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COM (83) 315 
 
 
 
Vol. 1983/0127 
  
 
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Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), t his file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februa r 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 v om 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION  OF THE  EUROPEAN  COMMUNITIES 
COM(83) 315 final 
Brussels,  15 June 1983 
ENERGY AND ENERGY RESEARCH  IN THE COMMUNITY  : 
A FIVE-YEAR  PROGRAMME OF  ACTION AND ITS  FINANCING 
(Communication  from the Commission  to the  Council) 
COM(83) 315 final 

ENERGY AND ENERGY  RESEARCH  IN THE COMMUNITY  : 
A FIVE-YEAR  PROGRAMME  OF ACTION  AND ITS  FINANCING 
COVER NOTE 
In the explanatory  memorandum  to its proposals on the Future Financing 
of the Community  (COM(83)270  final),  the Commission  announced  its intention 
to propose  a special  effort  to develop  Community-wide  policies  to secure 
a more rational use of  energy  and a more secure and diverse supply. It 
also stated that it was considering the introduction into the own resources 
system of a tax on non-industrial  consumption  of energy  so as to finance 
this effort. 
The attached  Communication  sets out 
results  of further consideration of 
it. accordingly the  programme  and the 
the appropriate  mechanism  for financing 

ENERGY  AND  ENERGY  RESEARCH  IN THE COMMUNITY  : 
A FIVE-YEAR  PROGRAMME  OF  ACTION  AND ITS FINANCING 
CONTENTS 
Pages 
THE NEED  FOR A  DIFFERENT  APPROACH 
The Lessons of the Past 
The Opportunities and the Risks 
Building a Bridge to the Future 
The Optimisation of Resource Use 
Coherence  and Continuity 
Guidelines  for the Programme 
THE CONTENT  OF THE  PROGRAMME 
More Rational Energy Use 
Investment 
Technology 
Electri  city 
Prospection 
Hydrocarbons 
Uranium 
More Balanced Development of Supplies 
Solid  Fuels 
Nuc lear 
Gas 1 - 7 
1 - 2 
2- 3 
3 
3- 4 
4- 5 
5- 7 
7-15 
7- 9 
8 
8- 9 
9 
9- 12 
10 - 11 
11 - 12 
12 - 15 
12 - 13 
13 - 14 
14 
Alternative Energy Resources 15 
COSTS  OF THE  PROGRAMME 15 
FINANCING 16 
A TAX ON  ENERGY  CONSUMPTION 16 - 18 
Annex 1 : Expenditure by National Governments on Energy 
Annex 2 : Energy Consumption 
Annex 3 : Incidence of Energy Consumption Tax 

ENERGY  AND  ENERGY  RESEARCH  IN THE  COMMUNITY: 
A FIVE-YEAR  PROGRAMME  OF  ACTION  AND ITS  FINANCING 
Communication from the Commission to the Council 
THE NEED  FOR A  DIFFERENT  APPROACH 
1. The past three years have brought dramatic changes on the world oil market 
as it adjusts to new and very different market conditions. The price 
increases  of 1979/80 contributed substantially to the damaging depression of economic 
activity which has been witnessed throughout the industrialised world. But on the 
positive side they had a direct effect on the demand for oil and on the 
supply and use of other fuels. They also changed the perceptions and 
behaviour of Governments in oil-consuming and oil-producing countries 
alike,  and those of companies and individuals inside and outside the 
oil industry. 
The combination of these factors pushed world oil demand down by a 
staggering 20% in 3 years and  with  this has come the fall in the price of 
crude itself. 
These  changes carry important lessons for energy policy and set a new 
context for  future  action. The new situation requires a different 
response  in the Community from  that  of the past, building on the  successes 
of the past but learning from the mistakes; capitalising on the opportunities 
while minimising the risks; and providing a solid bridge from the present 
to a more stable and more certain future. 
The Lessons  of the  Past 
2. One key lesson from the past is  that  energy policy brings clear rewards. 
Some  of the gains  that  have been made are due to the efforts of Governments 
to encourage more rational energy use and a  less  vulnerable and more 
diversified pattern of energy supply. 
Another lesson is  that  market forces are very much alive and kicking in  
the energy field/working during the past three years vigorously in support 
of our energy policy objectives. 

