Student Number: 0971824

Msc Ecological Economics

Course: Energy Policy and Politics
Academic Year 2009/2010

A critical review of:

Commission of the European Communities; “Green Paper: A
European Strategy for Sustainable, Competitive and Secure Energy”;
{SEC (2006) 317} Brussels, 8. 3. 2006

LIST OF ABREVIATIONS:

CFSP: Common Foreign and Security Policy

EC: European Commission [ Commission of the European Communities]
EMP: Euro-Mediterranean Partnership
ENP: European Neighborhood policy
ETS: European Trading Scheme
EU: European Union
GHG: Greenhouse Gases
IEA: International Energy Agency
OECD: Organization for Economic Cooperation and Development
 Introduction

The EC's “Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy”
(2006) aimed to provide a guideline for a common energy strategy in the context of growing
concerns on energy provision, security and sustainability in the 21st century - both on European1 and
global levels2. It consisted in the potential design of a European answer not only to EU
preoccupations stricto sensu but also to global developments.

The reviewed document, instead of separating different concerns directly relevant to energy policy,
proposes to establish a unified strategy on all fronts: competitiveness, security and sustainability. It
consequently presents a “holistic” proposal encompassing elements of both intra-Union domestic
policies and external relations.

While a common holistic strategy could be welcomed as an ambitious European project, further
strengthening EU legitimacy, a core question arises: can we consider the strategy proposed as a
viable answer to the problems identified? We first (I) present an overview of the document before
(II) a skeptical discussion of EC's position. We argue that some of the means used to achieve
different goals could prove antagonistic rather than complementary.

1. The rationale of the Green Paper: A brief summary

The European Commission has got, following the Lisbon Treaty, three core functions: it is first an
impulsive organ for European policies and agendas, secondly an execution organ of policies fixed
by the European Council and finally the guardian of established treaties. The “green paper” enters
in the first category since no agreement of the Council had yet been reached when the document
was released: thus, it aimed precisely to give an impulsion for a common EU energy strategy,
further subject to discussion both in the Parliament and the Council.

1 See notably: Helm, D. (2005); “European energy policy”. Paper prepared for the UK Presidency of the EU.

2 United Nations Development Program (2000); World Energy Assessment: Energy and the Challenge of
Sustainability; Bureau for Development policy, New York.
The “Green paper” proposes a strategy to: (1) spur and deepen the construction of a common EU
energy market in a context of increasing prices; (2) enhance internal and external energy security
through intra-Union cooperation as well as a common EU policy towards so-called “indigenous”
energy providers, in a context of increasing dependency; And finally (3), to adopt a common stance
on sustainability issues linked to energy patterns in the context of climate change mitigation.

(1) In view of the first objective, the EC, in vogue with the “neoliberal consensus” (Scrase et Al,
2009), proposes the establishment of a common European market through the privatization and
liberalization of energy throughout the EU. This implies a progressive convergence of different
national regulation schemes and privatizations of public monopolies. Such a policy would allow for
greater competition on an EU level, leading to lower energy prices, and enhance international
competitiveness in the energy sector. Thus, the document is based on the axiom that privatization
and liberalization are the optimal solutions for energy provision within the EU.

(2) Considering that the creation of an EU energy market, transcending current fragmentation, will
imply higher interdependence, the document proposes to spur cooperation between member-states
in the name of energy security, including: the adoption of a common regulation and EU electricity
grid, the creation of institutions aiming to prevent national energy crises, and finally, a higher
degree of cooperation on a global scale for the security of energy provision from indigenous
countries.

(3) Sustainability and energy transformation in the context of climate change should be tackled,
according to the EC, through existing mechanisms – i.e. the ETS – coupled with common
technology policies involving energy mixes to be defined, energy efficiency measures, and the
promotion of low-carbon energy sources, such as renewable and nuclear energy. Finally, a common
international stance on atmospheric change should be maintained.

Although the document encompasses various elements relative to EU energy markets’ integration,
energy security and sustainability, its disproportionate insistence on liberalization and privatization
transmits a latent core argument: that privatization and liberalization should be the basis of
discussion for virtually all energy challenges of the 21st century. Hence the holistic assertion: “A
truly competitive single European […] market would bring down prices, improve security of supply
and boost competitiveness. It would also help the environment [...]”3. The discussion that follows
focuses on this critical position.

