WORK IN PROGRESS

1 September 2010
Energy Efficiency as New Paradigm of the European External
Energy Policy
The Case of the EU-Russian Energy Dialogue
Anatole Boute

Abstract:
In the face of the twin energy-related challenges of climate change and security of
supply the promotion of energy efficiency in third countries and especially in energy
producing countries ta!es an increasing importance in the e"ternal energy relations of
the European Union# It has for instance e$ol$ed as one of the main pillars of the EU-
Russian Energy Dialogue# The EU institutions understand that its main energy supplier
is not only rich in natural gas oil coal and uranium# It also holds an enormous potential
for the so-called %fifth energy source&: energy conser$ation# De$eloping this potential
would not only contribute to secure the future a$ailability of energy resources for the
EU# It would also participate in the European and international efforts to combat climate
change# This contribution analyses how the promotion of energy efficiency has been
institutionalised in the e"ternal energy relations of the European Union with non-EU
countries and in particular with Russia# The aim of this analysis is to delimitate the
concept of energy efficiency in the e"ternal energy relations of the European Union# Can
energy efficiency be seen as a new paradigm for understanding the European e"ternal
energy policy' (ased on this conceptual delimitation this contribution purports to
describe and assess the legal mechanisms that the EU institutions ha$e proposed to
implement this approach in practice# )hat specific legal constraints and incenti$es can
be de$eloped to generate energy sa$ings in the countries that determine Europe*s
security of energy supply'

University of Groningen. he author can !e contacted at a.".r.t.!oute#rug.nl and an!oute#yahoo.fr. his

paper was written for the Political Economy of Energy in Europe and $ussia %PEEE$& 'arwic( 'or(shop
on )Governing Energy in Europe and $ussia* organised on + and , -eptem!er ./0/ at the University of
'arwic(.
0
WORK IN PROGRESS
1 September 2010
TABLE OF CONTENTS
INTRODUCTION............................................................................................................................ 3
1. ENERGY EFFICIENCY IN THE EU EXTERNAL ENERGY POLICY: THE DEVELOPMENT
OF A NEW PARADIGM?............................................................................................................... 5
1.1. THE PROMOTION OF ENERGY SAVINGS IN NON-EU COUNTRIES TO SECURE ENERGY SUPPLY AND
COMBAT CLIMATE CHANGE............................................................................................................. 5
1.2. ENERGY EFFICIENCY IN THE EU-RUSSIAN ENERGY DIALOGUE...............................................10
1.3. ENERGY EFFICIENCY IN BILATERAL RELATIONS BETWEEN RUSSIA AND EU MEMBER STATES.....13
1.4. PRELIMINARY ASSESSMENT.................................................................................................. 14
2. THE POLICY AND REGULATORY INSTRUMENTS OF THE EU EXTERNAL ENERGY
EFFICIENCY POLICY.................................................................................................................. 18
2.1. INTERNATIONAL LAW AND THE PROMOTION OF ENERGY EFFICIENCY........................................18
2.1.1. The Energy Charter Treaty and the Protocol on Energy Efficiency...........................18
2.1.2. The Kyoto Protocol.................................................................................................... 21
2.1.3. International Agreement on Energy Efficiency..........................................................23
2.2. EUROPEAN LAW AND THE PROMOTION OF ETERNAL ENERGY EFFICIENCY..............................25
2.2.1. The export of the ac!"i# comm"na"taire................................................................2$
2.2.2. %oint Pro&ect# 'ith third co"ntrie# "nder the (ene'a)le Energy *o"rce# +irecti,e..2-
2.2.3. .in/ing "nder the E0 Emi##ion# Trading *cheme....................................................28
3. EVALUATION OF THE POLICY AND REGULATORY INSTRUMENTS.................................28
3.1. EVALUATION CRITERIA.......................................................................................................... 28
3.2. DECLARATIVE NATURE......................................................................................................... 33
3.2.1. The #ignificance of the Energy Charter Treaty and the Protocol on Energy
Efficiency.............................................................................................................................. 33
3.2.2. The #ignificance of the 182$ International Partner#hip for Energy Efficiency
Cooperation 3IPEEC4........................................................................................................... 35
3.2.2. The #ignificance of the export of the ac!"i# comm"na"taire.....................................35
3.3. FINANCING.......................................................................................................................... 34
3.4. INVESTMENT RIS!S.............................................................................................................. 3"
3.5.1. The protection of energy efficiency in,e#tment# "nder the in,e#tment regime of the
ECT ..................................................................................................................................... 36
3.5.2. Impro,ing in,e#tment #ta)ility for energy efficiency pro&ect# )y exporting the ac!"i#
comm"na"taire ................................................................................................................... 3-
3.5. PRELIMINARY CONCLUSIONS................................................................................................. 3#
4. CONCLUSIONS ...................................................................................................................... 4
4.1. THE CONCEPT OF ENERGY EFFICIENCY IN THE ETERNAL ENERGY POLICY..............................40
4.2. THE SPECIFIC INSTRUMENTS OF THE ETERNAL ENERGY EFFICIENCY POLICY..........................41
.
WORK IN PROGRESS
1 September 2010
INTRODUCTION
Energy efficiency is since long considered as a ma"or pillar of the European energy
policy.
0
1t lies today at the heart of the European strategy to create a sustaina!le2 secure
and competitive European energy mar(et. 1ndeed2 !y generating primary energy savings2
energy efficiency constitutes an important instrument in the com!at against climate
change. According to the European 3ommission2 it constitutes )without dou!t the
4uic(est2 most effective and most cost5effective manner for reducing greenhouse gas
%G6G& emissions*.
.
7oreover2 energy efficiency contri!utes to increased security of
supply !y providing an alternative to additional energy production and networ(
infrastructure.
+
By the same to(en2 it ena!les the European Union to reduce its
dependency on imported fossil fuels. 8inally2 energy efficiency is li(ely to introduce
competition on the demand side and so participate to the completion of the internal
energy mar(et2 and more generally to the increased competitiveness of the European
economy. he potential for such improvement and its !eneficial impact for Europe are
huge. 1t is indeed estimated that2 !y ././2 the European Union could reduce )at least ./
percent of its present energy consumption in a cost5effective manner2 e4uivalent to 9/
!illion of Euros per year.*
,
his potential of ./ percent cost5effective primary energy
savings is nowadays generally considered !y the EU institutions as a political target to !e
attained !y ././.
:
7ore recently2 the concern for improved energy efficiency has shifted from the realm of
the EU internal energy mar(et to the EU external energy relations. raditionally2 the
external energy policy aimed to guarantee the future availa!ility of sufficient energy
sources to meet the consumption needs of the EU !y focusing on issues such as the
promotion and protection of EU investments in the upstream energy sector of energy5
producing countries2 trade and contractual arrangements2 and the transit of energy
resources to the EU.
9
he EU institutions now advocate energy efficiency improvements
0
-ee among others European 3ommission2 3ommunication of 0+ 7ay 0;<= owards a 3ontinuing
Policy for Energy Efficiency in the European Union %3>7%<=& ..+ final&? European 3ommission2
3ommunication of 0, >cto!er 0;;0 on A 3ommunity -trategy to @imit 3ar!on Aioxide Emissions and to
1mprove Energy Efficiency %3>7%;0& 0=,, final&? European 3ommission2 3ommunication of .9 April
./// on an Action Plan to 1mprove Energy Efficiency in the European 3ommunity %3>7%.///& .,=
final&? European 3ommission2 Green Paper .; Novem!er ./// on owards a European -trategy for the
-ecurity of Energy -upply %3>7%.///& =9; final&.
.
European 3ommission2 Green Paper of .. Bune .//: on Energy Efficiency or Aoing 7ore with @ess
%3>7%.//:& .9:&2 at ,.
+
European Economic and -ocial 3ommittee2 >pinion of .+ Banuary .//, on the Proposal for a Airective of
the European Parliament and of the 3ouncil on Energy End5Use Efficiency and Energy -ervices %+, .//:
3 0./C00:&.
,
European 3ommission2 Green Paper on Energy Efficiency2 at ,.
:
-ee European 3ommission2 3ommunication of ; >cto!er .//9 on an Action Plan for Energy EfficiencyD
$ealising the Potential %3>7%.//9&:,: final&2 at +? 3ouncil of the European Union2 Presidency
3onclusions of .+ Novem!er .//9 %0:.;:C/9&? European Parliament2 $esolution of 0 Bune .//9 on Energy
Efficiency or Aoing 7ore with @ess E Green Paper %P9FA%.//9&/.,+&2 1tem +.
9
8or a legal analysis2 see - 6aghighi2 Energy -ecurity . The E"ternal /egal Relations of the European
Union with 0a1or +il and 2as -upplying Countries %>xfordD 6art Pu!lishing2 .//=&.
+
WORK IN PROGRESS
1 September 2010
in non5EU countries as an alternative2 or at least complement2 to this traditional
instruments.
7ore than in Europe2 the potential for energy savings in many EU partner countries is
considera!le. 1n $ussia2 for instance2 the pu!lic authorities estimate the potential for the
improvement of the energy efficiency of the general $ussian economy !y ././ at at least
,/ percent in comparison to $ussiaGs energy consumption in the year .//=.
=
Under
international energy law2 energy efficiency or energy conservation 4ualifies as an energy
source.
<
1t can thus !e said that $ussia is not only an energy power !ecause of its huge
reserves of natural gas2 oil2 coal and uranium. 1t also holds an enormous potential for the
so5called )fifth energy source*D energy conservation.
his contri!ution aims to analyse the policy and regulatory approach that the EU
institutions have developed in order to exploit the considera!le energy savings potential
of non5EU countries. 1 first examine the integration of energy efficiency in the EU
external energy policy from a conceptual perspective. 'hat place does energy efficiency
hold in the current external energy relations of the EUH 'hat are the reasons that underlie
this approach and what are its o!"ectivesH 1 try to analyse whether the concept of energy
efficiency in the EU external energy policy provides a new paradigm for understanding
and approaching the new energy challenges to which the EU is confronted.
Based on this conceptual delimitation2 1 identify the specific policy and regulatory
mechanisms that the EU institutions propose to improve the energy efficiency of the EU
partner countries. he focus is on )the EUGs most important energy supplier*
;
E the
$ussian 8ederation.
1n a third step2 1 evaluate the effectiveness of the EU )external energy efficiency policy*
in the light of the main regulatory !arriers that prevent energy efficiency investments in
$ussia today2 i.e. the declarative nature of the national regulation on energy efficiency2
the a!sence of a legal framewor( that ena!les the financial via!ility of these investments2
and the ris(s of regulatory changes that face energy efficiency investments.
=
IJKLMNLOP QJRSJTUJVKJSJ TJLOWRXKJ5YZJKJ[OVMTZJSJ UW\]O^OP _JTTO`TZJ` aMQMUWLOO KW NMUOJQ
QJ ././ SJQW2 b^]MUcQMKW _WTNJUPcMKOM[ dUW]O^MRXT^]W _JTTO`TZJ` aMQMUWLOO J^ 0= KJPeUP .//<
S. f 099.5U %3onception for the @ong5term -ocial and Economic Aevelopment of the $ussian 8ederation
until ././2 as adopted !y $egulation of the Government of the $ussian 8ederation No. 099.5r of 0=
Novem!er .//<2 as modified !y the $egulation of the Government of the $ussian 8ederation No. 00.05r of
< August .//;&2 at 9,. -ee also gKMUSM^OVMTZWP T^UW^MSOP KW NMUOJQ QJ ./+/ SJQW2 b^]MUcQMKW
_WTNJUPcMKOM[ dUW]O^MRXT^]W _JTTO`TZJ` aMQMUWLOO J^ 0+ KJPeUP .//; S. f 0=0:5U %$ussiaGs
Energy -trategy for the Period up to ./+/2 as adopted !y $egulation of the Government of the $ussian
8ederation No. 0=0:5r of 0+ Novem!er .//;&2 at 0:E09. >n the $ussian energy savings potential2 see P
>pith2 )Energy -avings in $ussia E Political 3hallenges and Economic Potential* %.//=& Russian
Analytical Digest :.
<
-ee Article 02 para. 0 Energy 3harter reaty Protocol on Energy Efficiency and $elated Environmental
Aspects2 signed in Aecem!er 0;;, and entered into force in April 0;;<. his provision considers )the
promotion of energy efficiency* as a )considera!le source of energy*.
;
European 3ommission2 Green Paper of < 7arch .//9 on a European -trategy for -ustaina!le2
3ompetitive and -ecure Energy %3>7%.//9& 0/: final&2 at 0:.
,
WORK IN PROGRESS
1 September 2010
1. ENERGY EFFICIENCY IN THE EU ETERNAL ENERGY POLICY! THE
DE"ELOP#ENT OF A NEW PARADIG#$
3#3# The promotion of energy sa$ings in non-EU countries to secure energy supply and
combat climate change
he European 3ommissionGs Green Paper owards a European -trategy for the -ecurity
of Energy -upply of .; Novem!er ./// is often considered as the start of a new
approach to the European policy to guarantee security of energy supply.
0/
1n this
document2 the 3ommission advocated energy efficiency as an indispensa!le instrument
to tac(le the dual security of supply and climate change challenges that characterise the
)new energy landscape of the .0
st
century*.
00
-imultaneously2 it proposed to integrate the
promotion of energy efficiency and renewa!le energy sources in the EU external energy
relations. 1n .//<2 the 3ommission confirmed this approach in its -econd -trategic
Energy $eview and stated that )iijt is at least as important to achieve improved energy
efficiency in other industrialised countries and emerging economies as in Europe*.
0.

According to the 3ommunication of the European 3ommission of .9 7ay .//+ on the
Aevelopment of Energy Policy for the Enlarged European Union2 its Neigh!ours and
Partner 3ountries2 such an external energy efficiency policy would !e )necessary in the
long term to assure our energy security*.
0+
1ndeed2 in accordance with the European
3ommissionD
iijnvestments into energy saving more !roadly would free up resources that could !e
exported in the interest of !oth our neigh!ouring countries and the EU. herefore2 co5
operation in the fields of energy efficiency and energy saving should !e given even higher
priority than is presently the case under the EU5$ussia Energy Aialogue and the Euro5
7editerranean Partnership.
0,
8ollowing this reasoning2 energy efficiency improvements in non5EU countries
contri!ute to EuropeGs security of supply !ecause they reduce2 or at least limit2 energy
consumption world5wide and so improve the availa!ility of energy sources for the
European Union. he potential for energy savings a!road E %and thus indirectly the
0/
-ee for instance European 3ommission2 3ommunication of .9 Bune .//. 8inal $eport on the Green
Paper kowards a European -trategy for the -ecurity of Energy -upplyG %3>7%.//.& +.0 final&2 at ..
00
-ee European 3ommission2 Green Paper of < 7arch .//9 on A European -trategy for -ustaina!le2
3ompetitive and -ecure Energy%3>7%.//9& 0/: final&2 at ,.
0.
European 3ommission2 3ommunication of 0+ Novem!er .//< on the -econd -trategic Energy $eviewD
an EU Energy -ecurity and -olidarity Action Plan %3>7%.//<& /=<0 final&2 at 0+.
0+
3>7%.//+& .9. final2 at :59.
0,
European 3ommission2 3ommunication on the Aevelopment of Energy Policy for the Enlarged European
Union2 its Neigh!ours and Partner 3ountries2 at .;. >n this approach2 see B Anderson2 - Bassi and l
Aufenanger2 )Aiscussion PaperD he Energy and 3limate 3hange Aimensions of the European
Neigh!ourhood Policy* %.//:& ))4 and Institute for European En$ironmental 5olicy2 at 0=.
:
WORK IN PROGRESS
1 September 2010
positive impact on EuropeGs energy security& E is considera!le. 1ndeed2 according to the
3ommission2 the )efficiency of the energy systems of our partner countries %m& could !e
improved significantly.*
0:
hese )low hanging fruits* in terms of energy savings a!road
are an additional reason to integrate energy efficiency as a new pillar of the EU external
energy policy.
he European 3ommission further ela!orated this idea in its Green Paper on Energy
Efficiency or Aoing 7ore with @ess of .. Bune .//:
09
where it considered thatD
itjhe recent increase in oil prices highlighted the impact of increased energy demand
resulting from rapid growth in energy consumption in a num!er of countries2 including
3hina. Given the scarcity of energy resources and the limited spare production capacity2
especially for hydrocar!ons2 it is o!vious that energy importing countries increasingly
!ecome competitors for the same energy resources %m&. herefore2 energy efficiency is an
issue in the interest of all energy importing countries2 including the Union2 and should !e
integrated into their glo!al strategy for security of energy supply.
0=
he European Union should support the domestic efforts of non5EU countries2 with
priority for countries experiencing rapid economic growth2 such as 3hina and 1ndia.
0<
he
EU should also wor( in this field with ma"or consuming countries with developed
economies2 such as the United -tates of America2 3anada and Bapan. According to the
European 3ommissionGs Green Paper on a European -trategy for -ustaina!le2
3ompetitive and -ecure Energy of < 7arch .//9D
iijf these countries ie.g. 3hina2 1ndia2 the U-2 3anada and Bapanj reduce the use of fossil
fuels2 it will also !e !eneficial for EuropeGs energy security. he EU could significantly
step up !ilateral and multi5lateral cooperation with these countries with the o!"ective of
encouraging the rational use of energy worldwide %m&.
0;
he main reasons for energy efficiency cooperation with non5EU countries are thus
primarily related to the )geopolitical and strategic interests of the EU*2 i.e. guaranteeing
the future availa!ility of energy sources to supply Europe.