- 2 -
Consumers  and investors responded to the rise in oiL prices in 1979/80 
by cutting oil consumption and shifting to other fuels. And in the oil 
sector  itself increased production from  non-OPEC  sources has added to the 
impact of falling oil demand in establishing a more market-based level of 
pri ces. 
A third  lesson however, is the importance of sustained  effort  and continuity 
of approach. The process of adjustment in the energy sector after the  first 
oil shock of 1973-74 was not sustained as prices began to fall in real terms 
thereafter. Some of the results are only being  felt  today in the electricity 
sector  where new oil-fired plant ordered in the mid-1970s is coming 
into  operation. Many of the gains of the past few years will be lost if 
this cycle is repeated,  with  short-term market signals setting the process 
of adjustment in reverse once again and encouraging a  return  to the earlier 
uneven balance between oil-producers and oil-consumers in the market place. 
The Opportunities and the  Risks 
3. The opportunities in the new situation are substantial. The Community's 
balance-of-payments will be 210 bn better this year than last because oil 
prices  are lower. Economic growth should be higher by 0.5% or more next year as a result 
and inflation will be down by 1% or more. There will be gains to. the public 
purse as economic activity picks up and there will be gains to industry 
and to the consumer. The short-term economic outlook for the Community 
as a whole wi 11 therefore be better as a result of the new oi I market situation. 
4. The longer-term is clearly  less  secure. The present oil market 
situation seems most unlikely to change overnight, barring unforeseeable 
political developments, but some time later in this decade the position could 
be very different. The industrialised countries have meanwhile a breathing 
space  to consolidate the gains of the past and to put the  future  on a 
sounder footing. 
But, conversely,the slackening of the oil markets may work against their 
doing so. Adequate progress towards the Community's long-term energy 
objectives could not be taken for granted even before the new oil market 
situation developed. Falling oil prices and changing perceptions about 
their  future  evolution will make the realisation of those objectives 
even  more  difficult. 

-3 -
5. The risks are of two kinds. The fi rst is  that  Governments will put energy 
policy on a back-burner as the other and more immediately pressing  issues 
of employment and inflation continue to dominate the political debate. 
The second is  that  consumers and investors in both the public and private 
sectors  will see  little  market incentive to sustain the pace of restructuring 
when investments outside the energy sector begin to show substantially 
quicker  returns as the relative price of energy falls. 
Building  a Bridge to the Future 
6. The problem is where to strike the  right  balance in trading off the 
short- against the longer-term. The Commission certainly does not want to 
risk nipping the economic upturn in the bud by unnecessary burdens on 
economic  operators and consumers. Neither do we wish to see the energy 
sector  preempt unduly the investment resources which will be needed also 
to transform the outlook for some of those new industries on which the 
future  industrial health of the Community will also depend. Nor would 
we wish to see energy developed  just  for its own  sake.  Energy is only one 
factor of production which, in combination  with  others, ensures the 
production of goods and services. 
7. But energy is so fundamental to the successful pursuit of the Community's 
general  economic aims  that  it should have special and  priority  treatment. 
If the main objective of energy policy is to prevent a rationing in the 
growth of goods and services in the years to come, energy investment should 
be made a major beneficiary rather than a potential casualty of falling 
oil pri ces. 
By using in the energy sector some of the resources freed by tailing oil 
prices,  the risk of a longer-term energy constraint on growth can be 
reduced.. 
The Optimisation of Resource Use 
8. A  priority  role for enerqy can be justified only if the additional  effort  is 
achieved  at least cost and at greatest benefit. Resource use in its 
widest  sense  must therefore be optimised. This cannot be achieved at 
national  level. 

-4 -
9. The waste and the rigidities created by uncoordinated and duplicited 
action in the energy sector are visible  throughout  the Community. In 
the electricity sector, for example, there is excessive and underutilised 
supply  capacity in some Community countries while the interconnection system 
is in places quite inadequate; in the field of solid fuels,stocks have been 
rising to record levels in the producing countries/ reducing the finance 
available  for the investment required to make the Community industry more 
competitive against imports  from  outside; and in  both  primary energy supplies 
and energy-using equipment the internal market of the Community has hardly 
been  exploited at all. Energy policies have certainly brought their rewards, 
but they have been far more costly to Member States than they need have  been. 
10. This situation must now change. The Community cannot continue wasting 
resources  in this way. Better coordination of action at Community level 
would provide the basis for  optimi  sing the use of physical and financial 
resources,  reducing waste and increasing the  flexibility  of the energy 
supply  system to everybody's benefit. 
Coherence  and Continuity 
11. Optimisation cannot be taken for granted, however, as long as Community 
action is undertaken only in an ad hoc and piecemeal fashion. Effective 
Community action can be assured only through programmes which, where 
they involve budgetary expenditure, have a minimum level of credibility 
in terms of the financial resources allotted to them and a framework 
of continuity over a number of years. 
This  has not been the  case  up to now. Community expenditure programmes in 
the energy field have been restricted largely to technological development 
which,  though of critical importance, is only one element in energy policy. 
Even  some of those programmes, and notably in the demonstration field, have 
been  financed of late on a hand-to-mouth  basis. 
The result is  that  many of the gains of Community action have been severely 
jeopardised. 