2. Discussion of the EC's assertions: A skeptical point of view

Although deregulation of energy markets through privatization and liberalization can be socially
and economically beneficial, such is not always the case, as suggested by various international
trajectories4: the lessons of liberalization experiences is that public enforcement and regulation,
notably concerning competition policy, are crucial for the outcomes of privatization both in terms of
price reductions and security of supply5. This is partly because, in the energy sector, the distinction
between private and public domains is blurry, even where privatization and liberalization policies
have been applied6. Nonetheless, the Green Paper provides (1) scarce information about future
regulations beyond its insistence on market “unbundling”7 and (2) it is unclear whether members-
States or the EU would enforce these regulations.

While the document acknowledges the magnitude of energy transformation required in

technological and financial terms in the context of global warming, it stipulates that the market will
provide for these, as long as proper institutional incentives are established. Three questions
consequently arise: first, the main market-based framework for reducing GHG emissions, the ETS,
has shown poor results, partly because of political laxity8, but also because of the policy choice of
cap-and-trade regimes9. Second, as Helm argues10, the hybrid nature of European environmental
3 Page 5.

4 Cumbers, A (2003); “Remaking the case for public ownership: A critical review of privatization and a proposal for
democratic control of Scotland's energy resources”; (Draft) published by: Department of Geography & Topographic
Science, University of Glasgow. Http://www.goes.gla.ac.uk/olpapers/acumbers003.pdf
5 Von Weizacker E; Young O; Finger M - Ed (2005); Limits to Privatizations: A Report to the Club of Rome;
Earthscan.

6 Scrase, I; MacKerron, G (2009); “Lock-in”; In: Scrase, I; MacKerron, G (Ed); Energy for the Future: A New
Agenda ; Palgrave Macmillan, 2009.
7 Helm, D (2007); “European Energy Policy: Meeting the Security of Supply and Climate Change Challenges”; EIB
papers, Volume 12, No 1.
8 Fitoussi, J-P; Laurent, E; Le Cacheux, J (2007); “La stratégie environnementale de l'Union Européenne”;
Observatoire Français des Conjonctures Économiques (OFCE); Working paper No 2007-24, Sept.
9 For a critique of the choice of cap-and-trade regimes see notably: Nordhaus, W (2006); “After Kyoto: Alternative
Mechanisms to Control Global Warming”; Foreign Policy In Focus (FPIC), March 27.Nordhaus, W (2007); “To
tax or not to tax? Alternative approaches to slowing global warming”; Review of Environmental Economics and
Policy, volume 1, issue 1.
10 Helm, D (2009); “EU climate-change policy – A critique”; In: Helm, D and Hepburn, C (Ed); The Economics and
Politics of Climate Change; Oxford University Press, 2009.
strategy, involving both the ETS and numerous regulations and objectives for renewable energy and
energy efficiency, lacks clarity and therefore effectiveness11. Finally, liberalization policies, if not
coupled with considerable State intervention, can spur technological lock-in pathways in the long
run despite the eventual spurring of competitiveness in the short-run12. Thus, if new forms of “State
planning”13 walk hand-in-hand with market-based policies in order to spur technological
transformation14, under-regulated liberalization could be contradictory to sustainability objectives.

A final concern can be expressed concerning the foreign policy dimension of energy security. As
Van der Linde argues15, It is not clear whether an “atomized” energy market, underpinned by the
liberalization and market “unbundling” EU rationale in order to spur competition, is compatible
with a high degree of external energy security and bargaining power. Likewise, the latter will be
crucially dependent on the developments of the CFSP, the ENP and the EMP16, which have all been,
until now, only partly effective in spurring a coherent foreign stance17, including concerning energy
policy18.

Conclusion

While many of the above critiques have led to a more balanced approach in a subsequent
document19, a fundamental question in the literature is how sustainability, competitiveness and
security intertwine within the EU: as highlighted above, the relations between these objectives
directly address the State/Market dialectic in a more complex perspective than the simple
“privatize” and “liberalize” prescriptions.