./

1n addition2 this strategy aims to contri!ute to the European efforts to com!at climate
change. According to the European 3ommission2 the promotion of energy efficiency in
non5EU countries would !e )called for in the light of our shared commitment with our
0:
European 3ommission2 3ommunication on the Aevelopment of Energy Policy for the Enlarged European
Union2 its Neigh!ours and Partner 3ountries2 at .;.
09
3>7%.//:& .9: final.
0=
European 3ommission2 Green Paper on Energy Efficiency or Aoing 7ore with @ess2 at ++.
0<
European 3ommission2 Green Paper owards a European -trategy for the -ecurity of Energy -upply2 at
,;.
0;
European 3ommission2 Green Paper on a European -trategy for -ustaina!le2 3ompetitive and -ecure
Energy2 at 0=.
./
European 3ommission2 Green Paper on Energy Efficiency or Aoing 7ore with @ess2 at ++. -ee also
Annex 0 of 3ommunication from the 3ommission of 0/ Banuary .//= on An energy policy for Europe
%3>7%.//=& ///0 final&.
9
WORK IN PROGRESS
1 September 2010
neigh!ouring countries to com!at climate change.*
.0
6ere to2 however2 the European
approach is not totally disinterested. 1t is not solely !ased on moral considerations related
to EuropeGs )commitment to com!at climate change*. 1ndeed2 the 3ommission defends
the view that )iajction to tac(le climate change reinforces security of energy supply*.
..
Energy efficiency investments can generate a )dou!le dividend*
.+
!y guaranteeing
security of supply in a climate5friendly way. 7oreover2 this external climate change
policy pursues commercial o!"ectives. he European 3ommission argued in its Green
Paper on Energy Efficiency or Aoing 7ore with @ess thatD
idjue to the fact that the EU2 since the first energy crisis in the early 0;=/Gs2 has put in
place coherent policies and programmes for energy efficiency promotion2 the EUGs
energy5efficiency manufacturing industry is now well placed to ma(e the most of new
opportunities and to gain new mar(ets in third countries. European industry is at the
forefront in technology2 and occupies the strategic high ground in the glo!al competition
on energy5efficiency technology in most sectors %m&. $enewed efforts for an international
drive on energy efficiency could play a (ey role in consolidating the European industryGs
role as world leader in this field and could contri!ute to !oosting EuropeGs competitive
edge in the energy sector.
.,
he implementation of energy efficiency measures a!road would thus !e a way to
stimulate the realisation of !usiness %export& opportunities for EU companies2 in addition
to the positive impact on EuropeGs security of energy supply and climate change policy.
8ollowing the European 3ommissionGs ./// Green Paper on an EU -trategy for the
-ecurity of Energy2 the importance to promote energy efficiency improvements in the EU
external energy policy has !een endorsed !y the other EU institutions. he European
3ouncil considered in the Presidency 3onclusions of ., 7arch .//9 thatD
iijn its energy dialogues with third countries2 the EU should facilitate the development of
sustaina!le and efficient energy systems and assume a more proactive approach in
com!ating climate change2 promoting renewa!les2 low emission technologies and energy
efficiency and the implementation of the nyoto Protocol mechanisms.
.:
.0
European 3ommission2 3ommunication on the Aevelopment of Energy Policy for the Enlarged European
Union2 its Neigh!ours and Partner 3ountries2 at .;.
..
European 3ommission2 Green Paper )owards a European -trategy for the -ecurity of Energy -upply*2
at ,;.
.+
A Palacio2 in G 3oop and 3 $i!eiro %eds.&2 In$estment 5rotection and the Energy Charter Treaty2
%6untingtonD BurisNet2 .//<&2 at xxvii. -ee also A Boute2 )3om!ating 3limate 3hange and -ecuring
Electricity -upplyD he $ole of 1nvestment Protection @aw* %.//=& 09 European En$ironmental /aw
Re$iew ..=.
.,
1!id2 at +,. -ee also 3ommunication from the 3ommission of = >cto!er .//; on 1nvesting in the
Aevelopment of @ow 3ar!on echnologies %-E5Plan& 3>7%.//;& :0; final.
.:
Annex 111 of the Brussels European 3ouncil of .+C., 7arch .//92 Presidency 3onclusions ===:C0C/9
$El 0 %0< 7ay .//9&2 at +,. -ee also the European 3ouncil Action Plan %.//= E .//;& Energy Policy for
Europe %EPE&2 Annex 1 of the Brussels European 3ouncil of <C; 7arch .//=2 Presidency 3onclusions
=..,C0C/= $El 0 %. 7ay .//=&2 at 0;.
=
WORK IN PROGRESS
1 September 2010
he 3ouncil meeting on Energy of 0; 8e!ruary .//; confirmed thatD
idjue to increasing energy demand worldwide and in order to ensure a more diversified
and secure supply2 energy policy represents a (ey part of external relations of the EU and
its 7em!er -tates. Building on the kEnergy Policy for EuropeG Action Plan2 the 3ouncil
stresses that %...& imjessages to third countries should !e consistent with the EU policy
o!"ectives2 focusing on the reduction of G6G2 energy efficiency2 renewa!le and low5
emission technologies.
.9
Along the same line2 the European Parliament the European Parliament in its $esolution
of .+ 7arch .//9 on -ecurity of Energy -upply in the European Union
.=
stressed )the
importance of including in the new energy diplomacy of the EU a constructive dialogue
with all ma"or consumers of energy and nota!ly emerging economies on energy
efficiency and energy conservation*.
.<
7oreover2 in its $esolution of .9 -eptem!er .//=
on towards a 3ommon European 8oreign Policy on Energy
.;
the European Parliament
advocated theD
creation of a common European foreign policy on energy2 covering security of supply2
transit and investment related to energy security2 and the promotion of energy efficiency
and energy savings as well as clean and renewa!le energy sources2 particularly in relations
with countries whose energy consumption is growing rapidly.
+/
-imilarly it noted in its $esolution of + 8e!ruary .//; on the -econd -trategic Energy
$eview
+0
that )3hinaos growing energy consumption and greenhouse gas emissions
represent a huge challenge to environmental goals and security of energy supply*. 1t
called on this !asis for )an enhanced cooperation !etween the EU and 3hina to promote
the transfer of low car!on technology2 in particular energy efficiency and renewa!le*.
+.
he promotion of energy efficiency in the EU external energy policy is not limited to
)(ey consumer countries*
++
such as 3hina2 1ndia2 the United -tates of America2 3anada
and Bapan. 1t is also directed to the ma"or energy producing countries that supply Europe.
1n this respect2 energy efficiency holds an important place in the European Neigh!orhood
Policy.
+,
he concern for energy savings in the national economy of the energy suppliers
.9
3ouncil of the European Union2 Press $elease .;.,
th
3ouncil 7eeting E Energy2 0; 8e!ruary
.//; %99=/C/; Presse ,+&.
.=
P9FA%.//9&/00/.
.<
European Parliament2 $esolution on -ecurity of Energy -upply in the European Union2 para. 0/.
.;
P9FA%.//=&/,0+.
+/
European Parliament2 $esolution on towards a 3ommon European 8oreign Policy on Energy2 para. +.
+0
P9FA%.//;&//+<.
+.
European Parliament2 $esolution of + 8e!ruary .//; on the -econd -trategic Energy $eview2 para. 9..
++
An external policy to serve EuropeGs energy interests E Paper from 3ommissionC-GC6$ for the European
3ouncil of 0:C09 Bune .//9.
+,
European 3ommission2 3ommunication of 0. 7ay .//, on the European Neigh!ourhood Policy E
-trategy Paper %3>7%.//,& +=+ final&2 at 0=. -ee also European 3ommission2 3ommunication of :
Aecem!er .//= on A -trong European Neigh!ourhood Policy %3>7%.//=& ==, final&2 at <.
<
WORK IN PROGRESS
1 September 2010
of the EU has !een integrated in the Partnership and 3ooperation Agreements2
+:
Action
Plans
+9
and 7emoranda of Understanding
+=
!etween these countries and the EU. By the
same to(en2 it is a (ey aspect of the so5called 1Nterstate >il and GAs o Europe
%1N>GAE& Program2
+<
the Ba(u 1nitiative
+;
and the Eastern Partnership and the Blac(
-ea -ynergy initiative.
,/
7oreover2 the European 3ommission supports New Partnerships
for $enewa!le Energy
,0
and Energy Efficiency 3ooperation with the 7editerranean and
Gulf states.
,.
Along the same line2 the European Parliament recently called on the
European Union to cooperate with the countries of the 7editerranean region2 and of
North Africa )in view of their significant energy resource potential*.
,+
1t considered2 in
particular2 that )the use of solar and wind energy should !e researched and encouraged*
and called2 therefore2 for )common o!"ectives for renewa!le energy and energy
efficiency*.
,,
As for ma"or consuming countries2 the reasoning underlying the promotion of energy
savings in energy producing countries is primarily related to the )geopolitical and
strategic interests of the EU*. 1ndeed2 the EU is helping these countries to focus on
alternative energy sources and energy efficiency in order to )release important energy
resources.*
,:
1n addition to ma"or energy consuming and producing countries2 a third target group for
the EU external energy efficiency policy is constituted of transit countries. he European
3ommission has for instance underta(en action to modernise and thus improve the
energy efficiency of the U(rainian transit system.
,9
8ollowing the $usso5U(rainian gas
+:
-ee for instance Article :: of the Partnership and 3ooperation Agreement !etween the European
3ommunities and their 7em!er -tates2 of the one part2 and the $epu!lic of Aher!ai"an2 of the other part 5
Protocol on mutual assistance !etween authorities in customs matters2 .. April 0;;92 +, 0;;; @ .,9C+.
+9
-ee for instance the EUCAher!ai"an Action Plan2 availa!le online at
httpDCCec.europa.euCworldCenpCpdfCactionFplansCaher!ai"anFenpFapFfinalFen.pdf.
+=
-ee for instance the 7emorandum of Understanding on a -trategic Partnership !etween the European
Union and the $epu!lic of Aher!ai"an in the 8ield of Energy2 = Novem!er .//9.
+<
-ee the Astana 0inisterial Declaration of 67 8o$ember 977: on Enhanced Energy 3ooperation !etween
the EU2 the @ittoral -tates of the Blac( and 3aspian -eas and their Neigh!ouring 3ountries2 that considers
action in the field of the support of )sustaina!le energy development2 including the development of energy
efficiency2 renewa!le energy sources and demand side management*.
+;
-ee the 3onclusions reached at the Energy 7inisterial 3onference organised in Ba(u on 0+ Novem!er
.//,2 www.inogate.orgCinogateCenC!a(u5initiative.
,/
-ee European 3ommission2 3ommunication of 00 April .//= on the Blac( -ea -ynergy E A New
$egional 3ooperation 1nitiative %3>7%.//=& 09/ final&2 at :.
,0
B 8errero5'aldner2 )>pening $emar(s* to the EU57editerranean5Gulf $enewa!le Energy 3onference2
Brussels2 ; >cto!er .//; %-PEE36C/;C,:9&. -ee also )3ommission goes step further in developing
renewa!le energy with 7editerranean and Gulf countries*2 Press release of < >cto!er .//; %1PC/;C0,;,&.
,.
European 3ommission2 Pu!licationD EU2 7editerranean and Gulf -tatesD New Partnerships for
$enewa!le Energy2 : Novem!er .//;2 availa!le online at
httpDCCec.europa.euCexternalFrelationsCli!raryCpu!licationsC.//;FmedFgulfFen.pdf.
,+
European Parliament2 $esolution of + 8e!ruary .//; on the -econd -trategic Energy $eview2 para. :/.
,,
1!id.
,:
-ee European 3ommission2 3ommunication on the Blac( -ea -ynergy2 at :.
,9
European 3ommission2 European Ban( for $econstruction and Aevelopment2 European 1nvestment
Ban(2 'orld Ban( and Government of U(raine2 Boint Aeclaration of .+ 7arch .//; on the Boint EU5
U(raine 1nternational 1nvestment 3onference on the 7odernisation of U(raineGs Gas ransit -ystem.
;
WORK IN PROGRESS
1 September 2010
crises2 leading analysts pointed to U(raineGs very energy5inefficient economy
,=
as one of
the causes of its heavy dependence on imported $ussian gas and thus one of the ma"or
concerns for the European Union. 1n this context2 they argued in favour of reducing
energy consumption via the implementation of energy5saving measures in the U(rainian
economy.
,<
3#9# Energy efficiency in the EU-Russian Energy Dialogue
Energy efficiency also plays a central role in the relations !etween the EU and its main
energy supplier E the $ussian 8ederation. 1t has !een included in the Partnership and
3ooperation Agreement !etween $ussia and the EU
,;
and is one of the cornerstones of
the EU5$ussian Energy Aialogue. 8ormer EU 3ommissioner for Energy Pie!algs and
$ussian Energy 7inister -hmat(o considered in this respect thatD
iijmproving energy efficiency in all sectors of the economy and increasing the share of
renewa!le energy resources has !een one of the main priority areas of the EU5$ussia
Energy 3ooperation since the !eginning of the Energy Aialogue.
:/
7oreover2 energy efficiency is a central part of the recent EU5$ussian Partnership for
7odernisation agreed at the EU E $ussia -ummit in Bune ./0/ in $ostov5on5Aon.
:0
1n accordance with the general idea of energy efficiency promotion in the EU external
energy policy2 the EU institutions aim to stimulate the realisation of energy savings in
$ussia to guarantee the availa!ility of energy resources for future supply to the EU.
,=
According to Pirani2 -tern and pafimava2 )the most energy5inefficient economy in the world. %m& Gas is
used in unusually large 4uantities %m&.* - Pirani2 B -tern and n pafimava2 )he $usso5U(rainian gas
dispute of Banuary .//;D a comprehensive assessment*2 %.//;; +"ford Institute for Energy -tudies2 at :<2
availa!le online at www.oxfordenergy.orgCpdfsCNG.=.pdf.
,<
1!id. -ee also 3 van der @inde and B de Bong2 )Upping the -ta(es E -ome @essons for the EU from the
$ecent $ussia5U(raine Gas 3risis*2 %.//;& Clingendael International Energy 5rogramme (riefing 5apers
02 at :.
,;
-ee Article 9:2 para. . of the Agreement on Partnership and 3ooperation Esta!lishing a Partnership
!etween the European 3ommunities and their 7em!er -tates2 of one part2 and the $ussian 8ederation2 of
the other part2 ., Bune 0;;, %+, 0;;= @ +.=C///+&. -ee also the $oad 7ap for the 3ommon Economic
-pace E Building Bloc(s for -ustained Economic Growth2 availa!le online at
www.eu.//:.luCenCactualitesCdocumentsFtravailC.//:C/:C0/5,spacesC,spaces.pdf.
:/
A Pie!algs and - -hmat(o2 Energy Dialogue EU-Russia . The Tenth 5rogress Report2 Novem!er .//;.
-ee also 3ommon -trategy of the European Union of , Bune 0;;; on $ussia %0;;;C,0,C38-P&2 +, 0;;; @
0:=C///02 considering that )itjhe European Union will2 in particular2 cooperate with $ussia inD %a& energy
and nuclear safety2 !y enhancing the $ussian commitment to energy sector reform2 including nuclear safety
and environmental protection? for example !y wor(ing with $ussia to improve energy efficiency and !y
providing technical assistance on energy conservation in $ussia*.
:0
3ouncil of the European Union2 Boint -tatement on the Partnership for 7odernisation EU5$ussia -ummit
+0 7ay50 Bune ./0/ %0/:,9C0/ P$E--E 0:,&. -ee 3 Belton2 )$ussia and EU Agree 7odernisation Pact*2
0 Bune ./0/2 4inancial Times availa!le online at www.ft.comCcmsCsC/C;c,e;=a959d;c500df5!:c;5
//0,,fea!dc/.html.
0/
WORK IN PROGRESS
1 September 2010
1ndeed2 in accordance with the 3ommunication of the European 3ommission of 0+
Aecem!er .//, on the Energy Aialogue !etween the European Union and the $ussian
8ederation !etween ./// and .//,D
itjhe modernisation of the $ussian economy2 support to its high rate of growth %around =q
p.a.& ma(es it all the more essential that $ussian industry adopts efficient energy practices
in order to increase capacities for export2 including towards the EU.
:.
7oreover2 according to the hematic Group on Energy Efficiency of the EUE$ussian
Energy Aialogue2 deepening cooperation in the field of energy efficiency !etween $ussia
and the European Union is )a crucial issue in order to intensify EU5$ussia energy
relations.* 1ndeed2 such cooperation wouldD
increase the iEuropeanj security of energy supply !ecause %m& energy savings in $ussia
would contri!ute to the availa!ility of a higher level of $ussian energy supply for export
to the EU.
:+
7ore than in other partner countries2 the necessity to influence the domestic demand for
energy resources in $ussia is considered to !e of particular importance for EuropeGs
security of energy supply given concerning levels of investment in the development of
$ussiaGs energy infrastructure. 1n this view2 the European 3ommission considered in its
3ommunication of 0. >cto!er .//9 on External Energy $elations E 8rom Principles to
Action thatD
iwjith the current levels of investment in production2 transport and distri!ution of energy
products2 concerns have !een expressed that $ussia may not !e a!le ade4uately to satisfy
the growing demand on !oth its export and domestic mar(ets. here should2 therefore2 !e
a strong "oint effort to improve the energy efficiency of the $ussian economy.