- 5 -
The same mistakes must not be repeated. Capitalising on the Community 
dimension  requires setting a stable medium-term framework for a more 
comprehensive  range "of activities than in the past. 
Guidelines  for the Programme 
12. Four guidelines should be applied in the development of such a programme. 
13. The fi rst is  that  specific proposals for expenditure made  within  it should 
reflect the results of an assessment of programmes and actions in the fields 
in question  within  Member States themselves. The objectives of Community 
programmes must be to reduce waste and duplication and not risk adding to 
it, though the existence of high levels of expenditure in some Community 
countries is not in itself an argument against action at Community  level. 
National  expenditures in the  different  energy sectors vary a great  deal, 
even  taking account of  size  and geographical factors (Annex 1). The 
variation in expenditure levels per capita and in relation to oil consumption 
is one  further,  if imperfect, piece of evidence  that  equivalence of  effort 
in the pursuit of those objectives is still wanting. Provided  that  it is 
accompanied  by renewed  efforts  at national level by those Member States 
whose  vulnerability is the greatest, a medium-term programme of action at 
Community level would help to encourage greater equivalence of  effort, 
enabling Member States where substantial energy programmes are already in 
force actually to replace some of their national expenditures  with  Community 
finance. 
Successful  assessment of programmes in Member States requires, however, 
effective arrangements for a pooling of information about national action 
at Community  level,  so  that  the Commission can perform its monitoring 
responsibilities  with  the greatest confidence. Member States have agreed 
on common objectives for the longei—term. It is only logical  that  they 
should  facilitate the proper assessment of the adequacy of the instruments 
which they apply to their pursuit. 

- 6 -
14. The second guideline is  that  the Community should not  attempt  to be a 
substitute for economic operators themselves. Community action should be 
directed as a rule at establishing a framework which encourages operators 
to take the correct long-term decisions in terms of energy supply and use. 
In many  cases  that  objective can best be achieved by the  further  development 
and application of a rational approach to energy pricing, and this must 
continue to be a fundamental element in Community policy. 
But there are  cases  where pricing policy in itself will clearly be insufficient, 
particularly at a time of continuing economic difficulty. The programme of 
expenditure should be directed essentially towards them. 
15. Thi rdly, there is no reason why a programme of this kind should be of 
indefinite duration rolling over from one five-year period to the next; 
nor of gradually increasing  scale  or coverage. Quite the contrary. The 
Commission  is proposing a programme intended to build a sound bridge to 
the medium-term and to avoid the risk of a new energy constraint later in 
the decade.  A  successful  programme of activities,  with  expenditure tapering 
off in real terms towards the end of the five-year period 1984-88, should 
place  the Community in a new situation five years hence where a continued 
effort  through this mechanism may no longer be required. 
16. Fourthly, while the programme should provide a framework for continuity, 
it too must avoid rigidity. The Commission intends  that  there should be 
regular reviews of progress to decide on the pattern of activities  within 
and between energy sectors and the level of budgetary allocation needed in 
the later years of the programme. The  first  of these should take place 
two years  titter  the programme begins. 

- 7 -
17. The Commission's proposal reflects its desire to see a  both  more coherent 
and more professional approach to energy policy at Community  level.  It 
means  a qualitative change of approach. Without a bold advance of this 
kind energy policy at Community level  will  be out of step  with  the 
underlying requirements for action. 
THE CONTENT  OF THE  PROGRAMME 
18. The medium-term programme  will  not be based simply on new action. It 
will  be a mixture of measures already approved at Community  level, 
amplified where necessary; measures already proposed and under  discussion; 
and entirely new actions. 
The following paragraphs briefly summarise the Commission's suggestions 
as to the programme's content,under three headings : more rational energy 
use,  prospection, and more balanced development of supplies. 
More  Rational Energy Use 
19. The period following the second oil shock has been marked by a significant 
improvement in rational energy use,  both  in the  shift  from  oil to other 
fuels and in the efficiency of energy use. Some of this improvement reflects 
the immediate response to the 1979/80 price increases; some the lagged 
impact of investments made even earlier. 
The easy improvements have now largely been made. The outlook for sustained 
progress  in the coming years  will  depend heavily on the pace of  further 
investment  both  in immediately applicable technologies and in the development 
and application of new. and more efficient technologies.  Such  investments 
are of vital interest to the long-term energy security of the Community. 
But an acceleration of activity in this wide field would have a more 
immediate spin-off in terms of employment, economic  growth  and trade. 