11 Such is the case of the subsequent “20-20-20” objective, consisting more, according to Helm, in a political slogan
than a sound policy objective. Helm, D (2009); Op. Cit
12 Scrase, I; MacKerron, G (2009); Op. Cit
13 Giddens, A (2009); The Politics of Climate Change; Polity press (Ed), Cambridge.
14 Galiana, I.; Green, C (2009); “An analysis of a technology-led policy as a response to Climate Change”;
Copenhagen Consensus Center.
15 Van der Linde, C (2007); “External energy policy: old fears and new dilemmas in a larger Union”; In: Sapir, A
(Ed.), Fragmented Power: Europe and the Global Economy, Bruegel 2007.
http://www.clingendael.nl/publications/2007/20070000_ciep_misc_vanderlinde.pdf
16 Respectively: Common Foreign and Security Policy; European Neighborhood policy; Euro-Mediterranean
Partnership
17 Laidi, Z (2008); “The Normative Empire”; Garnet Policy Brief No 6. Fernandez, A; Youngs, R (2005); The Euro-
Mediterranean partnership: Assessing the first decade; Real Instituto Elcano, FRIDE, Madrid.
18 Van Vooren (2009); “Integrating the Union's Energy Policy into its European Neighborhood Policy: Added-Value
or emulating its deficiencies?” (Draft) European University Institute; Available at:
http://ssrn.com/abstract=1308455
19 Commission of the European Communities (2007); Communication from the Commission to the European
Council and the European parliament: An energy policy for Europe; {Sec (2007) 12}, Brussels. This revised version
came as an outcome of reactions of the European parliament, the European Council as an entity, and various national
governments.
Whence the paradox: Although the relations between the privatization - liberalization nexus with
energy security and sustainability are not straight nor uniform, leading to a suspicion that complex
positive and negative feedbacks exist between these different objectives, the EC points solely at the
positive ones: whilst, its proposal seems locked in a neo-liberal paradigm20.

REFERENCES

Commission of the European Communities (2006); “Green Paper: A European Strategy for
Sustainable, Competitive and Secure Energy”; {SEC (2006) 317} Brussels.

Commission of the European Communities (2007); Communication from the Commission to the
European Council and the European parliament: An energy policy for Europe; {Sec (2007) 12},
Brussels.

Cumbers, A (2003); “Remaking the case for public ownership: A critical review of privatization
and a proposal for democratic control of Scotland's energy resources”; (Draft) published by:

20 Such is the paradigm promoted as well by the International Energy Agency. See, for example, OECD/IEA (2008);
IEA Energy Policies Review: The European Union 2008; http://www.iea.org/textbase/nppdf/free/2008/EU2008.pdf
Department of Geography & Topographic Science, University of Glasgow.
Http://www.goes.gla.ac.uk/olpapers/acumbers003.pdf

Fernandez, A; Youngs, R (2005); The Euro-Mediterranean partnership: Assessing the first decade;
Real Instituto Elcano, FRIDE, Madrid.

Fitoussi, J-P; Laurent, E; Le Cacheux, J (2007); “La stratégie environnementale de l'Union

Européenne”; Observatoire Français des Conjonctures Économiques (OFCE); Working paper No
2007-24, Sept. [Translation of title: The Environmental strategy of the European Union]

Galiana, I.; Green, C (2009); “An analysis of a technology-led policy as a response to Climate
Change”; Copenhagen Consensus Center.

Giddens, A (2009); The Politics of Climate Change; Polity press (Ed), Cambridge.

Helm, D. (2005); “European energy policy”. Paper prepared for the UK Presidency of the EU.

Helm, D (2007); “European Energy Policy: Meeting the Security of Supply and Climate Change
Challenges”; EIB papers, Volume 12, No 1.

Helm, D (2009); “EU climate-change policy – A critique”; In: Helm, D and Hepburn, C (Ed); The
Economics and Politics of Climate Change; Oxford University Press, 2009.

Nordhaus, W (2006); “After Kyoto: Alternative Mechanisms to Control Global Warming”;

Foreign Policy In Focus (FPIC), March 27.

Nordhaus, W (2007); “To tax or not to tax? Alternative approaches to slowing global warming”;
Review of Environmental Economics and Policy, volume 1, issue 1.

OECD/IEA (2008); IEA Energy Policies Review: The European Union 2008;
http://www.iea.org/textbase/nppdf/free/2008/EU2008.pdf

Scrase, I; MacKerron, G (2009); “Lock-in”; In: Scrase, I; MacKerron, G (Ed); Energy for the
Future: A New Agenda ; Palgrave Macmillan, 2009.

United Nations Development Program (2000); World Energy Assessment: Energy and the
Challenge of Sustainability; Bureau for Development policy, New York.

Van der Linde, C (2007); “External energy policy: old fears and new dilemmas in a larger Union”;
In: Sapir, A (Ed.), Fragmented Power: Europe and the Global Economy, Bruegel, 2007.
http://www.clingendael.nl/publications/2007/20070000_ciep_misc_vanderlinde.pdf

Van Vooren (2009); “Integrating the Union's Energy Policy into its European Neighborhood
Policy: Added-Value or emulating its deficiencies?” (Draft) European University Institute; Available
at: http://ssrn.com/abstract=1308455

Von Weizacker E; Young O; Finger M - Ed (2005); Limits to Privatizations: A Report to the Club
of Rome; Earthscan.
.