:,
he 3ommissionGs concerns a!out the threat that the inade4uacy of investments in the
$ussian energy sector2 com!ined with rising domestic demand2 poses for EuropeGs
security of energy supply2 and the 3ommissionGs conclusions a!out the necessity to
stimulate energy savings in $ussia to guarantee future supplies are shared !y many
o!servers. he 1nternational Energy Agency2 for instance2 is concerned that rising
domestic gas demand )will !egin to affect $ussiaGs position as a secure and relia!le
:.
3>7C.//,C/=== final
:+
-ee hematic Group on Energy Efficiency of the EUE$ussian Energy Aialogue2 Terms of Reference .=
-eptem!er .//=2 Annex .2 availa!le online at httpDCCec.europa.euCenergyCrussiaCgroupsCefficiencyFen.htm.
-ee also G 3rsar et al.2 Russie: 5uissance ou interd<pendence <nerg<ti=ue' %-rnat 8ransais2 .//;&
availa!le online at www.senat.frCnoticerapC.//;Cr/;50<.5notice.html.
:,
3>7%.//9& :;/ final2 at +.
00
WORK IN PROGRESS
1 September 2010
supplier*.
::
herefore2 $ussia could use its considera!le energy efficiency potential to
slow demand growth and help manage the a!ove pro!lems.
:9
According to the 1EAD
itjhe economic value of the saved gas "ustifies the identified energy5efficiency
improvements2 which would also enhance energy security for $ussia and importing
countries. 1t will thus reinforce $ussiaGs role as a relia!le supplier of natural gas in the
coming decades.
:=
Along the same lines2 a report drafted !y 8rench senators on !ehalf of the EU delegation
on EU5$ussian relations expressedD
a real concern a!out $ussiaGs capacity to honour its commitments towards the European
Union as regards the supply of hydrocar!ons2 given the increases in domestic demand and
the lac( of investments2 in particular in the gas sector.
:<
1n the face of these challenges for EuropeGs security of energy supply2 the senators2 in a
similar way to the European 3ommission and the 1nternational Energy Agency
highlighted $ussiaGs )huge potential in the field of energy efficiency and energy
savings*.
:;
-imilarly to the general idea underlying the promotion of energy efficiency in the EU
external energy policy2 European support for energy efficiency improvements in $ussia
would not only contri!ute to EuropeGs security of supply2 !ut also to the European
commitment to com!at climate change.
9/
-timulating energy savings in $ussia would
avoid nullifying European efforts to reduce domestic emissions of greenhouse gases
through an increase of energy consumption in $ussia. he European Parliament2 for
instance2 called in its $esolution of 0, Novem!er .//= on the EU5$ussia -ummit
90
on
the $ussian 8ederation to )invest heavily in energy efficiency measures2 given the urgent
need to address the pro!lem of climate change*. 7oreover2 it considered in its $esolution
of .9 -eptem!er .//= on owards a 3ommon European 8oreign Policy on Energy that
::
1nternational Energy Agency2 +ptimising Russian 8atural 2as . Reform and Climate 5olicy %ParisD 1EA2
.//9&2 at 09. -ee also 'orld Ban( $ussia 3ountry >ffice2 Russian Economic Report 8o# 0= %'ashingtonD
he 'orld Ban( Group2 .//<&2 at ,/. >n the uncertainty concerning future investments in gas fields in
$ussia2 see 3am!ridge Energy $esearch Associates2 -ecuring the 4uture . 0a!ing 2as Interdependence
)or! %3am!ridge 7assachusettsD 3E$A2 .//=&2 at Executive -ummary50+.
:9
1n this view2 see also A Goldthau2 )$hetoric versus $ealityD $ussian hreats to European Energy
-upply* %.//<& +9 Energy 5olicy 9<92 at 9<= and 9;/? A Bohnson2 )EU5$ussian Energy @in(sD A 7arriage
of 3onvenience* %.//:& 2o$ernment and +pposition .:92 at .9..
:=
1nternational Energy Agency2 +ptimising Russian 8atural 2as2 at 09.
:<
ranslation from 8rench !y the present author of p Pohho di Borgo2 et al.2 Rapport d*information fait au
nom de la d<l<gation pour l*Union europ<enne sur les relations entre l*Union europ<enne et la 4<d<ration
de Russie2 %-rnat 8ransais2 .//=&2 at ,9
:;
1!id2 at ,;. -ee also G 3rsar et al.2 Russie: 5uissance ou interd<pendence <nerg<ti=ue' %-rnat 8ransais2
.//;& availa!le online at www.senat.frCnoticerapC.//;Cr/;50<.5notice.html.
9/
1n this view2 see also A Goldthau2 )1mproving $ussian Energy EfficiencyD Next -teps* %.//<& ,9
Russian Analytical Digest ;2 at 00.
90
P9FA%.//=&/:.<.
0.
WORK IN PROGRESS
1 September 2010
)the principle of developing environment5friendly and energy5efficient technologies
should !e incorporated into a new agreement !etween the EU and $ussia.*
9.
Also in relation to $ussia2 the external energy efficiency and climate change agenda of
the EU institutions can !e considered to pursue commercial !enefits. he participation of
European companies in the modernisation and improvement of the energy efficiency of
the national economy is expected to !ring su!stantial economic gains.
9+
he
modernisation of the electricity production infrastructure2 for instance2 represents a huge
!usiness opportunity for European energy companies. 1ndeed2 the $ussian electricity
mar(et is considered as )one of the worldGs largest and fastest growing*.
9,
Additional reasons could !e mentioned to "ustify the European support for energy
efficiency improvements in $ussia. Energy efficiency investments could !e considered as
less strategically important and sensitive than traditional upstream energy investments.
3ooperating in this field could thus !e seen as a way to reinforce the mutual trust
!etween the European and $ussian partners.
3#6# Energy efficiency in bilateral relations between Russia and EU member states
he promotion of energy efficiency and energy savings in $ussia is not only part of the
)common* EU external energy policy. 1t is also actively supported !y many EU mem!er
states individually in their !ilateral relations with $ussia. he Netherlands2
9:
Germany2
99
1taly2
9=
8inland2
9<
8rance2
9;
and even Greece
=/
have discussed2 concluded andCor
9.
P9FA%.//=&/,0+2 at :0.
9+
-ee for instance 7inistry of Economic Affairs of the Netherlands2 Energy Efficiency -ector in Russia:
0ar!et -ur$ey of E=uipment and -er$ices %ElA2 .//9&.
9,
' Bernotat2 ranscript of the elephone 3onference on the Ac4uisition of -hares in >Gn5, !y E.>N2 0=
-eptem!er .//=2 at . and +2 availa!le online at
www.eon.comCenCdownloadsC$edeFBernotatF>GnF,Fen.pdf. According to Bernotat2 chief executive
officer of the German energy concern E.on2 the $ussian mar(et is characterised with an )almost unrivalled
appetite for electricity*. -ee also G Ainmore and 3 Belton2 )1talyGs Power 8orce -ees New 8rontier in
$ussian 7ar(et*2 4inancial Times +/ >cto!er .//=2 at ..
9:
-ee for instance2 7inistry of Economic Affairs2 Russia: Energy Efficiency %.//;&2 availa!le online at
www.evd.nlChoe(enCshow!ouwsteen.aspH!stnumt0:;;0:.
99
-ee www.auswaertiges5amt.deCdiploCenCAussenpoliti(C$egionale-chwerpun(teC$usslandC$ussland5
'irtschaft5Energie.htmlut,.
9=
)vJT^JPRWTX ]T^UMVW [OKOT^UW YKMUSM^OZO _a vMUSMP w[W^ZJ T [OKOT^UJ[ YZJKJ[OVMTZJSJ
UW\]O^OP x^WROO IRWyQOJ vZW`JRW* %)he 7inister of Energy of the $ussian 8ederation -ergey -hmat(o
7et the 7inister for Economic Aevelopment of 1taly 3laudio -ca"ola*&2 .< Buly .//<2 availa!le online at
www.minenergo.gov.ru.
9<
-ee 7emorandum of Understanding %7oU&2 signed in 6elsin(i !y -ergei -hmat(o2 7inister of Energy
of $ussia2 and 7auri Pe((arinen2 7inister of Economic Affairs of 8inland2 , 8e!ruary ./0/2 www.energy5
enviro.fiCindex.phpHPAGEt.zN>AEF1At,z1At+//<.
9;
-ee the 1nter57inisterial Agreement on Energy Efficiency !etween 7inenergo %the $ussian 7inistry of
Energy& and the 8rench 7inistry of -ustaina!le Aevelopment2 -eptem!er .//<. -ee
www.ademe.frChtdocsCpu!licationsCinternationalC0,Cp0.htm.
=/
)vJT^JPRWTX ]T^UMVW {OKOT^UW YKMUSM^OZO _a vMUSMP w[W^ZJ T {OKOT^UJ[ UW\]O^OP |UMLOO
}UOT^JTJ[ aJROWTJ[* %)he 7inistry of Energy of the $ussian 8ederation -ergey -hmat(o 7et with the
7inistry of Aevelopment of Greece 3hristos 8olias*&2 .< Buly .//<2 availa!le online at
0+
WORK IN PROGRESS
1 September 2010
implemented !ilateral cooperation agreements with $ussia in the field of energy
efficiency improvements in $ussia. Germany and 8rance have even institutionalised this
cooperation with the creation of "oint $ussian5German and $ussian58rench energy
centres. he $ussian5German Energy Agency %$uAEA&
=0
primarily focuses on the
development of the $ussian potential in energy efficiency and renewa!le energy sources.
his agency ta(es place within the German5$ussian 7odernisation Partnership.
=.
1t is argua!le that this !ilateral approach to the promotion of energy efficiency pursues
the same goals as the EU external energy policy2 i.e. guaranteeing the future availa!ility
of $ussian energy sources in a climate5friendly way.
=+
Energy efficiency could !e seen as
a way to tighten the !ilateral lin(s with $ussia. By wor(ing together in this less strategic
domain2 the individual EU mem!er states would actually aim to2 or at least hope to2 !e
the preferred partners when it comes to concluding deals on ma"or upstream energy
developments. 1n this way2 cooperation in the field of energy efficiency in $ussia could
!e considered as a strategy to increase the mutual !ilateral trust and ties in order to more
easily conclude traditional !ilateral energy contracts in the future.
1n addition2 EU mem!er states also purport to harness the commercial potential that the
huge investment needs in the modernisation of the $ussian economy represent for their
companies.
=,
3#># 5reliminary assessment
1t appears from this overview of EU policy and regulatory documents that energy
efficiency !ecame one of the pillars of the EU external energy policy of the .0
st
3entury.
he promotion of energy savings in ma"or non5EU energy consuming2 producing and
transit countries aims to achieve the overarching goals of EU energy policy2 i.e. to
guarantee energy security2 com!at climate change and improve competitiveness. his
approach contrasts with the traditional understanding of external energy policy as a
policy aiming at stimulating investments in the upstream energy sector. Energy efficiency
can therefore2 to a certain extent2 !e considered as proposing a new )paradigm* for
understanding external energy relations.
www.minenergo.gov.ru.
=0
-ee httpDCCrudea5energy.com.
=.
-ee www.auswaertiges5amt.deCdiploCenC1nfoserviceCPresseC1nterviewC./0/C0//:+05B758A~.html.
=+
litor argues that )ioj!viously2 !oth sides can !enefit from $uAEAGs wor( and an increase in energy
efficiency in $ussiaD Not only can Germany and $ussia massively reduce their 3>. emissions and com!at
climate change. $ussia2 !y decreasing its domestic consumption2 can also free capacities for the export of
natural gasto its own economic !enefit and at the same time to an increased security of supply in
Germany and the EU.* 7 litor2 )1$ENA and $uAEA E Germany Promotes $enewa!le Energy and
Energy Efficiency Glo!ally*2 AGAPa(tuell2 Bune .//;2 at ,2 availa!le online at www.dgap.orgCmidcom5
serveattachmentguid50de99e:+;d.,!c.99e:00dea!90!fafa.!d/fd//fd/C.//;5/:Fdgapa(tuellFvi55
torFirena5and5rudea.pdf.
=,
litor further considers that )itjhe application of German experience and technology can also help
develop new mar(ets for the German economy and simultaneously modernise the $ussian economy E a
cooperation to the !enefit of all parties.* 7 litor2 )1$ENA and $uAEA E Germany Promotes $enewa!le
Energy and Energy Efficiency Glo!ally*2 at ,.
0,
WORK IN PROGRESS
1 September 2010
1t is argua!le that the EU institutions have opted to integrate the promotion of energy
efficiency in the external energy policy !ecause of the limited EU competences in this
field. Energy efficiency is historically an EU competence. 1nternal rules were adopted in
this field. According to the so5called )effect5doctrine* of the ERTA Budgment of the
3ourt of Bustice of the European 3ommunities2 this would allow the EU to exercise
implied external powers in this field.
=:
1n this view2 it could !e said that the limited EU
competences would have forced the EU institutions to develop the energy efficiency
)paradigm* in order to pursue some action in its energy relations with third countries.
his new approach provides (ey conceptual answers to the necessity to guarantee energy
security in a car!on5constrained world. By reconciling energy security with climate
change mitigation2 it provides an ideal solution to the common energy challenges that the
EU and its partner countries face. 6owever2 the energy efficiency paradigm as developed
!y the EU appears to suffer from important deficiencies in its approach to external energy
relations.
1ndeed2 the promotion of energy efficiency in the external energy policy cannot !e seen
as a uniform policy that could !e universally applied independently from the specific
features of the recipient %non5EU& state. he opportunities and challenges related to the
promotion of energy efficiency in non5EU countries may significantly differ depending
on the 4ualification of the recipient countries concerned as ma"or consuming2 producing
or transit countries.
1n all the scenarios the promotion of energy efficiency contri!utes to improving the
general availa!ility of energy sources. 6owever2 energy savings in energy5producing
countries offer potential additional !enefits. he EU or its mem!er states could for
instance argue that their support for the realisation of energy savings in energy5producing
countries gives them the )right* to !e supplied with the amount of energy saved.
=9
As
seen a!ove2 one of the arguments that could "ustify mem!er statesG support for energy
savings in $ussia is related to the opportunities that such cooperation could generate as
regards their future participation to upstream energy pro"ects. 1n this respect2 !eing
involved in the $ussian energy efficiency sector offers much !igger opportunities than in
energy consuming countries.
1n addition2 the opportunities that the realisation of energy savings in energy consuming
countries
==
represent for the EU could !e considered as a threat to energy exporting
countries. Energy savings reduce the need for additional energy sources or at least limit
=:
3ase ..C=/2 Commission $# Council ?European Road Transport Agreement; Budgment of +0 7arch 0;=0
i0;=0j E3$ .9+. >n the relevance of the ERTA Budgment for the external energy relations of the EU2 see -
6aghighi2 Energy -ecurity . The E"ternal /egal Relations of the European Union with 0a1or +il and 2as
-upplying Countries %>xfordD 6art Pu!lishing2 .//=&2 at <<5;<.
=9
As seen a!ove2 international law %the Protocol on Energy Efficiency to the Energy 3harter reaty&
considers energy savings %energy conservation& as an energy source. 3ontracts for the realisation of energy
savings could for instance provide that the necessary investments will !e paid with a certain percentage of
the energy saved.
==
1ncluding energy savings in the EU itself.
0:
WORK IN PROGRESS
1 September 2010
increases of energy consumption. his could have a potentially very damaging impact on
the long5term financial via!ility of upstream energy pro"ects. Uncertainty a!out the
impact of energy efficiency measures on the energy demand of certain regions could
dissuade the development of these pro"ects. he impact that energy efficiency
programmes in energy consuming countries could have on energy producing countries
was for instance highlighted in the reactions of $ussian officials to EUGs energy
consumption forecasts in the -econd -trategic Energy $eview.
=<
Also within energy5exporting countries themselves interests can diverge significantly.
Energy efficiency can represent different !enefits and challenges for the federal
%national& and regional authorities. 1n $ussia2 for instance2 the federal authorities
advocate the necessity to modernise the economy and reduce the general energy intensity.
6owever2 the implementation of energy efficiency measures !y the regional authorities
could have negative conse4uences for the future allocation of gas to their region. 1ndeed2
energy savings at the regional level could reduce the amount of gas to which the regions
that implemented these savings were initially entitled. Energy efficiency is therefore seen
as a sensitive issue !y certain regional authorities. he federal interests are not always
aligned with the regional interests.
8urthermore2 differences can !e identified as regards the strategic importance of the
energy infrastructure that undergoes energy efficiency improvements. 1n $ussia2 for
instance2 the pipeline infrastructure for the transportation of oil and gas is considered to
!e of strategic national importance.
=;
he access of foreign parties to this infrastructure is
historically a very sensitive topic. 1t can thus !e expected that the national authorities
would !e particularly reluctant to allow foreign investments improving the efficiency of
the pipeline infrastructure. -imilarly2 the access to the $ussian gas networ( !y oil
producers in order to reduce the amount of )associated gas* !eing flared is a very
controversial issue. 1n contrast2 in energy consuming countries2 the participation of
foreign investors to the development and modernisation of the energy networ(
infrastructure could not necessarily always !e so controversial.