- 8 -
20. The scope for such investments is Large but there are three main reasons 
why it may not be adequately exploited. The  first  is that  in difficult 
economic  conditions, where  cash  is short and profits low, investments in 
RUE will tend to be displaced by others yielding quicker and higher returns, 
a problem aggravated by falling oil prices. The second problem is 
insufficient development and use of new technologies. The  third  is the low rate of 
investment in the electricity sector which will reduce the headroom available 
for solid fuels and nuclear to replace oil and gas. 
The Commission believes  that  Community action should be directed essentially 
at those three problem  areas. 
21. In the  first  (the financial constraints on investment) the Community role 
should  be first  of all to identify those investments  that  should be made 
in the Community interest but which will not go ahead  without  support; 
secondly  to identify the most effective and least costly mode of intervention. 
The Commission has already begun to perform this role. It made a detailed 
survey  in February 1982 of the barriers to more rational energy use; it 
encouraged  the adoption in July of a Recommendation by the Council to 
Member  States on-ways to accelerate the pace of investment; and it 
subsequently  made a highly selective proposal for Community action in 
the form of interest-rate subsidies on Community loans for investments in 
coal  conversion, coal preparation, district heating and energy production 
from waste where there were evidently major problems. Discussions in the 
Council  have demonstrated  that  the problem sectors are wider than the 
Commission  judged initially. In particular, it is clear  that  the present 
approach  could usefully be expanded to cover energy saving investment itself 
and may need  further  extension later to provide for direct grants as well 
as interest-reliefs. The Commission believes  that  the proposed medium-term 
programme could provide a clearer framework for the early adoption of this 
proposal,  with  its necessary changes. 
22. As far as technology is concerned, matters are already  further  advanced. 
Research  and development in this sector (and especially in the fields of 
energy saving and the use of solid fuels) is already an essential element 
in the Framework Programme for  Science  and Technology it will figure 
1, C0MC82J865  final and C0M(83)260 final. 

- 9 -
Large  in the 3rd Energy R&D Programme which the Commission is proposing 
separately;  and it is a key element in the programme for Community demonstration 
projects which covers energy saving and technologies to increase the outlets 
for solid fuels in the longer-term (coal gasification and liquefaction), as 
well as geothermal energy, solar, wind, hydropower and biomass. 
Although R, D & D is an area where the importance of the Community dimension 
has been recognised for some time, in the demonstration field the Council 
has so far failed to agree on financing for the medium-term despite lengthy 
discussions  since the Commission's proposals were put forward early last 
autumn. As in the  case  of the proposal on interest-rate reliefs discussed 
above,  the Commission considers  that  consideration by the Council of a 
pluriannual programme of energy and energy research as a whole should help 
to provide a better framework for early agreement on a credible level of 
medium-term financial commitment in the demonstration projects field. 
23. Thirdly, the pluriannual programme should provide a framework for elaboration 
and adoption of measures (e.g. in the technological  field)  to help expand 
the markets forsolid fuels and nuclear power through greater penetration  
of electricity  from  those sources where it is economic and efficient to use 
it. As a corollary, rational energy use demands the greater integration of  
the electricity networks in the Community so as to  profit  from  the existence 
of different  patterns of supply and demand in Member States and to minimise 
the consequences of accidental disruption to supplies. The programme should 
include measures to  that  end. 
Prospection 
24. The Community is now consuming 3 mbd  less  oil than in 1973 and it is importing 
5 mbd  less,  thanks largely to the development of the North Sea. But 
dependence  on imported energy remains high and its economic burden (measured 
by the net cost of imports in relation to GDP) is the same now  (3.8%)  as it 
was in 1974. 

