Brussels, 04/06/2002 (Agence Europe) - State aid to the coal industry, the liberalisation of the gas and electricity sector, biofuels and trans-European networks in the energy sector will be the focus of debates at the Energy Council on 7 June in Luxembourg, under the presidency of Ana Maria Birulès y Bertran, Spanish Minister for Science and Technology. A political agreement is expected on State aid to the coal industry. On the issue of biofuels, some delegations are reportedly reticent about the idea of coming to general pattern in the absence of a political agreement at the Ecofin Council on tax measures. European Energy Commissioner Loyola de Palacio will be presenting two documents: a proposal of decision finalising a programme on "intelligent energy for Europe" and the broad lines of the report on supply security that the Commission intends to present to the European Council of Seville on 21 and 22 June. Furthermore, the Commissioner will take stock of progress made on energy cooperation between the EU and Russia, after the EU/Russia summit on 29 May (see EUROPE of 31 May, p.8).
The main issues on the Council's agenda are:
State aid to the coal industry: A political agreement is expected on the proposal of regulation aimed at ensuring certain coal production capacities are maintained after expiry of the ECSC Treaty and the current aid regime (see EUROPE of 18 July, p.12). "All conditions are now met" for coming to an agreement, the Spanish Presidency told the press. The Council, however, should seek to resolve the question of phasing out aid. The Commission proposes three categories of aid (resource security, reduced activity and exceptional costs) for a duration of eight years. The regime would expire on 31 December 2010 except for aid for reducing activities, which would expire on 31 December 2007. Some delegations, however, hope to strengthen the degressive nature of aid for reduction of activity and access to coal reserves. The proposal was approved by the European Parliament (see p.18).
Internal electricity and gas market: The Council will be called upon to reach an agreement of principle on the key elements of the directive aimed at accelerating the liberalisation of the gas and electricity sectors (see our Special Edition of 17 March on the Barcelona Summit). "A political agreement is impossible at this stage", states the Presidency, as "some countries hope to specify certain concepts" such as the protection of end-users and universal service, and the legal separation between the various activities. "We hope that the Council's conclusions will form a sound basis for presenting a report to the European Council in Seville", said the Presidency. The Council will also be informed on the state of progress of work on the proposal of directive concerning the conditions of access to the network for the crossborder trade in electricity. The proposal mainly insists on the establishment of rules that are fair (in terms of cost), transparent and directly applicable during cross-border energy exchange between national operators.
Trans-European networks in the energy sector: Pending the opinion of the Parliament during the month of June, the Council is expected to reach a general orientation on the proposal of directive aimed at promoting interconnection, interoperability and development of trans-European networks in the energy sector. The proposal aims to modify the guidelines in force by focusing on ten projects of common interest, defining twelve priorioty projects and increasing from 10 to 20% the maximum rate of co-funding of priority projects by the Community. The Council should above all settle two issues: 1) the link between this proposal and updating of the regulation on the financing of trans-European networks. Some delegations hope to define a future financial framework before reaching a final agreement on amending the proposal, while others hope there will be rapid agreement on the basis of the current financial regulation; 2) emphasis placed on the development phase of projects and the possibility of financing investment costs. Some delegations wonder how appropriate it is to increase the maximum rate of co-financing for priority projects, given the limited amount of budget available. The European Council of Barcelona on 15 and 16 March called for this issue and the accompanying financial rules to be settled by December.
Biofuels in transport: The Council is to reach a general orientation on the proposal of directive aimed at promoting the use of biofuels in transport (see EUROPE of 8 November, p.6). Two questions remain outstanding: the indicative nature of the aims and the review clause. "If there is agreement, it will be on the indicative nature of the objectives", predicted the Presidency.
To start off with, the Commission suggested the targets be compulsory but most Member States felt this wasn't realistic in the short-term, she said. On the reassessment clause (which could led to the targets being changed in 2007 or later) while not opposing it, various delegations expressed reservations over wording that would make it possible to set compulsory targets at a later date. Since this issue is connected with the proposal to allow Member States to levy reduced duty on biofuel (discussed at the ECOFIN Council of 4 June), various delegations are unhappy with the idea of a general guideline without political agreement from the ECOFIN Council on the tax measures.
The Council will also discuss: 1) a progress report on the Energy Charter following the most recent Energy Charter Conference on 17 December 2001. The report gives an overview of the four areas of Charter activity - transit, energy efficiency, investment and trade; 2) a draft decision by Commissioner Loyola de Palacio on the Intelligent Energy for Europe programme for the EU for 2003-2006. The proposal aims to strengthen the security of energy supply, deal with climate change and promote the competitiveness of European industry in this sector; 3) an address by Commissioner de Palacio outlining the report on security of supply that the Commission is planning to present to the Seville European Council of 21/22 June 2002, drawn up following consultation with stakeholders based on the Commission Green Paper (see EUROPE of 30 November 2001, p.5).