Energy efficiency pro"ects related to the networ( segment of the energy industry illustrate
the fact that2 while cooperation in the field of energy efficiency is in theory much less
strategically sensitive than traditional upstream energy investments2 this cooperation
could in practice prove to !e much more challenging. 1n the context of the EU5$ussian
energy relation2 the sensitivity of networ( related energy efficiency pro"ects has recently
!een highlighted !y $ussiaGs heavy criticism of the Boint EU5U(raine Aeclaration of .+
7arch .//; on the Boint EU5U(raine 1nternational 1nvestment 3onference on the
=<
-ee P van @eeuwen2 )EU en Externe Energierelaties*2 Nederlands lereniging voor Energierecht2 Pels
$i"c(en z Aroogleever 8ortui"n N.l.2 he 6ague2 , 7arch .//;. 1n accordance with the -econd -trategic
Energy $eview2 at .2 )EuropeGs new Energy Policy will fundamentally alter the EUos energy outloo(. he
pac(age will reduce energy consumption in the EU in ././ !y as much as 0:q2 and lead to a reduction of
expected imports of energy !y up to .9q compared to the developments !efore the ./5./5./ initiative.*
=;
-ee the 8ederal @aw No. := of .; April .//< )>n Procedures for 8oreign 1nvestments in 3ompanies of
-trategic 1mportance for National Aefense and -ecurity* %aMQMUWRXK` \WZJK J^ .;./,..//< N :=5a
NJUPQZM JTyMT^]RMKOP OKJT^UWKK OK]MT^OLO` ] J\P`T^]MKKM JeMT^]W2 O[MOM
T^UW^MSOVMTZJM \KWVMKOM QRP JeMTNMVMKOP JeJUJK T^UWK O eM\JNWTKJT^O SJTyQWUT^]W&.
09
WORK IN PROGRESS
1 September 2010
7odernisation of U(raineGs Gas ransit -ystem.
</
$ussiaGs Prime 7inister Putin
threatened to review $ussiaGs energy relations with the EU after the European
3ommission announced plans to modernise U(raineGs gas transit system without
involving $ussia in this pro"ect. Putin argued that since $ussia E as energy producing
country E provides the gas that transits through this infrastructure2 it should !e involved
in these modernisation plans in the transit country.
7oreover2 the interests pursued with the promotion of energy efficiency in the EU
external energy relations could differ from the agenda of the EU mem!er states in their
!ilateral relations with $ussia. Analysts often argue that EuropeGs fundamental pro!lem
in its approach towards $ussia is its ina!ility to )spea( with one voice*. Building upon
this criticism2 it is argua!le that also in the field of energy efficiency a !ilateral approach
towards $ussia could possi!ly undermine the common EU policy. >fficially the $ussian5
German 7odernisation Partnership promotes the idea that )ithe $ussian5Germanj
!ilateral experiences will !enefit the European5$ussian pro"ect.*
<0
Nevertheless2 as
mentioned a!ove2 energy efficiency could !e seen as a political strategy to increase
mutual trust and so gain priority access to the future development of traditional energy
pro"ects. 1n this view2 it is argua!le that energy efficiency could reinforce the divisions of
the mem!er states in their external energy policy towards $ussia.
Energy efficiency does thus not provide a clear and unam!iguous approach to external
energy relations. 1t needs to !e decomposed in function of the type of the recipient
country concerned %energy consuming2 energy producing and transit& and in function of
the entity that advocates this principle in its external energy relations %the EU or the EU
mem!er states&. -uch a conceptual decomposition is essential in order to grasp the
different challenges %sensitivities& and opportunities at sta(e. 1t is essential to !alance the
ris(s and !enefits related to the promotion of energy efficiency in non5EU countries.
>nly !ased on such a !alanced approach2 it is possi!le to propose an efficient policy that
would allow attaining the dual energy security and climate change mitigation goals of EU
energy policy.
6aving examined the notion and raison d*@tre of energy efficiency in the EU external
energy policy2 1 now loo( at the more practical content of this new approach. 'hat
concrete measures do the EU institutions propose to improve the energy efficiency of
their partner countries and in particular of $ussiaH
</
)$ussia neen to Boin EU in $evamping U(raineGs pipelines* %./0/& Euracti$ availa!le online at
www.euractiv.comCenCenergyCrussia5eager5"oin5eu5revamping5u(raine5s5pipeline5networ(5news5,.0/0+.
-ee also )@a perspective dGune intrgration de lGU(raine au marchr uni4ue europren de lrnergie irrite la
$ussie* %.//;& Europe Energies ? |WeyM]2 )_JTTOP NJ]WM^ QW]RMKOM SW\W*2 .9 7arch .//;2
IJ[[MUTWK^ %A Ga!uev2 )$ussia 1ncreases the Gas Pressure*2 Aommersant&2 availa!le online at
www.(ommersant.ruCdoc.aspxHAocs1At00,,0<9.
<0
-ee www.auswaertiges5amt.deCdiploCenC1nfoserviceCPresseC1nterviewC./0/C0//:+05B758A~.html.
0=
WORK IN PROGRESS
1 September 2010
2. THE POLICY AND REGULATORY INSTRU#ENTS OF THE EU ETERNAL
ENERGY EFFICIENCY POLICY
he EU develops its external energy efficiency policy !y promoting the adoption of
international political and legal documents. 1n addition to this diplomatic role on the
international scene2 the EU acts directly in its !ilateral relations with partner countries !y
ma(ing use of internal EU legal rules in the field of energy efficiency and renewa!le
energy.
he focus of this chapter is on the policy and regulatory instruments that the EU
institutions proposed and developed to create a legal framewor( in non5EU countries that
is conductive to energy efficiency investments. 1 aim to examine general financial and
institutional answers that are designed to facilitate energy savings a!road or at least have
the potential to reduce the energy intensity of the EU partner countries2 in particular of
$ussia.
8unds %e.g. A31- funds2 the Glo!al Environmental 8acility2
<.
the Glo!al Energy
Efficiency and $enewa!le Energy 8und
<+
& and pilot pro"ects %e.g. the EU energy
efficiency pro"ects in Ar(hangels(2 Astra(han and naliningrad2
<,
the 3arnot pro"ect on
clean coal
<:
& are excluded from the scope of this analysis.
9#3# International law and the promotion of energy efficiency
..0.0. he Energy 3harter reaty and the Protocol on Energy Efficiency
he Energy 3harter reaty %E3&
<9
results from a European initiative
<=
aiming at
facilitating 'estern2 especially European2 investments in the energy sectors of $ussia and
the Newly 1ndependent -tates %N1-& following the !rea(down of the -oviet Union.
<<
1t
was considered that the penetration of 'estern investments in the Eastern energy sector
<.
www.thegef.orgCgef.
<+
European 3ommission2 3ommunication of 9 >cto!er .//9 on 7o!ilising Pu!lic and Private 8inance
towards Glo!al Access to 3limate58riendly2 Afforda!le and -ecure Energy -ervicesD he Glo!al Energy
Efficiency and $enewa!le Energy 8und %3>7%.//9& :<+ final&.
<,
A Pie!algs and A -hmat(o2 8inth 5rogress Report on the EU-Russian Energy Dialogue2 >cto!er .//<2
at 95=.
<:
httpDCCec.europa.euCenergyCinternationalCrussiaCpro"ectsFen.htm.
<9
-igned in Aecem!er 0;;,2 entered into force in April 0;;<. >n the participation of the European
institutions2 see 3ouncil and 3ommission Aecision ;<C0<0CE32 E3-32 Euratom of .+ -eptem!er 0;;= on
the conclusion2 !y the European 3ommunities2 of the Energy 3harter reaty and the Energy 3harter
Protocol on energy efficiency and related environmental aspects2 +, 0;;< @ 9;C0.
<=
7ore precisely2 the Energy 3harter process was launched !y $ @u!!ers2 Prime 7inister of he
Netherlands2 in Bune 0;;/.
<<
1t is !ased on the reasoning that )$ussia and many of its neigh!ours were rich in energy resources !ut
needed ma"or investments to ensure their development2 whilst the states of 'estern Europe had a strategic
interest in diversifying their sources of energy supplies.* -ee Energy 3harter -ecretariat2 )An 1ntroduction
to the Energy 3harter reaty*2 op cit.2 at 0+.
0<
WORK IN PROGRESS
1 September 2010
would generate a win5win exchange.
<;
>n the one hand2 it would contri!ute towards the
improved security of energy supply in Europe. >n the other hand2 it would provide an
impulse to transition the former -oviet countries towards mar(et economies and stimulate
the transfer of 'estern technology.
;/
1n addition to provisions on energy trade2 transit2 investment protection and dispute
resolution2 the E3 also contains provisions that directly deal with energy efficiency.
;0
1n
accordance with Article 0; of this reaty2 the 3ontracting Parties )shall strive to
minimise in an economically efficient manner harmful Environmental 1mpacts occurring
%m& from all operations within the Energy 3ycle in its Area.* 1mportantly2 Article 0; of
the E3 recognises the precautionary principle and the )polluter pays* principle.
7oreover this provision imposes specific )o!ligations* that are related to energy
efficiency. he 3ontracting Parties shall )have particular regard to 1mproving Energy
Efficiency2 to developing and using renewa!le energy sources2 to promoting the use of
cleaner fuels and to employing technologies and technological means that reduce
pollution.* 7oreover2 they shall promote mar(et5oriented price formation and a fuller
reflection of environmental costs. 1n addition2 the parties shall )promote and co5operate
in the research2 development and application of energy efficient and environmentally
sound technologies2 practices and processes which will minimise harmful Environmental
1mpacts of all aspects of the Energy 3ycle in an economically efficient manner*2 and
shall )encourage favoura!le conditions for the transfer and dissemination of such
technologies*.
As its name indicates2 the Energy 3harter reaty Protocol on Energy Efficiency and
$elated Environmental Aspects %PEE$EA&
;.
specifically focuses on the promotion of
energy efficiency. Building on Article 0; of the Energy 3harter reaty2 the Protocol on
Energy Efficiency defines in more detail the !asic policy principles that can achieve
energy savings2 including mar(et !ased reforms and )reduction of !arriers to energy
efficiency*. 1n accordance with Article ,2 each 3ontracting Party )shall strive to ensure
that energy efficiency policies are coordinated among all of its responsi!le authorities.*
Article : en"oins the parties to )formulate strategies and policy aims for 1mproving
Energy Efficiency %...& as appropriate in relation to their own specific energy conditions.*
Article < provides that )iijn order to achieve the policy aims formulated according to
Article :2 each 3ontracting Party shall develop2 implement and regularly update energy
efficiency programmes !est suited to its circumstances.* his provision proposes policies
instruments such as the development of standards to improve the efficiency of energy
using e4uipment2 and efforts to harmonise these internationally to avoid trade distortions2
as well as the support and promotion of energy efficient techni4ues such as com!ined
heat and power %36P& generation. Article 9 provides that the parties )shall encourage the
<;
-ee $ @u!!ers2 )8oreword*2 in 'lde %ed.&2 The Energy Charter Treaty . An East-)est 2ateway for
In$estment and Trade %he 6agueC@ondonCBostonD nluwer2 0;;9& xiii2 at xiv. -ee also A nonoplyani( and
'lde2 )Energy 3harter reaty and its $ole in 1nternational Energy* %.//9& ., ,ournal of Energy and
8atural Resources /aw :.+2 at :.,.
;/
1!id.
;0
>n the energy efficiency provisions of the Energy 3harter reaty2 see A Brad!roo(2 )-ignificance of the
Energy 3harter reaty* %0;;;& 9, Applied Energy .:0.
;.
Also signed in Aecem!er 0;;,.
0;
WORK IN PROGRESS
1 September 2010
implementation of new approaches and methods for financing energy efficiency and
energy5related environmental protection investments2 such as %m& hird Party
8inancing.* 7oreover2 they )shall endeavour to ta(e advantage of and promote access to
private capital mar(ets and existing international financing institutions in order to
facilitate investments in 1mproving Energy Efficiency*. 8ollowing Article =2 the parties
)shall encourage commercial trade and co5operation in energy efficient and
environmentally sound technologies2 energy5related services and management practices.*
8rom an institutional perspective2 the 3harter 3onference shall2 in accordance with
Article 0/ of the PEE$EA2 adopt procedures for (eeping under review the
implementation of these provisions2 including reporting re4uirements. 1t shall also
identify areas of cooperation. he Annex specifies areas of international cooperation2
including the )development of economic2 legislative and regulatory measures* and
financing measures such as the )development of legal framewor(*2 hird Party
8inancing2 "oint ventures and co5financing.
$ussia signed the E3 on 0= Aecem!er 0;;,. his reaty has however never !een
ratified as re4uired !y Articles 0, and 0: of the 8ederal @aw No. 0/058~ of 0: Buly 0;;:
on the 1nternational reaties of the $ussian 8ederation for its entry into force.
;+
>n ./
August .//;2 the $ussian 8ederation officially informed the Aepositary %Portugal& that it
did not intend on !ecoming a 3ontracting Party to the E3 and the PEE$EA.
;,
he
a!sence of ratification does not mean that $ussia lac(s rights and o!ligations under the
reaty. 1ndeed2 the E3 provides for its provisional application. 1n accordance with
Article ,:2 paragraph 0 of the E32 each -ignatory Party agrees to apply the reaty
provisionally pending its entry into force2 to the extent that such provisional application is
not )inconsistent with its constitution2 laws or regulations*.
;:
1n the famous Bu!os cases2 the Ar!itral ri!unal ruled that the principle of provisional
application was not inconsistent with $ussiaGs internal legislation.
;9
$ussia was thus
!ound to apply the energy efficiency provisions until the 0<
th
>cto!er .//;.
;+
As modified !y 8ederal @aw No. +0<58~ of 0 Aecem!er .//= %aMQMUWRXK` \WZJK J^ 0: ORP 0;;:
f 0/05a [McQyKWUJQK QJSJ]JUW _JTTO`TZJ` aMQMUWLOO&.
;,
$egulation of the Government of the $ussian 8ederation No. 0/::5r of +/ Buly .//; on the 1ntention of
the $ussian 8ederation not to Become a Participant to the Energy 3harter reaty and to the Protocol to the
Energy 3harter reaty on Energy Efficiency and $elated Environmental Aspects %_WTNJUPcMKOM
dUW]O^MRXT^]W _a J^ +/./=..//; f 0/::5U ) KW[MUMKOO _JTTO`TZJ` aMQMUWLOO KM T^WKJ]O^XTP
yVWT^KOZJ[ JSJ]JUW Z gKMUSM^OVMTZJ` }WU^OO2 W ^WZcM dUJ^JZJRW Z gKMUSM^OVMTZJ` }WU^OO NJ
]JNUJTW[ YKMUSM^OVMTZJ` YMZ^O]KJT^O O TJJ^]M^T^]yO[ YZJRJSOVMTZO[ WTNMZ^W[*&. -ee also
www.encharter.orgCfileadminCuserFuploadCdocumentCEN.pdf.
;:
Article .: lienna 3onvention on the @aw of the reaties allows for the provisional application of
treaties. his provision leaves the details of provisional application to specific arrangements in each treaty.
-ee n 6o!rr2 )he $ole of the Energy 3harter reaty in the 3ontext of the European Union and $ussia*2
in G 3oop and 3 $i!eiro %eds.&2 In$estment 5rotection and the Energy Charter Treaty %6untington2 New
por(D BurisNet2 .//<& .+:2 at .=:E.=9.
;9
Bu!os Uni$ersal /imited $# The Russian 4ederation2 1nterim Award on Burisdiction and Admissi!ility2 +/
Novem!er .//;2 P3A 3ase No. AA ..= %UN31$A@&? Ceteran 5etroleum /imited ?Cyprus; $# The
Russian 4ederation2 1nterim Award on Burisdiction and Admissi!ility2 +/ Novem!er .//; %P3A 3ase No.
AA ..<2 UN31$A@&? Dulley Enterprises /imited ?Cyprus; $# The Russian 4ederation 1nterim Award on
Burisdiction and Admissi!ility2 +/ Novem!er .//; %P3A 3ase No. AA ..92 UN31$A@&.
./
WORK IN PROGRESS
1 September 2010
$ussia has effectively participated to the energy efficiency reviews !y the Energy 3harter
-ecretariat.
;=
1t is argua!le that $ussia could still participate to the Energy 3harter !ased
on its signature of the Energy 3harter Aeclaration. he E3 and the PEE$EA have
however no !inding effect on $ussia after the 0<
th
of >cto!er .//;.
8or foreign companies that committed to energy efficiency investments in $ussia !efore
this date %e.g. the huge investments of E.>N2 ENE@ and 8>$U7 in the modernisation
of the $ussian electricity production sector&2 the acceptance of "urisdiction on the !asis of
Article ,: of the Energy 3harter reaty in the Bu!os cases can !e held to !e of
considera!le importance.
;<
8ollowing this ruling2 the investment chapter of the Energy
3harter reaty and the dispute resolution clause2 remain in force for these investors until
0< >cto!er ./.;.
..0... he nyoto Protocol
he promotion of the flexi!le mechanisms %Boint 1mplementation %B1& and 3lean
Aevelopment 7echanism %3A7&& of the nyoto Protocol
;;
constitutes one of the central
aspects of the external EU energy efficiency policy. he EU institutions consistently
highlight the opportunities that the B1 and 3A7 mechanisms offer in terms of energy
savings and G6G emission reductions. 1ndeed2 the B1 and 3A7 mechanisms represent an
important source of financing for G6G emission reduction pro"ects2 such as energy
efficiency and renewa!le energy pro"ects2 at least for the period from .//< to ./0..
0//
-upport for the implementation of the nyoto Protocol is for instance central to the
1N>GAE program.
0/0
he flexi!le mechanisms are a core component of the Astana
7inisterial Aeclaration of +/ Novem!er .//9 on Enhanced energy co5operation !etween
the EU2 the @ittoral -tates of the Blac( and 3aspian -eas and their neigh!ouring
countries.