- 10 -
It is in the interest of the whole Community to ensure an adequate level 
of effort  in identifying resources at Community level which will help to 
reduce dependence in the longer-term on more vulnerable and  less  secure 
supplies  from outside. 
25. The companies must clearly be in the  lead.  They have the expertise and 
the physical and financial resources. But it is not clear  that  in the 
present market conditions they have the motivation to do all  that  is 
requi red. 
26. Here too there are three roles for the Community. 
The first  is a role of analysis and monitoring. The Community's task must 
be to examine the adequacy of  effort  and to draw attention to those areas 
where more should be done. 
The second must be to ensure  that  the gaps are f i lied  in the most economic 
and effective way. The  third  is to ensure  that  the companies have the 
technology they  need. 
27. In the hydrocarbons field, exploration by the private sector continues, but 
is almost wholly confined to areas of. established potential such as particular 
North Sea basins.  Because  of the current oil market surplus and weakening 
oil prices the private sector is not giving  priority  to investigating new 
areas  of possible  future  potential  within  the Community. In the current 
market climate, they are unwilling and in some  cases  unable to spend money 
on higher risk exploration projects; and fiscal changes by Member States 
would be unlikely of themselves to rectify this. It is however important 
for the Community's long-term supplies  that  such areas should be evaluated. 
The Commission therefore proposes  that  a new Community hydrocarbon prospection 
activity covering both oil and gas (including deep gas) should be included in 
the pluriannual programme. This would provide both for seismic surveys and 
for drilling to obtain geological data on new areas and to identify the 
presence  of hydrocarbon-bearing strata. Its cost, even at its peak^ 
would be modest compared  with  total  oil industry exploration activity in 
Western Europe (about  7 billion ECU in  1980). 

- 11 -
The Community has been running a programme of assistance to the development 
of hydrocarbon technology since 1973. The  latter  has already proved to be 
of particular value in assisting the exploitation of Community oil and gas 
reserves  in Continential Shelf areas and should clearly continue. New 
technologies  will  need to be developed in line  with  the  trend  towards 
smaller  discoveries in deeper and hostile waters. Many of the projects 
financed have been commercially successful and led to substantial 
reimbursements of Community funds. But there is an increasing number of 
projects which cannot be assisted or are having to be delayed because of 
inadequate funds available. The Commission's proposed budget for 1984 
therefore includes an expanded allocation of 40  MECU  for this programme. 
28. Uranium prospection is another  important  field where intensified action 
at Community level could bring large rewards. 
Nuclear  power  will  account for over 35% of the Community's electricity 
supplies  by 1990 and  that  share is likely to grow  further.  Yet the 
Community is dependent on the outside world for 80% of its uranium supplies. 
The uranium market has shown itself to be highly volatile in the past. 
At present there is an  excess  of production capacity world-wide. But 
this could change.quite rapidly as a result of economic factors (closure 
of high-cost mines) or political factors (notably a change of government 
in a major producing country). Community resources must therefore be 
kept under permanent scrutiny and, when and where justified, developed 
by prospecting efforts. The Commission  will  therefore continue its review 
of Member States' proven reserves and estimated.resources and extend this 
action towards more specific targets, making recommendations in addition 
and as guidance to its direct financial support for specific uranium 
prospecting campaigns. 
At the same  time  action must be taken to increase the level of exploration 
activity itself which has fallen to low levels during the last few years. 
The Commission is proposing 10  HECU  in the 1984 budget to investigate areas 
already  identified as having potential, as a trigger to foster other national 
and private efforts. 

- 12 -
29. The Commission is also considering the possible role for the Community 
in furthering  both  hydrocarbon and uranium exploration in areas outside 
the Community  itself,  and particularly developing countries. This would 
have  the aim of diversifying the Community's  future  supply sources and 
reducing the potential for cartel action by external suppliers. 
More  Balanced Development of Supplies 
30. Action here has to be directed at solid fuels and nuclear as the main 
alternatives to oil in the medium-term; at gas, where particular 
questions  of flexibility  and security arise; and at alternative energy 
resources  as a major contributor to Community supplies in the longer-term. 
31. In the field of solid fuels, the present situation is wasteful and 
incoherent. The penetration by solid fuels has been much weaker than 
expected  in the past, most notably in the industrial sector. Stocks of 
coal  in the coal-producing countries are at record levels (+/- 60m tonnes) 
aggravating the  difficult  financial circumstances of the industry. At 
the same time. Member States are importing 70m tonnes  from  outside the 
Communi  ty. 
32. The  right  Community approach is outlined in the Commission's separate 
Communication  containing Proposals for a Balanced  Policy  for Solid  Fuels 
Essentially,  Community action should be focussed on four main areas : 
(i) improving technology, especially in developing new, more efficient 
and cleaner ways of burning solid fuels; in the conversion of solid 
fuels (gasification and liquefaction) so as to widen the potential 
market in the longer-term; as well as continuing  efforts  to improve 
production technology.  Research  and development in this sector 
is an important  element in the 3rd Energy R&D Programme; and coal 
gasification and liquefaction is  part  of the programme for Community 
demonstration projects; 
1 C0M(83)  309 

