the share of renewable energies in overall EU energy consumption to 20% by 2020, with a separate 10% target for biofuels in transport.

To develop the technologies needed for these ambitious targets, the European Commission is currently preparing a European Strategic Energy Technology Plan. A key element of this plan is to stimulate “carbon capture and storage” that would reduce net greenhouse gas emissions from electricity generated from fossil fuels to close to zero.

The role of DG ECFIN

DG ECFIN contributes to the preparation and evaluation of energy policy initiatives. It assists the lead services, namely the Directorates-General for Transport and Energy (DG TREN), the Environment (DG ENV) and Taxation and Customs Union (DG TAXUD) in:

  • Conducting adequate problem analyses;
  • Identifying promising and economically meaningful policy options;
  • Analysing the economic effects of policy initiatives and different elements of the energy system in general.

Examples of this work include: analysis of the liberalisation of European energy markets; and the economics of renewables and of the energy-efficiency action plan.

The ultimate aim is to ensure that policies and policy reforms are welfare-enhancing, that the economic implications are well understood and that expected costs do not exceed expected benefits. Preferably, policy initiatives should support economic growth and job creation as well as sustainable development.

With this in mind, DG ECFIN provides methodological support to the analysis of policy proposals at the interface of transport, energy and environment, and their impact on cohesion within the European Union. It also encourages the use of economic instruments in these policies, wherever deemed appropriate.

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