;=
Energy 3harter Protocol on Energy Efficiency and $elated Environmental Aspects2 Russian 4ederation
. Regular Re$iew of Energy Efficiency 5olicies %BrusselsD he Energy 3harter2 .//=&.
;<
1t has2 according to Gaillard %that represents the claimants& )a huge precedent value*. E Gaillard 4uoted
in )3ourt $ules Against $ussia in pu(os 3ase* %.//;& Euracti$ availa!le online at
www.euractiv.comCenCenergyCcourt5rules5russia5yu(os5caseCarticle50<=<9;HFprint? -ee also A $iley2 )he
pu(os AecisionD Profound 1mplications for the EU5$ussia Energy $elationship* %.//;& CE5-
Commentary availa!le online at www.ceps.!eC!oo(Cyu(os5decision5profound5implications5eu5russia5
energy5relationship2 at 02 spea(ing of )the pyrrhic victory of pyrrhic victories.*
;;
-igned on 00 Aecem!er 0;;=2 entered into force on 09 8e!ruary .//:.
0//
Under the nyoto Protocol2 greenhouse gas mitigation pro"ects can !enefit from support !y !eing
registered as 3lean Aevelopment 7echanism %3A7& or Boint 1mplementation %B1& pro"ect activities. his
registration entitles them to an amount of emission credits corresponding to the reduction of greenhouse gas
emissions achieved !y the concerned pro"ects. hese emission credits can !e traded on the international
car!on mar(et for use !y Annex 1 Parties to meet their emission reduction targets under Article + of the
nyoto Protocol and can !e traded on the international car!on mar(et. hey thus constitute an additional
financial income for climate5friendly investments.
0/0
-ee also www.inogate.orgCinogateFprogrammeCinogateFpro"ectsCongoing5inogate5pro"ectsCsupport5
(yoto5protocol5implementation5s(pi.
.0
WORK IN PROGRESS
1 September 2010
he nyoto Protocol and its flexi!le mechanisms have !een2 and continue to !e2 of crucial
importance in the context of EU5$ussia Energy Aialogue2 in particular as regards the EU
efforts to improve the energy efficiency of the $ussian economy. he European
3ommission considered for instance in its 3ommunication of 0= Aecem!er .//0 on EU5
$ussia Environmental 3ooperation
0/.
thatD
itjhe EU and $ussia have a common interest in implementation of the UN 8ramewor(
3onvention on 3limate 3hange %UN8333& and the nyoto Protocol. 8urther co5operation
on climate change under the Partnership and 3ooperation Agreement should maximise the
synergies with the EU5$ussia Energy Aialogue2 outcome of which aims at attracting
investments in the energy sector in $ussia and improved energy efficiency. 1n this respect2
the EU5$ussia Energy Aialogue should also facilitate the development of Boint
1mplementation pro"ects in $ussia.
1t later stated in its C%mm&'()*t(%' %+ 1, De)ember 200- %' T.e E'er/0 D(*1%/&e
bet2ee' t.e E&r%pe*' U'(%' *'3 t.e R&44(*' Fe3er*t(%' bet2ee' 2000 *'3 200-
0/+
thatD
isjince the start of the energy dialogue with $ussia2 the 3ommission has underlined the
importance which it attaches to commitments under the nyoto Protocol on climate change.
1n the framewor( of the dialogue2 the 3ommission has insisted on raising the 4uestion of
$ussian ratification of the Protocol2 without which the Protocol could not come into force.
$ussiaGs implementation of the nyoto Protocol should help $ussia move towards a more
efficient use of its energy resources.
0/,
$ussia ratified the nyoto Protocol.
0/:
1t is generally agreed that the EU has played a (ey
role as regards $ussiaGs ratification. his ratification ena!led the su!se4uent entry into
force of this treaty.
$ussiaGs ratification of the nyoto Protocol was a very controversial issue in national
politics.
0/9
>pponents of the nyoto Protocol argued that2 although the economic decline
following the collapse of the -oviet Union left $ussia with a large surplus of G6G
emissions2
0/=
the expected rapid economic development of the country could nullify this
excess.
0/<
Binding $ussia to limitations of its G6G emissions could therefore constrain
0/.
3>7%.//0& ==. final2 at 0..
0/+
3>7C.//,C/=== final.
0/,
-ee also the $esolution of the European Parliament of 0, Novem!er .//= on the EU5$ussia -ummit
%P9FA%.//=&/:.<&2 considering that )flexi!ility mechanism provided for in the nyoto Protocol could
attract investment to modernise the $ussian energy and energy end5uses sector.*
0/:
8ederal @aw No. 0.<58~ of , Novem!er .//, on the $atification of the nyoto Protocol to the United
Nations 8ramewor( 3onvention for 3limate 3hange %aMQMUWRXK` \WZJK J^ /,.00..//, f 0.<5a )
UW^OOZWLOO IOJ^TZJSJ dUJ^JZJRW Z _W[JVKJ` IJK]MKLOO USWKO\WLOO eMQOKMKK WLO` Je
x\[MKMKOO IRO[W^W*&.
0/9
A 8irsova and $ aplin2 )A $eview of nyoto Protocol Adoption in $ussiaD Boint 1mplementation in
8ocus*2 %.//<& 0: Transitional -tudies Re$iew ,</2 at ,<+5,<=? -ee also B Buchner and - AallG>lio2
)$ussia and the nyoto ProtocolD the @ong $oad to $atification* %.//:& 0. Transition -tudies Re$iew +,;.
0/=
he sale of this excess of 3>. emissions is often referred to as )hot air*.
..
WORK IN PROGRESS
1 September 2010
its economic growth.
0/;
>n the other hand2 proponents of $ussiaGs ratification %e#g# the
former electricity 4uasi5monopoly $A> UE-& pointed to the countryGs great potential for
emission reductions. hey argued that the B1 mechanism could contri!ute to the financing
of the modernisation of $ussiaGs energy infrastructure and to the attraction of foreign
technologies.
00/
$A> UE-2 for instance2 counted on the B1 mechanism to attract
investments in the refur!ishing of the existing installations2 the construction of new state5
of5the5art plants and the development of renewa!le energy.
000
Analysts argue that2
ultimately2 $ussiaGs decision to ratify the nyoto Protocol was driven !y political reasons.
1t is considered as a !argaining move to secure the support of the European Union for its
accession to the 'orld rade >rganisation and to o!tain a special status for the
naliningrad >!last.
00.
he potential offered !y B1 pro"ects2 as well as !y emissions
trading2 only played a secondary role.
00+
..0.+. 1nternational Agreement on Energy Efficiency
he European 3ommission has actively promoted its external energy efficiency agenda
in the context of the G<. he initial idea advocated !y the European 3ommission was to
0/<
-ee among others { MeMQM]W O x dWJ[J]W2 ){McQyKWUJQKJ5dUW]J]M WTNMZ^ yVWT^OP
_JTTOO ] IOJ^TZJ[ NUJ^JZJRM* %.//9& , EFGHI JKL MNKOP %7 p @e!edeva and p 1 Pa(homova2
)1nternational @aw Aspects of $ussiaGs Participation to the nyoto Protocol* %.//9& , +il 2as /aw2 at :<&?
B Buchner and - AallG>lio2 op cit.2 at +:.2 referring to the declarations of Andrei 1llarionov2 at that time
chief economic adviser of President Putin? G Avdeeva2 )$ussia and the nyoto ProtocolD 3hallenges
Ahead* %.//:& 0, Re$iew of European Community and International En$ironmental /aw .;+2 at .;:E.;9.
0/;
7oreover2 a warmer climate would have positive conse4uences for $ussiaGs agriculture and would
reduce the expenses in heating. p A 1hrael2 )-tatement of the Advisory Board of the $ussian Academy of
-ciences $egarding the Possi!le Anthropogenic 3limate 3hange and Pro!lems of the nyoto Protocol*2
Nau(a v -i!iri2 at ..5.+2 4uoted in A 8irsova and $ aplin2 op cit.2 at ,<9. 1n addition to these reasons2
some argue that the decision of the United -tates not to ratify the nyoto Protocol removed an important
potential !uyer of $ussiaGs emission credits. his decreased the economic attractiveness of car!on trade for
$ussia. -ee A 8irsova and $ aplin2 op cit.2 at ,<:.
00/
@ A 6enry and @ 7c1ntosh -undstrom2 )$ussia and the nyoto ProtocolD -ee(ing An Alignment of
1nterests and 1mage* %.//=& = 2lobal En$ironmental 5olitics ,=2 at :,E:: and :=? B Buchner and -
AallG>lio2 op cit.2 at +99E+9=. -ee also B 7uller2 )he nyoto ProtocolD $ussian >pportunities* %7arch
.//,& The Royal Institute of International Affairs . (riefing 8ote2 at =2 availa!le online at
www.chathamhouse.org.u(CfilesC+099F!mmar/,.pdf? 8 @aroui2 E ellegen and n ourilova2 )Boint
1mplementation in Energy Between the EU and $ussia >ut @oo( and Potential* %.//,& +. Energy 5olicy
<;;2 at ;/:2 ;/= and ;00.
000
o stimulate the deployment of state5of5the5art technologies in electricity production !y ma(ing use of
the financial mechanisms of the nyoto Protocol2 the $A> UE- created the )Energy 3ar!on 8und* %see
www.car!onfund.ru&. 8ollowing the dismantlement of the $A> UE-2 the Energy 3ar!on 8und has !een
transferred to the 8ederal Grid 3ompany. >n the role of this 8und2 see > Pertsovs(y2 )1mplementation of
nyoto Protocol 7echanisms in the $ussian Power -ector*2 presentation given at the conference on $A>
UE- of $ussia and the nyoto Protocol2 ./ -eptem!er .//=2 7oscow2 availa!le online at
www.car!onfund.ruCdocCcar!onfundCprehentationC/.Fpertsovs(iy.pdf.
00.
@ A 6enry and @ 7c1ntosh -undstrom2 op cit.2 at :<? A 8irsova and $ aplin2 op cit.2 at ,<9? B Buchner
and - AallG>lio2 op cit.2 at +:,E+:: and +=9. -ee also B naras2 )$ussia and the nyoto ProtocolD Political
3hallenges* %7arch .//,& The Royal Institute of International Affairs . (riefing 8ote2 at 0+2 availa!le
online at www.res.ethh.chC(!CsearchCdetails.cfmH
fecvnodeidt0.;/90zdomt0zfecvidt.0zv.0t0.;/90zlngtenzidt.+/+;.
00+
A 8irsova and $ aplin2 op cit.2 at ,<9.
.+
WORK IN PROGRESS
1 September 2010
create an 1nternational Agreement on Energy Efficiency with specific targets and
standards.
00,
'ith a view to promoting energy efficiency world5wide2 the European
3ommissionGs 3ommunication of 0; >cto!er .//9 on an Action Plan for Energy
EfficiencyD $ealising the Potential
00:
proposed an international framewor( agreement
involving !oth developed and developing countries2 including Brahil2 3hina2 1ndia2 Bapan2
$ussia and the United -tates. his agreement should have !een done in colla!oration
with the United Nations2 the 1nternational Energy Agency2 G< %Gleneagles Aialogue on
3limate 3hange&2 the 'orld rade >rganisation2 the 'orld Ban(2 the European Ban( for
$econstruction and Aevelopment2 the European 1nvestment Ban( and other institutions.
1n accordance with the 3ommission2 the aim of such a )framewor( agreement* would
have !een toD
develop closer co5operation on energy efficiency measurement and evaluation2 minimum
performance re4uirements for goods and services2 la!elling and certification2 energy
audits2 stand5!y losses2 codes of conduct2 and more. 1t should ihave coveredj all end5use
sectors2 including transport2 as well as energy transformation2 where the glo!al potential is
particularly large.
009
Along the same lines2 in its $esolution of .+ 7arch .//9 on -ecurity of Energy -upply
in the European Union2
00=
the European Parliament stressedD
the importance of including in the new energy diplomacy of the EU a constructive
dialogue with all ma"or consumers of energy and nota!ly emerging economies on energy
efficiency and energy conservation2 with the aim of setting minimum efficiency standards
for glo!al goods li(e cars2 appliances2 consumer electronics and office e4uipment2 to !e
harmonised in phases2 and promoting at glo!al level the integration of the environment
into transport and energy decisions.
Eventually2 at the G< Energy 7inisterial in Aomori in Bune .//<2 the G< countries plus
3hina2 1ndia2 -outh norea and the EU adopted a declaration on the creation of an
1nternational Partnership for Energy Efficiency 3ooperation.
00<
he 1nternational
Partnership for Energy Efficiency 3ooperation %1PEE3& aims to support the on5going
wor( of the participants to promote energy efficiency !y2 for instance2 compiling !est
practices2 exchanging information2 ena!ling "oint5research and developing pu!lic5private
partnerships. 1n contrast to the EU proposal2 the 1PEE3 does not purport to develop
!inding standards or energy efficiency targets for the participants.
00;

00,
@esage2 A.2 et al.2 )G<: 3olla!oration on Energy Efficiency and 1PEE3D -hortcut to a -ustaina!le
8utureH* %.//;& Energy 5olicy2 doiD0/.0/09C".enpol..//;./;./,+2 at +
00:
3>7%.//9&:,: final2 at 0;.
009
-ee also )1EA 7inisterial 7eetingD Andris Pie!algs 3alls for an 1nternational Agreement on Energy
Efficiency*2 Press $elease of 0: 7ay .//= %1PC/=C9=0&.
00=
P9FA%.//9&/00/2 1tem 0/.
00<
-ee httpDCCipeecshare.org.
00;
@esage2 A.2 et al.
.,
WORK IN PROGRESS
1 September 2010
9#9# European law and the promotion of e"ternal energy efficiency
....0. he )export* of the ac=uis communautaire
he European 3ommission considered in its 3ommunication of 0+ Aecem!er .//, on
he EU5$ussian Energy Aialogue !etween ./// and .//, thatD
itjhe energy dialogue %m& has opened the way for the convergence of strategies in the
$ussian and EU mar(ets. he principles of the internal energy mar(et2 such as energy
efficiency2 reform of internal industrial structures2 reform in the electricity sector and
un!undling2 could provide part of the reference framewor( for the restructuring of
$ussiaGs energy sector. Even if the two mar(ets are separate2 they should !e inspired !y
shared principles.
he notion of )regulatory convergence*2 )harmonisation* or approximation refers to the
integration of EU legal principles into foreign countries. 1n contrast to the harmonisation
of national regulations within the European Union2 these countries do not participate to
the creation of these principles2 !ut are invited to unilaterally integrate ready5made rules
into their legal systems. $egulatory convergence could thus2 in a certain sense2 !e
compared with the adoption of the ac=uis communautaire !y candidate 7em!er -tates in
the context of their accession to the European Union. his later process can !e descri!ed
as )an o!ligation to fully align national laws2 regulations and procedures in order to give
effect to the entire !ody of EU law contained in the ac=uis communautaire.*
0./
$egulatory convergence needs however to !e distinguished from this )full* incorporation
of EU legislation into national law. 1t does indeed not re4uire kthe entire and wholesale
exportation of all standards and regulatory framewor(s pertinent to the energy sectorG
0.0
2
!ut would rather refer to the process of )!ringing two legal systems closer together.*
0..
1t
is !ased on the adoption of common or e4uivalent2 not identical2 rules and standards. 1n
this sense2 regulatory convergence could !e defined as the integration of EU principles in
the legal regimes of Partner countries of the European Union2 disconnected from any
direct am!ition of accession. his )external Europeanisation*
0.+
could thus !e considered
as a unilateral approach2 !ased on the recognition of the EU principles as )models*.
he ac=uis communautaire in the field of energy efficiency consists of a considera!le
amount of documents.
0.,
Among these documents2 Airective .//9C+.CE3 on Energy End5
0./
Environmental $esource 7anagement2 Con$ergence with EU En$ironmental /egislation in Eastern
Europe Caucasus and Central Asia: A 2uide2 %@uxem!urgD >ffice for >fficial Pu!lications of the
European 3ommunities .//+&2 p. ;.
0.0
European 3ommission2 3ommunication on the Aevelopment of an Energy Policy for the Enlarged
European Union2 its Neigh!ours and Partner 3ountries2 at :.
0..
Environmental $esource 7anagement2 at 0/.
0.+
A 7agen2 )he -hadow of EnlargementD 3an the European Neigh!ourhood Policy Achieve
3ompliance* %.//+& 0. Columbia ,ournal of European /aw +<,2 at +<9.
0.,
8or an overview of the ac=uis communautaire in the field of energy efficiency2 see among others A
Boute2 )Energy Efficiency in the European Union E he Policy 8ramewor(*2 in 7 $oggen(amp and U
6ammer %eds.&2 European Energy /aw Report CII %7ortselD 1ntersentia2 .//=& 0+:.
.:
WORK IN PROGRESS
1 September 2010
Use Efficiency
0.:
provides a general framewor( to enhance the cost5effective
improvement of energy efficiency in the 7em!er -tates.
0.9
1t aims to remove the existing
!ottlenec(s impeding the efficient use of energy and !y creating a mar(et for energy
services and other energy efficiency improvement measures.
0.=
1n this view2 this Airective
esta!lishes a general indicative energy savings target of ; percent to !e attained !y the
7em!er -tates for the ninth year of application of the Airective.
0.<
7oreover2 it re4uires
7em!er -tates to pu!lish so5called Energy Efficiency Action Plans %EEAPs& descri!ing
the measures ta(en to achieve the target. Besides2 the Airective mentions some
mechanisms among which 7em!er -tates have to choose in order to promote energy
efficiency. hese mechanisms among others include the o!ligation imposed on energy
suppliers to offer energy services2 the implementation of a white certificate scheme and
the conclusion of voluntary agreements. 8urthermore2 the Airective determines some
informative %e.g. energy audits2 specific metering and !elling o!ligations2 certification
schemes and the dissemination and exchange of !est energy5savings practices& and
financial %e.g. energy performance contracts2 third party financing2 funds& mechanisms.