- 13 -
(ii) action to deal  with  environmental problems,notably those arising  from 
solid  fuel combustion, which are of a transnational as well as 
national nature. Specific proposals have recently been submitted 
to the Council 
(iii) rationalising the  pattern  of supply and demand  within  the Community 
by action to encourage the commercialisation of stocks and to 
develop  intra-Community trade; 
(iv) increasing the economic security of the Community by measures to 
reduce  the costs of Community production and encourage the development 
of a healthy and more vigorous Community industry. This in itself 
should  help to change attitude's towards the use of coal and other 
solid  fuels. 
33. In the nuclear field, there are large expenditures which can only be 
organised  and mana9ed by the operators themselves. But the Community has 
a role to play in helping to ensure the availability of technology and 
in addressing some' of the major public concerns about this source of 
energy, notably on the safety side and in the field of nuclear waste. 
The Commission believes  that  pi lot.schemes should now be undertaken at 
Community level on storage of radioactive wastes. 
This  is a good example of a  case  where expenditure on projects 
within  particular Member States, not likely to be  justified  by national 
considerations  alone, would provide vital experience and information for 
the long-term needs of other countries and for the Community as a whole. 
In doing so, it  will  help to clear the way for the increased use of 
nuclear  power. 
Similar  considerations apply to  further  efforts  in the field of nuclear  
safety, where Community action is already  important,  covering such areas 
as the safety of proven and advanced reactors  (fast  breeders), health 
protection, R & D on nuclear waste management and storage, and nuclear 
safeguards. 
1 
C0M(83)173. 

- 14 -
A further  element in Community activity should be some pooling of resources 
on projects to investigate the problems associated  with  the decommissioning  
of nuclear plant. The field of decommissioning is of relevance to the whole 
Community and not  just  to Member States  with  nuclear programmes, because 
of its implications for electricity  tariffs. 
34. As far as gas is concerned the role for the Community is to develop a more 
flexible supply system. Greater  flexibility  within  and between Member States 
would provide  both  long-term benefits in reducing the overall cost of 
deliveries  to the consumer and greater protection against disruption. 
Increased  flexibility  requires action to encourage greater integration of the 
delivery systems and stand-by supplies in the  form  of stocks or surplus 
production capacity. 
The importance of such measures has already been demonstrated in the 
discussions  within  the Community about the security of gas supplies 
(these are summarised in the separate Communication on Community Energy 
Strategy 
This  is not at present an area of expenditure in which the Community 
budget is involved, apart  from  assistance to some gas storage  projetts 
in the UK under line 707 of the 1983 budget  (though  the Community's loan 
instruments have of course been heavily involved in financing improvements 
in infrastructure in the energy sector). But it is one where action 
coordinated and assisted at Community level through judicious use of 
budgetary expenditure could bring benefit to the whole of the Community 
while saving costs incurred by Member States in financing  less  effective 
and partial national solutions. The Commission therefore proposes  that 
the pluriannual programme should include measures to promote the greater  
integration of the Community's gas systems. The Commission is also 
considering  the  case  for providing assistance for the creation of st rategi c  
natural gas stocks which could be used for the benefit of several countries, 
through a more flexible and interconnected supply system, but which would 
not be financially justifiable in the  case  of a particular Member State 
looking at national needs alone. Similar considerations may apply to the 
creation of strategic oil stocks. 
1 
Community Energy Strategy : Progress and Guidelines for Future Action 
C0M(83)  305 finaL. 

- 15 -
35. In the field of alternative energy resources the primary Community role is 
in the fields of R, D & D. But assistance to the financing of investment 
in large projects involving the application of new technologies in this 
sector  within  the Community could be considered where there is a risk  that 
development may be held back by the heavy investment costs in early years 
and the fact  that  the economic  return  would be spread over a very long 
period of time. One  case  in point might be tidal energy. 
COSTS  OF THE  PROGRAMME 
36. Taking account of the new activities put forward in the previous section, 
and possible later proposals, it is likely  that  the programme would require 
an expenditure of 1.5 - 2 billion ECU a year at its peak in 1986 or 1987, 
with  the higher figure being more likely. The Commission's proposed Chapter 70 
energy budget for 1984 of 769  MECU,  together  with  the proposed energy research 
budget (excluding fusion) of 177  MECU,  is designed to be a realistic step 
forward for the  first  year of the pluriannual programme. A programme on 
this  scale,  as already pointed out would help to reduce expenditure by 
national governments where the activities concerned could be more efficiently 
carried out at Community  level.  It would also help to achieve a better 
overall balance of receipts from the Community budget. 