7oreover2 it provides some specific criteria as regards the role of pu!lic authorities2 and
in particular pu!lic procurement2 in relation to energy efficiency.
A second document of considera!le relevance for energy efficiency improvements in the
European Union consists of Airective .//+C<=CE3 of the European Parliament and of the
3ouncil of 0+ >cto!er .//+ Esta!lishing a -cheme for Greenhouse Gas Emission
Allowance rading within the 3ommunity2
0.;
as modified !y Airective .//;C.;CE3. he
operators of the installations that fall within the scope of application of this Airective are
re4uired to cover their G6G emissions with a corresponding amount of emission rights
%allowances&. he expected scarcity of such allowances is supposed to create a pressure
to reduce G6G emissions. he installations that are covered !y the EU Emissions
rading -cheme are excluded from the scope of application of Airective .//9C+.CE3 on
Energy End5Use Efficiency.
7oreover2 it is essential to refer to Airective .//,C<CE3 of 00 8e!ruary .//, on the
Promotion of 3ogeneration !ased on a Useful 6eat Aemand in the 1nternal Energy
7ar(et
0+/
and Airective .//;C.<CE3 of .+ April .//; on the Promotion of the Use of
Energy from $enewa!le -ources.
0+0
0.:
Airective .//9C+.CE3 of : April .//9 on energy end5use efficiency and energy services and repealing
3ouncil Airective ;+C=9CEE32 +, .//9 @ 00,C9,.
0.9
8or a further analysis of Airective .//9C+.CE3 on Energy End5Use Efficiency see BE$>@A12 )he
Energy Efficiency and Energy -ervices Airective* in 'E$$1NG2 EU Energy @aw2 lolume 111 E EU
Environmental @awD Energy Efficiency and $enewa!le Energy -ources2 3laeys and 3asteels2 @euven2
.//9. -ee also A Boute and A Ae Geeter2 )Airective .//9C+.CE3 on Energy End5Use Efficiency and
Energy -ervicesD $ealising the ransition to -ustaina!le Energy 7ar(etsH* %.//9& ,ournal for European
En$ironmental and 5lanning /aw ,0,.
0.=
Article 0 of Airective .//9C+.CE3 on Energy End5Use Efficiency.
0.<
-ee Article , of Airective .//9C+.CE3 on Energy End5Use Efficiency.
0.;
+, @ .//+ .=:C+..
0+/
+, .//, @ :.C:/.
0+0
+, .//; @ 0,/C09.
.9
WORK IN PROGRESS
1 September 2010
8ollowing the regulatory convergence approach of the EU external energy efficiency
policy2 non5EU partner countries would have to integrate these legislative documents in
their internal legal order.
...... Boint Pro"ects with third countries under the $enewa!le Energy -ources Airective
Airective .//;C.<CE3 on the Promotion of the Use of Energy from $enewa!le -ources
allows 7em!er -tates to reach their mandatory national targets for the use of renewa!le
sources through cooperative measures with third countries.
0+.
7em!er -tates can support
the construction of renewa!le energy installations in non5EU countries and ta(e the
electricity produced !y these installations into account to comply with their national
targets. herefore2 the following conditions must !e fulfilled.
0++

8irstly2 the electricity produced from renewa!le energy sources in a third country must !e
)consumed in the 3ommunity*.
0+,
his re4uirement is considered met where an
e4uivalent amount of electricity to the electricity accounted for has !een firmly
nominated to the allocated interconnection capacity.
-econdly2 the electricity must !e produced !y new installations.
0+:
his means
installations that have !een constructed since .: Bune .//;2 as well as increases in
capacity after that date of existing installations. he rationale of this re4uirement is to
avoid the diversion of existing renewa!le energy sources to the 3ommunity and their
replacement in the third country !y conventional energy sources.
0+9
he proportion of
renewa!le energy sources in the fuel mix of the third country may not !e reduced as a
conse4uence of the implementation of a )Boint Pro"ect*. >n the contrary2 the 7em!er
-tates should facilitate the domestic use !y the third country concerned of a part of the
electricity produced !y the installations covered !y the "oint pro"ect.
0+=
7oreover2 the
7em!er -tates should encourage the third countries to develop a renewa!le energy
policy and adopt am!itious targets for the share of renewa!le energy in domestic
consumption.
hirdly2 the support !y 7em!er -tates of renewa!le energy production in third countries
must !e exclusive. his means that the amount of electricity produced and exported must
not have received support from a support scheme from a third country other than the
investment aid granted to the installation.
0+<
0+.
-ee Article + Airective .//;C.<CE3.
0++
-ee Article ; Airective .//;C.<CE3.
0+,
Article ; Airective .//;C.<CE3 does not re4uire that this electricity has to !e consumed in the 7em!er
-tate that implements the "oint pro"ect and aims to ta(e the electricity produced !y this pro"ect into account
for compliance with its national target.
0+:
Article ; %!& Airective .//;C.<CE3.
0+9
-ee $ecital += and +< of Airective .//;C.<CE3.
0+=
-ee $ecital +< of Airective .//;C.<CE3.
0+<
Article ; %c& Airective .//;C.<CE3.
.=
WORK IN PROGRESS
1 September 2010
he electricity systems of different regions of $ussia %e#g# the 7urmans( >!last2 the
@eningrad >!last2 the narelian $egion2 the Ps(ov $egion2 naliningrad2 etc.& are
interconnected within the European networ( %EN->&. he )Boint Pro"ects* mechanism
thus offers interesting financial opportunities for electricity production from renewa!le
energy sources in these regions.
0+;
Article 09 of Airective .//;C.<CE3 o!liges 7em!er
-tates to ta(e )appropriate steps* to develop their interconnection capacity with third
countries so as to stimulate the development of electricity production from renewa!le
energy sources. his provision is an important legal !asis for removing one of the main
!arriers to the developments of Boint Pro"ects in $ussiaD the limited amount of
interconnection capacity !etween $ussia and the EU networ(.
....+. @in(ing under the EU Emissions rading -cheme
he EU Emissions rading Airective %Airective .//+C<=CE3& authorises the operators of
installations that fall within the scope of this Airective to use emission credits generated
!y B1 and !y 3A7 pro"ects %respectively Emission $eduction Units %E$U& and 3ertified
Emission $eductions %3E$s&& to fulfil their o!ligations. he EU5E- can thus2 to a
certain extent2 !e considered as a mechanism that can contri!ute to financing investments
in energy efficiency pro"ects in %Annex 1 and non5Annex 1& non5EU countries.
$ussia is an Annex 1 country. 1t has adopted a national regulation for the implementation
of B1 pro"ects.
0,/
Energy efficiency pro"ects implemented in $ussia in accordance with
this procedure could thus in theory generate E$Us that could !e purchased !y EU
companies.
,. E"ALUATION OF THE POLICY AND REGULATORY INSTRU#ENTS
6#3# E$aluation criteria
1n order to effectively contri!ute to the improvement of the energy efficiency in non5EU
countries2 the EU external energy efficiency policy must !e adapted to the needs of the
recipient non5EU countries in this field. o !e efficient2 the policy and regulatory
approach that the EU institutions developed to stimulate energy savings a!road must
contri!ute to tac(le the !arriers that prevent realising energy efficiency investments in
these countries. An evaluation of the efficiency of the EU external energy efficiency
0+;
-ee A Boute2 )he Aevelopment of $enewa!le Energy in the Northwest of $ussia with European
-upport E he >pportunities >ffered !y the New $E- Airective*2 presentation given at the Northwest
$ussia $enewa!le Energy 8orum2 7urmans(2 09 -eptem!er .//;.
0,/
dJT^WKJ]RMKOM dUW]O^MRXT^]W _a J^ .<50/5.//; f <,+ ) [MUW NJ UMWRO\WLOO T^W^XO 9
IOJ^TZJSJ dUJ^JZJRW Z _W[JVKJ` IJK]MKLOO Je x\[MKMKOO IRO[W^W* %Aecree No. <,+ on
7easures for the 1mplementation of Article 9 of the nyoto Protocol to the UN8333&.
.<
WORK IN PROGRESS
1 September 2010
policy can only !e made in relation to the contri!ution of this policy to the neutralisation
of these !arriers.
'hat are the main regulatory !arriers to energy efficiency investmentsH 'hat prevents
the transition of the $ussian economy towards more energy efficiency patternsH
8irstly2 most experts agree that2 in general2 the most important !arrier to the
implementation of energy efficiency pro"ects consists of the lac( of a regulatory
framewor( that ena!les the financial via!ility of these pro"ects. 1n Europe2 for instance2
the European 3ommission stated that )financing is one of the ma"or pro!lems to !e
resolved* to ameliorate the energy efficiency of the economy.
0,0
he difficulty to finance
energy efficiency pro"ects result from the current lac( of internalisation of 3>. and other
environmental and health externalities in energy prices.
0,.
3urrent pricing for energy
products )does not point consumers towards patterns of consumption which offer a more
economical and rational use of energy*.
0,+
7oreover2 the European 3ommission
identifies a lac( of financing instruments adapted to energy5efficiency pro"ects.
1n $ussia2 the pricing issue is exacer!ated !y a tradition of )cost plus* tariffs2 cross5
su!sidisation and comparatively low energy prices2 far !elow international levels.
0,,
7oreover2 in contrast to the European Union2 the presence of large reserves of fossil fuels
on the $ussian territory decreases the necessity to promote energy efficiency and
renewa!le energy sources to diversify and guarantee the availa!ility of energy supply.
0,:
1n addition2 commercial financial institutions have limited experience in energy
efficiency pro"ects.
0,9
Analysts consider that do not they have an interest in developing
such experience !ecause they are focusing on other opportunities.
0,=
-econdly2 analysts highlight the declarative nature of energy efficiency regulations as one
of the main flaws of the legal and political answers proposed in this field. 1n Europe2 for
instance2 the use of declarative2 and not mandatory2 national energy efficiency targets in
Airective .//9C+.CE3 on Energy End5Use Efficiency has !een heavily criticised.
0,<

0,0
3ommissionGs Green Paper on Energy Efficiency2 op cit2 p 0=.
0,.
he 'orld Ban( Clean Energy and De$elopment: Towards an In$estment 4ramewor! %'ashingtonD
he 'orld Ban(2 .//9&2 at .02 availa!le online at
httpDCCsiteresources.world!an(.orgCAEl3>771NCAocumentationC./<;/9;9CA3.//95///.%E&5
3leanEnergy.pdf.
0,+
3ommissionGs Green Paper on Energy Efficiency2 op cit2 p 00.
0,,
1nternational Energy Agency2 Russian Energy 5rices Ta"es and Costs 3QQ6 %ParisD 1nternational
Energy Agency2 0;;,&2 at ;.
0,:
1 verland and 6 n"rnet2 Russian Renewable Energy . The 5otential for International
Cooperation %8arnhamD Ashgate2 .//;&2 at ..
0,9
1nternational 8inance 3orporation2 4inancing Energy Efficiency in the Russian 4ederation . 2E4
5ro1ect (rief %.//,&2 at 0/.
0,=
Energy 3harter -ecretariat2 In$esting in Energy Efficiency . Remo$ing the (arriers %BrusselsD Energy
3harter -ecretariat2 .//,&2 at 009.
0,<
>n this criticism2 see A Boute and A Ae Geeter2 )Airective .//9C+.CE3 on Energy End5Use Efficiency
and Energy -ervices*2 at ,0,.
.;
WORK IN PROGRESS
1 September 2010
Along the same line2 in $ussia2 commentators critically appraised the declarative content
of the 8ederal @aw No. .<58~ of + April 0;;9 on Energy Efficiency.
0,;
hey also
underscored the fact that most concepts and tools remained undeveloped in the @aw2 and
thus had to !e further implemented in future executive documents.
0:/
he 'orld Ban(2
for instance2 stated thatD
ithej federal and regional legislation on energy efficiency is largely declarative. 1t does not
address (ey !arriers2 such as the lac( of information and access to long5term funding.
7easures to remove these !arriers and stimulate upta(e of financially via!le energy5
efficiency pro"ects are essential to realising $ussiaGs energy efficiency potential.
0:0
he 8ederal @aw No. .9058~ of .+ Novem!er .//; on Energy Efficiency
0:.
replaced the
8ederal @aw No. .<58~ of 0;;9. his new @aw provides for a much more detailed
regulatory !asis for energy efficiency investments. 1t creates a system of la!elling and
information for energy5consuming products and for!ids the sale of incandescent lamps.
7oreover2 it esta!lishes a system of energy efficiency re4uirements for !uildings and
introduces metering o!ligations. he @aw also imposes specific measures and energy
savings o!ligations on the pu!lic sector. 3ompanies with state participation or that are
active in the regulated segments of the energy industry have to integrate energy
efficiency measures in their investment programs. 1n addition2 the @aw provides for a
system of mandatory energy audits. 1t also contains financial incentives2 such as fiscal
measures2 and creates a system of contracts for energy services. he new @aw on Energy
Efficiency thus contains important mandatory mechanisms. 6owever2 the practical
impact of this @aw is limited !y the fact that2 li(e the 8ederal @aw No. .<58~ of 0;;92
many measures must !e further implemented !y the competent executive authorities.
7oreover2 the scope of some mandatory re4uirements is very limited. he o!ligation for
energy companies to audit their energy use2 for instance2 does not re4uire these
companies to implement the energy efficiency improvements that are proved to !e
economically "ustifia!le.
A third !arrier consists of the inconsistent and insufficient implementation of the
regulation on energy efficiency. According to the Energy 3harter -ecretariatD
iejnforcement pro!lems reduce the success of energy efficiency regulations. Enforcement
is poor2 especially in 3entral and Eastern Europe2 partly due to uncertainty a!out which
government !odies has the responsi!ility to enforce2 partly due to lac( of (nowledge
among civil servants and lac( of resources.
0:+
0,;
aMQMUWRXK` \WZJK f.<5a e gKMUSJTeMUMcMKOO.
0:/
-ee WUyeOKW2 )dUW]J]M WTNMZ^ YKMUSJTeMUMcMKOP ] _JTTOP* %.//.& : UOT^ .+ %l ~aru!ina2
)he @egal Aspects of Energy Efficiency in $ussia*2 purist&.
0:0
'orld Ban( $ussia 3ountry >ffice2 Russian Economic Report 8o# 0= %'ashingtonD he 'orld Ban(
Group2 .//<&2 at ,+. -ee also 1nternational 8inance 3orporation %he 'orld Ban( Group&2 Energy
Efficiency in Russia . Untapped Reser$es %'ashington2 he 'orld Ban( Group2 .//<&2 at 9:.
0:.
aMQMUWRXK` WZJK f.905a Je YKMUSJTeMUMcMKOO O J NJ]MKOO YKMUSM^OVMTZJ`
YMZ^O]KJT^O.
0:+
Energy 3harter -ecretariat2 In$esting in Energy Efficiency2 at ,..
+/
WORK IN PROGRESS
1 September 2010
1n addition2 it is argua!le that this !arrier results from the lac( of identification !y the
executive and regulatory authorities2 as well as !y the industry and population2 with the
necessity to act in this field. 7oreover2 the regulatory solutions proposed at the national
level do not always answer to the needs of the sta(eholders.
0:,
-ome analysts2 for
instance2 criticise the )overreliance on 'estern energy efficiency program models.*
0::
hese programs can help2 )!ut need to !e significantly adapted to suit local mar(ets and
conditions.*
0:9
8ourthly2 from a general perspective2 energy efficiency investments are hindered !y the
insta!ility and unpredicta!ility of the regulatory framewor( that governs these
investments. Perceived ris(s of changes of the )rules of the game* that investors in
energy efficiency pro"ects have ta(en into account to !uild their !usiness case negatively
affect the development of these pro"ects. he ris(s of regulatory changes are internalised
!y adding a ris( premium what increases the cost of capital for these pro"ects. he impact
of regulatory ris(s can !e considered to !e particularly severe when the financial via!ility
of energy efficiency investments depends on support !y the state %e.g. support schemes&.
he European 3ommission2 for instance2 considered thatD
iojne of the main concerns with national support schemes is any stop5and5go nature of a
system. Any insta!ility in the system creates high investment ris(s %m&. hus2 the system
needs to !e regarded as sta!le and relia!le !y the mar(et participants in the long run in
order to reduce the perceived ris(s.
0:=
1n $ussia2 the ris(s of su!stantial modification of the rules on energy efficiency are
exacer!ated !y the perceived low 4uality of the investment climate. 7any analysts argue
that the modernisation of the $ussian economy is prevented !y the general insta!ility and
unpredicta!ility2 as well as !y the a!sence of strong guarantees as regards the
enforcement of contracts. 1ndeed2 according to NorthD
itjhe ina!ility of societies to develop effective2 low5cost enforcement of contracts is the
most important source of !oth historical stagnation and contemporary
underdevelopment.
0:<
8ormer Energy 3ommissioner Pie!algs explicitly considered thatD
0:,
1nternational 8inance 3orporation2 4inancing Energy Efficiency in the Russian 4ederation2 at ,.
0::
A -ar(ar and B -ingh2 )8inancing Energy Efficiency in Aeveloping 3ountries E @essons @earned and
$emaining 3hallenges* %./0/& +< Energy 5olicy ::9/2 at ::9..
0:9
1!id.
0:=
European 3ommission2 European 3ommission2 3ommunication of = Aecem!er .//: on he -upport of
Electricity from $enewa!le Energy -ources %3>7%.//:& 9.= final&2 at 09E0=.
0:<
A North2 Institutions Institutional Change and Economic 5erformance %3am!ridgeD 3am!ridge
University Press2 0;;/& 4uoted in E 7artinot2 )Energy Efficiency and $enewa!le Energy in $ussia E
ransaction Barriers2 7ar(et 1ntermediation2 and 3apacity Building* %0;;<& .9 Energy 5olicy ;/:2 at ;0/.
+0
WORK IN PROGRESS
1 September 2010
$ussia needs to ensure a secure and attractive investment climate which reduces2 as far as
possi!le2 the level of non5commercial ris(. 'orries or uncertainties a!out the legal2
legislative or taxation regime increases the kris( premiumG element in the discounting rates
that investors2 $ussian and foreign2 use in evaluating investment pro"ects.
0:;
he Government of the $ussian 8ederation explicitly recognises the necessity to improve
the sta!ility and predicta!ility of investment conditions to attract private investors in the
$ussian energy sector.
09/
he Glo!al 3ompetitiveness $eport .//;E./0/ of the 'orld Economic 8orum puts
$ussia 00;
th
of 0++ analysed countries as regards the protection of property rights2
090
;9
th
as regards the favouritism in decisions of government officials2 and 009
th
as regards
"udicial independence.
09.
7oreover2 it is ran(ed 0/;
th
of 0++ on the efficiency of legal
framewor( in settling disputes2 and 000
th
on the efficiency of the legal framewor( in
challenging regulations.
09+
he failure to complete these first5generation reforms in $ussia constitutes an important
!arrier for investments in the modernisation of the $ussian economy.
09,
As regards
investments in renewa!le energy2 7artinot defends the view that )iejven given
information2 proper price signals2 and a conductive regulatory and contractual
framewor(2 one of the most serious !arriers is %m& a perceived climate of high
investment ris(.*
09:
As regards B1 pro"ects2 @aroui2 ellegen and ourilova argue that )the
attraction of possi!le investors for B1 in $ussia is also hampered !y the overall unsta!le
investment climate in $ussia*.
099
0:;
A Pie!algs2 )EU and $ussian Energy -trategies*2 -peech delivered at the EU5$ussia Energy
Aialogue 3onference of +/ >cto!er .//9 %-PEE36C/9C9:+&. 1n this view2 see also >E3A2 +ECD
In$estment 5olicy Re$iew of the Russian 4ederation: Russia*s Energy In$estment 5olicy %ParisD >E3A2
.//<&2 at .+.
09/
-ee $ussiaGs Energy -trategy for the Period up to ./+/2 as adopted !y $egulation of the
Government of the $ussian 8ederation No. 0=0:5r of 0+ Novem!er .//;2 3hapter l2 para. 0 %at 0.& and
para. . %at 0<&2 and Annex :2 para. .+ %at 0+&.
090
>n the need to secure property rights2 see also >E3A2 +ECD In$estment 5olicy Re$iew of Russia:
-trengthening the 5olicy 4ramewor! for In$estment %ParisD >E3A2 .//<&2 at 0/. -ee also N 8a!ry and -
~eghni2 )8oreign Airect 1nvestment in $ussiaD 6ow the 1nvestment 3limate 7atters* %.//.& +: Communist
and 5ost-Communist -tudies .<;2 at .;,E.;:.
09.
'orld Economic 8orum2 2lobal Competiti$eness Report 977Q.9737 %GenevaD 'orld Economic 8orum2
.//;& at .= and .9<2 availa!le online at www.weforum.orgCpdfCG3$/;CG3$.//;./0/fullreport.pdf.
09+
'orld Economic 8orum2 op cit.2 at .9<.
09,
$ Ahrend and ' ompson2 )8ifteen pears of Economic $eform in $ussiaD 'hat has !een AchievedH
'hat $emains to !e AoneH* %.//:& ,+/ +rganisation for Economic Cooperation and De$elopment
Economics Department )or!ing 5aper 02 at +;.
09:
E 7artinot2 )$enewa!le Energy in $ussiaD 7ar(ets2 Aevelopment and echnology ransfer* %0;;;& +
Renewable Energy and -ustainable Energy Re$iews ,;2 at 9/.
099
8 @aroui2 E ellegen and n ourilova2 op cit.2 at ;/<. -ee also A norppoo2 )$ussian Energy Efficiency
Pro"ectsD @essons @earnt from Activities 1mplemented Bointly Pilot Phase* %.//:& ++ Energy 5olicy 00+2 at
0.:? 7 Evans2 - @egro and 1 Popov2 )he 3limate for Boint 1mplementationD 3ase -tudies from $ussia2
U(raine and Poland* %.///& : 0itigation and Adaptation -trategies for 2lobal Change +0;2 at +.< and
+++E++,.
+.
WORK IN PROGRESS
1 September 2010
6#9# Declarati$e nature
+...0. he )significance*
09=
of the Energy 3harter reaty and the Protocol on Energy
Efficiency
-imilarly to the $ussian legislation on energy efficiency2 the provisions on energy
efficiency of the E3 and the PEE$EA appear to !e merely declarative. According to
Brad!roo(2 )iajdherence !y states can !e regarded as purely discretionary2 and the
o!ligations are no more than hortatory.*
09<
Article 0; of the E32 for instance2 only
re4uires states to )strive to minimise* the environmental impact of their energy activities.
-imilarly2 Article , of the PEE$EA provides that states )shall strive to ensure* that
energy efficiency policies are coordinated.
'hile it is true that the E3 and the PEE$EA contain more !inding language2 statesG
o!ligations to act have !een seriously limited !y other considerations. Article 0; of the
E32 for instance2 re4uires states to promote mar(et5oriented price formation and a fuller
reflection of environmental costs. 1t also provides for the o!ligation to promote and co5
operate in research and to encourage favoura!le conditions for the transfer of energy
efficiency technologies. 6owever2 these o!ligations are secondary to economic
considerations.
09;
-tates shall act )in an economically efficient* and )cost5effective
manner.* Along the same line2 Article : of the PEE$EA en"oins the parties to )formulate
strategies and policy aims for improving energy efficiency*. 6owever2 states are only
re4uired to act to the extent that their efforts are )appropriate in relation to their own
specific energy conditions* and are )!est suited to their circumstances.* According to
Brad!roo(D
ithese clausesj effectively give each country carte blanche to do as much or as little in
relation to energy efficiency as it might wish at any given time. he article effectively
ma(es each country the sole ar!iter of what is appropriate action.
0=/
1n addition to this su!ordination of energy efficiency policies to economic and local
conditions2 the effectiveness of the E3 and the PEE$EA appears to !e seriously limited
!y the fact that the energy efficiency provisions are vaguely formulated. 7oreover2 they
can hardly !e enforced at the international level.
0=0
he E3 and PEE$EA only provides
for a system of review. As the .//= $ussian Energy Efficiency $eview
0=.
illustrates2 this
follow5up can !e regarded as mere window5dressing2 rather than an attempt to critically
assess national policies implemented in this field.
09=
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .:0.
09<
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .:, and .9/.
09;
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .:,.
0=/
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .:9.
0=0
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .:, and .9/.
0=.
Energy 3harter Protocol on Energy Efficiency and $elated Environmental Aspects2 Russian 4ederation
. Regular Re$iew of Energy Efficiency 5olicies %BrusselsD he Energy 3harter2 .//=&.
++
WORK IN PROGRESS
1 September 2010
An additional )vital wea(ness* of the E3 and the PEE$EA is the a!sence of mandatory
targets for energy efficiency improvements.
0=+
+..... he significance of the G<: 1nternational Partnership for Energy Efficiency
3ooperation %1PEE3&
1n contrast to the EU proposal on the creation of an 1nternational Energy Efficiency
Agreement2 the G<: declaration on the creation of an 1nternational Partnership for
Energy Efficiency 3ooperation has not endorsed the idea of developing mandatory
energy efficiency standards and targets for the participants.
0=,
8ollowing the opposition of
the United -tates and of the emerging economies participating to this initiative2 the EU
proposal was )watered down to a voluntary kpartnershipG.*
0=:
he 1PEE3 is thus another
declaration regarding the necessity to underta(e action and cooperate to improve the
glo!al energy efficiency. 6ere also2 actions !y the states appear to !e purely
discretionary.
+..... he significance of the export of the ac=uis communautaire
As already introduced a!ove2 Airective .//9C+.CE3 on Energy End5Use Efficiency does
not contain mandatory energy efficiency targets that 7em!er -tates must achieve.
0=9
1n
contrast to Airective .//;C.<CE3 on the Promotion of the Use of Energy from $enewa!le
-ources2 Airective .//9C+.CE3 on Energy End5Use Efficiency only provides for
indicative targets. 1n addition2 many of the provisions of this Airective are characterised
with non5!inding language.
0==
7em!er -tates have thus considera!le discretion in the
implementation of this Airective. he ac=uis communautaire in the field of energy
efficiency appears thus2 at least to a certain extent2 to suffer from similar deficiencies to
the $ussian legislation on energy efficiency2 inasmuch as it is also characterised with a
non5!inding language. )Exporting* this part of the ac=uis to $ussia is thus unli(ely to
contri!ute to address the declarative nature of the $ussian legislation on energy
efficiency.
6#6# 4inancing
0=+
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .90.
0=,
@esage2 A.2 et al.
0=:
1!id.
0=9
A Boute and A Ae Geeter2 )Airective .//9C+.CE3 on Energy End5Use Efficiency and Energy -ervices*2
at ,0;5,./. he indicative nature of the targets was the su!"ect of stormy discussions !etween the European
3ommission and the European Parliament2 on the one side2 and the 3ouncil2 on the other.
0==
Airective .//9C+.CE3 contains what can !e considered as )discretionary re4uirements*2 i.e. 7em!er
-tates can choose !etween different instruments. -ee A Boute and A Ae Geeter2 )Airective .//9C+.CE3 on
Energy End5Use Efficiency and Energy -ervices*2 at ,.0.
+,
WORK IN PROGRESS
1 September 2010
he E3 and the PEE$EA fail to address ade4uately the issue of financing of energy
efficiency investments.
0=<
Article 9 of the PEE$EA only re4uires the parties to
)encourage the implementation of new approaches and methods for financing energy
efficiency investments*. Besides this mere )encouragement*2 the E3 and the PEE$EA
do not contain other financing commitments.
1n contrast2 the nyoto Protocol provides for financing mechanisms of G6G emission
reduction pro"ects2 including energy efficiency investments. As analysed a!ove2 the B1
mechanism ena!les investors to receive additional financial support for their low5car!on
%energy efficient& investments when these investments generate G6G emission
reductions that would not occur under a !usiness5as5usual scenario and when the
financial via!ility of these pro"ects is not possi!le under normal mar(et conditions. he
Emission $eduction Units %E$Us& that these pro"ects generate can !e purchased !y EU
investors or !y the EU mem!er states to fulfil their European and international emission
reduction o!ligations. European participation to B1 pro"ects in $ussia could thus
contri!ute to the financing of the modernisation and improved energy efficiency of the
$ussian economy.
6owever2 the B1 mechanism in $ussia could also provide financial resources to pro"ects
that would !e financially via!le without this additional support %i.e. that are not
financially )additional* as re4uired !y Article 9 of the nyoto Protocol&. As seen a!ove2
$ussia is an Annex 1 country. Under the so5called )rac( 0 procedure* it is entitled to
approve B1 pro"ects on the !asis of its own guidelines and procedures. 1n accordance with
the Aecree of the Government of the $ussian 8ederation No. <,+ on 7easures for the
1mplementation of Article 9 of the nyoto Protocol to the UN83332 B1 pro"ects are
approved on the !asis of their energy efficiency. Energy efficiency !eing a criterion for
the competitive selection of B1 pro"ects2 it can !e assumed that only the most energy
efficient pro"ects are selected on this !asis. Nevertheless2 such a selection process does
not guarantee that the additionality re4uirement within the meaning of Article 9 of the
nyoto Protocol and the UN8333 Guidelines on the 1mplementation of Article 9 of the
nyoto Protocol will !e fulfilled.
0=;
1ndeed2 depending on the overall efficiency and
amount of pro"ects su!mitted for approval2 it cannot !e excluded that relatively
inefficient pro"ects that are not additional within the meaning of Article 9 of the nyoto
Protocol could !e approved. 1f most pro"ects that are su!mitted to -!er!an( E the
institution charged with the selection of B1 pro"ects E are relatively inefficient or could !e
realised without additional financial support2 -!er!an( could approve some of these
relatively inefficient pro"ects. his loose approval procedure runs the ris( that $ussia E
which for the time !eing has a large surplus of Assigned Amount Units %AAUs&
0</
E
0=<
A Brad!roo(2 )he -ignificance of the Energy 3harter reaty*2 at .90.
0=;
his would however not violate the nyoto Protocol. 1ndeed2 as mentioned !efore2 under the )rac( 0
procedure*2 host states can approve B1 pro"ects on the !asis of their own procedures. he proof of
additionality and the determination of !aselines are su!"ect to the discretionary evaluation of the competent
national authorities. -trictly spea(ing2 host states do not have to comply with the additionality and !aseline
methodologies approved and used at the international level. $ussia has therefore the right to follow the B1
approval procedure of its choice.
0</
I#e# the emission credits that are allocated to Annex 1 Parties as a function of their G6G emission
limits provided in the nyoto Protocol.
+:
WORK IN PROGRESS
1 September 2010
would sell this )hot air* to other Annex 1 countries.
0<0
1n other words2 the approval of B1
pro"ects that do not reduce G6G emissions with respect to !usiness5as5usual conditions
would ena!le $ussia to sell it surplus of AAUs %)hot air*& in the form of E$Us. his
would affect the environmental and financial integrity of the B1 mechanism.
3ommentators argue that in this respect thatD
itjrac( 0 opens a new channel for countries to kgreenwashG their AAUs. Under this
argumentation a large surplus of AAUs constitutes an environmental integrity ris( for
rac( 0 B1 unless the pro"ects are truly additional. -ince B1 pro"ects can access the EU E-
through E$Us2 there would !e a danger this khot airG could !e allowed to the EU E-.
0<.

1t is argua!le that !y purchasing the E$Us generated !y B1 pro"ects in $ussia2 EU
companies and mem!er states primarily aim to achieve more easily and cheaply their
G6G emission reduction o!ligations in comparison to internal emission reduction efforts.
8rom the EU perspective2 the B1 mechanism provides for flexi!ility in the attainment of
3>. o!ligations. EU companies are interested in implementing these pro"ects !ecause it
will allow them to meet their 3>. targets at least costs. 1f2 as argued a!ove2 the $ussian
B1 approval scheme does not provide for strong guarantees that the pro"ects will
effectively generate energy efficiency improvements that would not !e implemented in
the a!sence of this additional B1 support2 EU companies would simply !enefit from
cheaper emission credits without participating in the modernisation and improved energy
efficiency of the $ussian economy.
A similar criticism applies to the Boint Pro"ects that EU mem!er states can implement to
attain their national renewa!le energy targets in accordance with Airective .//;C.<CE3
on the Promotion of the Use of Energy from $enewa!le -ources. hese Boint Pro"ects are
primarily aimed to facilitate the attainment of national renewa!le energy o!"ectives2 not
to promote the use of renewa!le energy and the realisation of energy efficiency
improvements a!road.
6#># In$estment ris!s
+.,.0. he protection of energy efficiency investments under the investment regime of the
E3
he reduction of the non5commercial ris(s associated to energy investments is one of the
core o!"ectives of the E3. here is no dou!t that energy efficiency and renewa!le
energy investments can2 in theory2 !e considered as )investments* within the meaning of
Article 02 paragraph 9 of the E3. hese investments are thus in theory protected under
the investment and dispute resolution chapters of the E3. 8or energy efficiency
0<0
-ee A norppoo and > Gassan5hade2 )Boint 1mplementationD @oo(ing Bac( and 8orward* %>cto!er .//<&
Climate -trategies 02 at 0;E./2 availa!le online at www.climatestrategies.orgCour5
reportsCcategoryC0;C=<.html.
0<.
A norppoo and > Gassan5hade2 op cit.2 at ./. 1ndeed2 the B1 mechanism is often considered as an
instrument for generating )greened AAUs*.
+9
WORK IN PROGRESS
1 September 2010
investments in $ussia2 however2 this protection is limited to foreign companies that have
entered the $ussian mar(et !efore the 0<
th
>cto!er .//;.
0<+
1n accordance with the
Aecision on Burisdiction and Admissi!ility in the Bu!os cases2 energy investments that
are made after this date are not covered !y the provisional application of the E3.
0<,
he protection of investments in $ussia is one of the main topics of the current
negotiations on a future agreement !etween $ussia and the EU. 1n this context2 it is
important to 4uestion whether the investment protection provisions of the E3 could !e
used as a model for a future agreement. Are the su!stantive investment protection
provisions of the E3 adapted to the specific characteristics of energy efficiency
investmentsH
he E3 was initially suggested as a mechanism to guarantee the EU energy security !y
stimulating and protecting investments in the )traditional* upstream energy sector. he
investment protection regime of the E3 is largely inspired !y the investment standards
that can usually !e found in most Bilateral 1nvestment reaties. 3ameron argues in this
respect thatD
imjost B1s do not venture into the interrelationship !etween investment protection and
regulation to promote or enforce environmental standards %...&. he E3 is %...& almost
explicitly not an environmental treaty.