- 16 -
FINANCING 
37. The Commission considers  that  the achievement of the Community's energy aims 
requires the introduction of the programme described above. It has examined 
how such  a programme could be financed, taking into account its special 
characteristics  and the difficulties which could arise through recourse to 
the normal budgetary resources. Given the limited duration of the programme 
and other possible demands on own resources an  alternative  - and one which 
specifically  reinforces the Community's energy policy - would be a tax 
on energy consumption. 
The Commission indicated in paragraph 15 of its proposals on  future 
financing  that  it was considering the idea ot introducing  such  a tax into 
the own resources system. Whilst at this stage not wishing to put forward 
formal proposals to this end, the Commission thinks it appropriate to set 
out for consideration the outlines of  such  a tax. 
A TAX ON  ENERGY  CONSUMPTION 
38. The fundamental objectives of the programme outlined above are improvements 
in our use of energy and greater security of energy supply. As the achieve­
ment of these objectives  will  benefit all energy consumers, the commission 
thinks it appropriate  that,  if the programme  were  to be financed by a tax, 
it should be as broadly based as possible, falling on all energy  sources. 
In addition, in order to reinforce the energy policy objectives,  such  a tax 
should  ideally  fall  on all energy consumers (but see the following paragraphs). 
The Commission would also envisage  that  the revenue accruing from an energy 
tax would be hypothecated to the programme, and  that  its  rate  would be a 
function of the expenditures agreed each year by the Budgetary Authority. 
39. Annex 2 attached sets out the estimated value of consumption of the major 
energy sources - about 230 billion ECU per year. Clearly, the overall 
incidence  of a tax yielding revenue of between 1.5 and 2 billion ECU per 
year on this level of consumption would be very low -  wetl  under one per cent. 
C0M(83)270  final. 
J 

- 17 -
The Low incidence of the tax would impose an  important  constraint on the tax 
mechanism.  If collection costs were to be kept in proportion to the modest 
revenue targets, the tax should be kept as simple as possible,  with  the 
minimum of collection points. The  ECSC  levy system, applied to  less  than five 
hundred levy-payers, and which has operated  with  a minimum of  difficulty  and 
cost  for  thirty  years, offers a model of  what  is possible in this direction. 
Such  a model uould imply an energy tax levied on production and on imports. 
40. In the interests of simplicity of application. minor energy 
sources,  such as wood, peat, and solar 
energy would not fall  within  the scope of the tax, and its coverage would be 
confined to oil products used as fuels, hard coal and lignite, gas and 
electricity. Similarly, as electricity is predominantly a secondary energy 
source,  and in order to avoid double taxation, energy sources supplied for 
the generation of electricity would be exempt  from  the tax. It is anti­
cipated  that  exemption for energy sources supplied for electricity generation 
and for oil products used for non-energy purposes (eg, naphtha, lubricants) 
could  be readily accorded at the  point  of production,  without  complicating 
the tax system. 
41. There is, however, a consideration of some importance which seems Likely to 
conflict  with  the objective of a simple tax. The Commission is conscious of 
the possible effects of such a tax on the competitiveness of Community industry, 
particularly in the absence of comparable tax measures amongst our major 
trading partners. The possible adverse effects should not be overstated. In 
certain sectors which are particularly heavy consumers of energy (e.g.  steel, 
non-ferrous metals, chemicals) energy costs may in some  cases  exceed 10 % of 
total  costs ; but for industry as a whole, energy costs tend to fall between 
3 - 5 'A of  total  costs. The impact of a tax of 1 X on (say) 5 % of  total  costs 
is clearly marqinal. It could even be aroued  that,  to the limited extent  that 
such  a tax did make an adverse impact on industrial costs, it would offer a 
i I . . . 
certain incentive to our industry, over time, to use energy relatively more 
efficiently than our competitors. 
42. Nevertheless, the Commission acknowledges a conflict of objectives between, on 
the one hand, incentives to more efficient energy use and, in particular, simple 
and low-cost collection of the tax, and, on the other hand, possible adverse 
effects on the competitiveness of Community industry and on some sectors in particular 