0<:

7oreover2 according to 'lde2 most international investment treaties focus on
)traditional political ris(.*
0<9
hey do not explicitly aim to address the specific ris(s that
characterise energy efficiency or climate change mitigation pro"ects.
0<=
his does not
mean that the classic investment protection standards would not ade4uately protect
energy efficiency investments. 6owever2 it calls for a thorough study of the interrelation
!etween energy efficiency investments and international investment protection law. 1t is
necessary to analyse the specific ris(s that are inherent to such investments in the light of
the investment protection standards and the ar!itral case law that has !een developed in
this field.
+.,... 1mproving investment sta!ility for energy efficiency pro"ects !y exporting the
ac=uis communautaire
0<+
Bu!os Uni$ersal /imited $# The Russian 4ederation2 1nterim Award on Burisdiction and Admissi!ility2
+/ Novem!er .//;2 P3A 3ase No. AA ..= %UN31$A@&.
0<,
1!id.
0<:
P 3ameron2 International Energy In$estment /aw . The 5ursuit of -tability %>xfordD >xford
University Press2 ./0/&2 at ./+. -ee also 1 l Gud(ov2 )he $ussian 3onceptual Approach and the Energy
3harter reaty E Part 1* %.//;& = +il 2as and /aw :/2 at :, %x |yQZJ]2 )_JTTO`TZO` ZJKLMN^yWRXK`
NJQJQ O JSJ]JU Z gKMUSM^OVMTZJ` WU^OO*2 EFGHI JKL R MNKOP&.
0<9
'lde2 )reaties and $egulatory $is( in 1nfrastructure 1nvestment* %.///& +, ,ournal of
)orld Trade 02 at 0,.
0<=
United Nations 3onference on rade and Aevelopment2 )orld In$estment Report 9737 .
In$esting in a /ow-Carbon Economy %GenevaD United Nations Pu!lication2 ./0/&2 at 0+=.
+=
WORK IN PROGRESS
1 September 2010
3ould the integration of the ac=uis communautaire in $ussia improve the sta!ility of the
domestic regulatory framewor( for energy efficiency pro"ectsH
As introduced a!ove2 the European 3ommission considers regulatory changes as the most
important ris(s that investments !ased on pu!lic support schemes face in Europe.
0<<
he
3ommission reached this conclusion as regards the promotion of renewa!le energy
pro"ects. A similar conclusion could however also !e made for energy efficiency pro"ects.
Airective .//9C+.CE3 on Energy End5Use Efficiency provides for the possi!ility to
create funds2 su!sidies and other support mechanisms %e.g. white certificates& to help
finance energy efficiency investments. 1t does2 however2 not o!lige 7em!er -tates to
guarantee long5term sta!ility of these support schemes.
$ecital +/ of Airective .//,CC<CE3 on the Promotion of 3ogeneration provides explicitly
thatD
iwjithin the purpose of this Airective to create a framewor( for promoting cogeneration it
is important to emphasise the need for a sta!ile economical and administrative
environment for investments in new cogeneration installations. 7em!er -tates should !e
encouraged to address this need imj !y avoiding fre4uent changes in administrative
procedures etc.
6owever2 Airective .//,CC<CE3 only refers to the importance of regulatory sta!ility in its
%non5!inding& recitals. 7em!er -tates are not hold !y any re4uirement in this respect.
As regards support schemes for renewa!le electricity production2 Article , of Airective
.//0C==CE3 of .= -eptem!er .//0 on the Promotion of Electricity Produced from
$enewa!le Energy -ources in the 1nternal Electricity 7ar(et
0<;
en"oined the European
3ommission to foresee transition periods of at least seven years and )maintain investor
confidence* were it to present a harmonised European support scheme.
0;/
6owever
Airective .//;C.<CE3 of .+ April .//; on the Promotion of the Use of Energy from
$enewa!le -ources repealed Airective .//0C==CE3. 1t does not contain this sta!ility
re4uirement anymore.
0;0
he first European Emissions rading Airective %Airective .//+C<=CE3& has also !een
heavily criticised !ecause of the lac( of predicta!ility and long5term perspective for
0<<
3ommunication he -upport of Electricity from $enewa!le Energy -ources2 at ,E:.
0<;
+, .//0 @ .<+C++.
0;/
>n this transitional provision2 see A Gunst2 )1mpact of European @aw on the lalidity and enure of
National -upport -chemes for Power Generation from $enewa!le Energy -ources*2 ,ournal of Energy and
8atural Resources /aw .+ %.//:& ;:2 at 009E00;.
0;0
$ecital .: Airective .//;C.<CE3 still refers to the need to )maintain investor confidence*.
+<
WORK IN PROGRESS
1 September 2010
investors generated !y the allocation of allowances over short periods.
0;.
Airective
.//;C.;CE3 has somehow tac(led this deficiency.
'ith some exceptions2 it is thus dou!tful that the export of EU regulations governing
energy efficiency investments could provide an answer to the ris(s of potential regulatory
changes of the $ussian regulation on energy efficiency. 1ndeed2 the EU ac=uis appears2 at
least to a certain extent2 to suffer from compara!le ris(s and uncertainties to those
identified in the $ussian context.
6#S# 5reliminary conclusions
he EU efforts to stimulate the creation in non5EU countries of a legal framewor( that is
conductive of energy savings are characterised !y important deficiencies. 1nterestingly2
these deficiencies are compara!le to the regulatory !arriers that affect the $ussian
legislation on energy efficiency. 1ndeed2 the policy and regulatory instruments developed
in the context of the EU external energy efficiency policy are merely hortatory? they do
not provide an ade4uate answer to the financing !arrier of energy efficiency pro"ects? and
they do not offer to energy efficiency investors an a!solute guarantee of protection
against su!stantial changes of the )rules of the game* that form the !asis of their
investments.
1mportantly2 the EU legislation on energy efficiency is also affected !y these deficiencies.
A considera!le part of the ac=uis communautaire on energy efficiency is largely
declarative in nature %e.g. Airective .//9C+.CE3&. 7oreover2 investors in energy
efficiency improvements in Europe can !e exposed to considera!le ris(s of regulatory
changes and uncertainty that can affect the financial via!ility of their investments.
he European and $ussian regulatory framewor( governing energy efficiency
investments is thus characterised with compara!le flaws. Proposing $ussia to unilaterally
integrate the EU ac=uis on energy efficiency will thus not address the !arriers that
currently prevent the modernisation of the $ussian economy.
1n addition2 the )prestige* of EU energy models in $ussia currently suffers from the
present geopolitical and economic tensions !etween the European Union and $ussia.
0;+
1n
contrast to the post5-oviet transition period2 $ussia is unli(ely to accept to unilaterally
align its legislation to the regulatory )models* developed !y the European )normative
hegemon*.
0;,
7oreover2 $ussia is increasingly critical towards the EU agenda to export
0;.
6igh @evel Group on 3ompetitiveness2 Energy and the Environment2 8irst $eport of . Bune .//9 on
3ontri!uting to an 1ntegrated Approach on 3ompetitiveness2 Energy and Environment Policies E
8unctioning of the energy mar(et2 access to energy 2 energy efficiency and the EU Emissions rading
-cheme2 availa!le online at httpDCCec.europa.euCenvironmentCclimatCemissionCpdfCcomF.//<F09Fen.pdf.
-ee also European 3ommission2 3ommunication of 0+ Novem!er .//9 on Building a Glo!al 3ar!on
7ar(et E $eport Pursuant to Art. +/ of Airective .//+C<=CE32 3>7%.//9& 9=92 at :?
0;+
>n the EU approach2 see among others B de Bong and 3 van der @inde2 )EU Energy Policy in a
-upply53onstrained 'orld* %.//<& -IE5- European 5olicy Analysis 02 at 9.
+;
WORK IN PROGRESS
1 September 2010
the EU model to the N1- countries in the context of the European Neigh!ourhood
Policy.
0;:
hese challenges should not prevent the EU institutions from promoting the creation of
rules that would ena!le to improve energy efficiency a!road. Nevertheless2 the
effectiveness of the EU external energy efficiency policy will depend on the recognition
!y the EU institutions of the limits of its unilateral approach towards $ussia and of the
limits of its own regulatory model.
8ollowing a )lesson5drawing* approach2
0;9
the EU institutions should ac(nowledge the
deficiencies of the EU energy efficiency )model* and experience in this field. his
exercise will ena!le to identify regulatory flaws that are common to the regulation
governing energy efficiency !oth in the EU and in $ussia. hese shared EU5$ussian
regulatory flaws should lie at the heart of the European policy to improve the $ussian
regulation on energy efficiency. hey should constitute the !asis of European attempts to
harmonise the EU and $ussian rules for energy savings.
-. CONCLUSIONS
>#3# The concept of energy efficiency in the e"ternal energy policy
Energy efficiency has !een ac(nowledged !y the EU institutions as a new pillar of the
external energy policy. European energy security2 climate change mitigation and
competition o!"ectives should not only !e attained !y internal EU energy savings
measures. hese o!"ectives also depend on the re5orientation of the economy of the
partner countries of the EU towards more energy efficient patterns.
he integration of energy efficiency in the EU external energy relations offers crucial
conceptual answers to the intertwined energy security and climate change challenges. 1t
appears to !e an essential tool to guarantee security of supply in a car!on5constrained
0;,
8or the role of the EU as a )normative hegemon*2 see 6 6au((ala2 )he European Union as a
$egional Normative 6egemonD he 3ase of European Neigh!ourhood Policy* %.//<& 9/ Europa-Asia
-tudies 09/02 at 09/..
0;:
6 6au((ala2 )@ost in ranslationH 'hy the EU has 8ailed to 1nfluence $ussiaGs Aevelopment*
%.//;& 90 Europe-Asia -tudies 0=:=? A Averre2 )3ompeting $ationalitiesD $ussia2 the EU and the k-hared
NeighourhoodG* %.//;& 90 Europe-Asia -tudies 09<;2 at 0=0/. As regards energy2 see 3am!ridge Energy
$esearch Associates2 -ecuring the 4uture . 0a!ing 2as Interdependence )or! %3am!ridge2
7assachusettsD 3E$A2 .//=& at 115;. his can !e understood !y the fact that the promotion of the EU
mar(et principles is advocated as a way to )(eep a regional hegemon at distance.* 6 Prange5Gsthl2
)Enlarging the EUGs 1nternal Energy 7ar(etD 'hy 'ould hird 3ountries Accept EU $ule ExportH*
%.//;& += Energy 5olicy :.;92 at :+//.
0;9
n 6olhinger and 3 nnill2 )3auses and 3onditions of 3ross5National Policy 3onvergence* %.//:& 0.
,ournal of European 5ublic 5olicy ==:2 at =<+. -ee also $ $ose2 )'hat is @esson5ArawingH* %0;;0& 00
,ournal of 5ublic 5olicy +2 at ,.
,/
WORK IN PROGRESS
1 September 2010
world. 7oreover2 it is a creative answer to the historically limited EU external
competences in the fields of energy and foreign investment policy.
Nevertheless2 the concept of energy efficiency that the EU institutions developed in the
context of the external energy policy fails to grasp the complexities that characterise the
relations !etween the EU as net energy importing entity and its energy exporting and
transit partners. 1t does not account for the diverging opportunities %!enefits& and
challenges %sensitivities& that characterise the promotion of energy efficiency in non5EU
countries depending on the 4ualification of these countries as ma"or consuming2
producing or transit countries.
1t is essential to decline the concept of energy efficiency in function of the specific
characteristics of the recipient non5EU country. 7oreover2 it is fundamental to ta(e into
account the interests of third5countries that could !e affected !y this external energy
efficiency policy2 even when they are not the target of a given energy efficiency policy.
he usefulness of the concept of energy efficiency for approaching external energy
relations is dependent on the understanding that2 although strategically less sensitive than
the traditional upstream energy sector2 energy efficiency touches upon the entire energy
chain. 1t can therefore affect vested interests of third states or parties in an unexpected
way.
he promotion of energy efficiency in non5EU countries is presented !y the EU
institutions as !eing in the geopolitical interests of the EU and its mem!er states. 1t is also
"ustified on the !asis of moral grounds such as the EU commitment to climate change
mitigation. Even in this respect2 though2 commercial interests E rather than moral
considerations E appear to !e the preponderant reason underlying this approach. Given
the potential strategic !enefits associated with external energy efficiency efforts2 mem!er
states are also willing to pursue this approach on a !ilateral way. hese !ilateral energy
efficiency policies could compete with the )common* EU approach and thus !e criticised
on the !asis of the classic concern that the EU is not )spea(ing with one voice* in its
external energy relations.
>#9# The specific instruments of the e"ternal energy efficiency policy
he EU institutions have proposed and developed specific policy and regulatory
instruments to assist the partner countries in the creation of a framewor( that would !e
conductive to energy efficiency improvements. >ne of the most important regulatory
!arriers to the development of energy efficiency pro"ects is the a!sence of a legal
framewor( that ena!les the financial via!ility of these investments. At the international
level2 the nyoto Protocol %in particular its flexi!le mechanisms& is an essential tool to
ena!le the financing of G6G emission reduction2 and thus energy efficiency2 pro"ects.
he EU institutions have played a crucial role in $ussiaGs ratification of this document.
hey now advocate the use of the pro"ect !ased nyoto mechanisms in $ussia to facilitate
the modernisation of the $ussian economy. 6owever2 !eing an Annex 1 country2 $ussia
can develop its own Boint 1mplementation approval procedure. Given its current surplus
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WORK IN PROGRESS
1 September 2010
of Assigned Amount Units2 $ussia could approve pro"ects that are not truly )additional*.
his runs the ris( that $ussia would export this )hot air* to the EU Emissions rading
-cheme. 1n this respect2 the flexi!le mechanisms of the nyoto Protocol would not !e used
to generate energy savings a!road2 !ut to facilitate the fulfilment !y EU companies of
their G6G emission reduction o!ligations.
he same criticism applies to the Boint renewa!le energy Pro"ects under Airective
.//;C.<CE3 on the Promotion of the Use of Energy from $enewa!le -ources. his
mechanism primarily aims to help mem!er states to attain their national renewa!le
energy target !y importing renewa!le energy from non5EU countries. $ecital +< of
Airective .//;C.<CE3 provides that 7em!er -tates should encourage the third countries
to develop a renewa!le energy policy and adopt am!itious targets for the share of
renewa!le energy in domestic consumption. his is however not a !inding provision.
Boint Pro"ects under Airective .//;C.<CE3 thus do not tac(le the financing !arrier that
currently prevents energy efficiency and renewa!le energy investments in non5EU
countries. 1t only purports to provide EU mem!er states with more flexi!ility in their
national renewa!le energy policies.
$is(s of changes of the )rules of the game* are a second ma"or !arrier to the development
of energy efficiency pro"ects. 7ore generally2 the insta!ility and unpredicta!ility of the
investment climate of many non5EU countries prevent the optimal deployment of capital
in the modernisation of these economies. he EU institutions proposed the Energy
3harter reaty as a mechanism to improve the sta!ility of investment conditions in
energy producing countries in order to improve the EU energy security. Although the
E3 contains provisions and a protocol on energy efficiency2 commentators consider the
E3 as )almost explicitly not an environmental treaty.*
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1t can !e seen as a legacy of
the traditional external energy policy that focused on the development of upstream energy
pro"ects. Nevertheless2 energy efficiency pro"ects fall within the scope of application of
the E3. he 4uestion is whether the su!stantive investment protection standards of the
E3 are adapted to the specific characteristics of energy efficiency pro"ects. Ao they
offer ade4uate protection against the specific ris(s that investments in energy savings
faceH 1n the context of the current negotiations of a new EU5$ussian or international
energy regime2 it is essential to ma(e sure that the investment protection regime is
adapted to these specific ris(s. A new energy regime must integrate the )paradigm shift*
of the external energy policy !y not only providing protection against the classical ris(s
of outright state intervention with traditional upstream investments2 !ut also protecting
energy efficiency investments against more su!tle regulatory changes.
A third regulatory !arrier to energy efficiency improvements is the declarative nature of
the regulation on energy efficiency. he E3 and its Protocol on Energy Efficiency are
characterised !y the same deficiency. he ac=uis communautaire on energy efficiency is
also2 at least to a certain extent2 affected !y this flaw. he EU institutions advocate the
integration of this ac=uis !y its partner countries as one of the main instruments to create
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P 3ameron2 International Energy In$estment /aw at ./+. -ee also 1 l Gud(ov2 )he $ussian
3onceptual Approach and the Energy 3harter reaty*2 at :,? A Brad!roo(2 )he -ignificance of the
Energy 3harter reaty*2 at .:0.
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WORK IN PROGRESS
1 September 2010
a framewor( that will ena!le the realisation of energy savings in these countries. Given
that the EU regulation on energy efficiency suffers from compara!le deficiencies to the
regulation of its partner countries2 this approach is unli(ely to generate the expected
!enefits.
1nstead of focusing on the ac=uis communautaire as a regulatory )model* %!est5practice&2
the EU institutions should loo( at the failures of its regulatory approach. he EU
experience in the field of energy efficiency ena!les to identify important lessons. he EU
external energy efficiency policy should focus on the lessons that can !e learned !y the
past and current EU failures in the field of energy efficiency regulation instead of
preaching its approach as )the single cosmopolitan standard2 to the exclusion of all other
norms*.
0;<
0;<
B 7ertus and E Breier5-harlow2 )Power2 @egal ransplants and 6armonisation* %.//,& <0 Uni$ersity of
Detroit 0ercy /aw Re$iew ,== at ,=;.
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