- 18 -
43. AIL these considerations are valid, and the Commission feels  that  it would be 
unwise to discard  from  the outset any one in favour of the others. Were it 
possible  readily to reconcile certain of them - for exemple to establish a 
simple tax whilst exempting industrial use - this would be the Commission's 
preferred solution. 
Unfortunately, examination of the possibilities has not so far established any 
easy  means for exempting industrial consumption of energy. Any system dividing 
consumption  into  industrial and non-industrial categories, if simple, would be 
arbitrary, and if equitable, would almost certainly prove complex and  difficult 
to administer. 
44. As an alternative', the Commission has considered using the Member States' VAT 
systems  as a means of re-paying to VAT tax-payers the energy tax charged to 
them by producers. One drawback to such a system is  that  it would extend 
exemption  from  the energy tax considerably beyond industrial users - to for 
example,'services  and the professions,  with  a consequential increase in the tax 
rate (see Annex 3 attached). This effect could of course be limited by refu­
sing  the  right  to claim energy tax against VAT to such categories of VAT tax­
payers. 
However, such a system would itself be more or  less  arbitrary. In any 
case,  although the VAT machinery is already to hand, its adaptation to 
the refunding of energy tax would entail certain costs,  both  for the 
national tax administrations and for VAT tax-payers. 

- 19 -
Considerable  progress has been made in diversifying the Community's energy 
supplies  and in rationalising energy use. But it would be wrong to suppose 
that  the Community has freed itself from the energy constraint and  that  the 
risk of  further  oil shocks has been averted,  with  all the damage they would 
bring to the pursuit of the community's general economic objectives (growth, 
employment and balance-of-payments). 
The present situation - which is in part at least the result of the 
efforts of the past - gives us a breathing space in which to consolidate 
the gains of the past and to protect ourselves for the future. The 
sensible  way to exploit  that  breathing space is to ensure  that  energy is 
a prime beneficiary of the resources freed by the fall in crude oil prices. 
But an increased  effort  in the energy sector should be encouraged in such 
a way as to optimise its results. 
A greater role for the Community action would bring this about, enabling 
an equitable distribution over time between consumer and producers of 
different energy sources in the Community of the economic  rent  that  has 
been  released by the fall in oil prices. But this will demand inevitably 
greater solidarity than in the past. 
The proposed programme is focussed on areas where the benefits of a transfer 
of action to the Community are the clearest in present circumstances. But 
inherent in it is the notion of a flexible response to inevitably changing 
ci rcumstances. 

- 20 -
The pluriannuaL  programme  has specific  aims justifying  sizeable 
expenditure for a Limited period of time, with the  profile  of 
expenditure  rising ,to a peak and then  falling  away. 
This gives the  programme  characteristics  which have led the  Commission  to 
envisage a  means of financing that  would avoid the  difficulties  that might 
be created by recourse to the normal budgetary resources.  Those  characteristic 
suggest a  means of financing that is  flexible  but assured for the period in 
question,  such as a  special  hypothecated tax based on non-industrial energy 
consumption. 
The Commission  agrees with the European Parliament in its Resolution 
of 18 May on the future  development  of the Community  and its 
financing,  that such a tax should not be regarded as a budgetary 
policy measure.  The Commission  recognises that such a tax  would constitute 
an exception to the budgetary  principles  of the EEC. 
The exemption of  industrial  consumption from a tax of  this kind 
would be possible by recourse to  Member  States VAT systems for 
repayments. But it  would be complicated. The simpler alternative 
of a levy on energy consumption  would mean extending the tax-base 
to industrial  consumption, with possible implications for the 
competitivity  of European industry which need  careful  consideration. 
The concept and  method  of appropriation of such a receipt  would 
therefore  constitute an important innovation in  relation  to the 
budgetary techniques at present in force in the  Community.  The 
Commission  considers that it is important  above all to propose 
the introduction of the pluriannuaL energy  programme.  These  reasons 
lead the Commission  not to present a formal proposal on the modalities 
of financing the  programme  and to continue its  work on the concept 
and mechanics of a tax. The  Commission  will make appropriate 
contacts  to that end. 

National Government's  expenditure  on energy (25 May '83) 
MECU(l) BE DK DE EL FR IR IT LX NE UK EUR-8 
1982 : 
Oil 13,6 I8 77,7 14,4 53,4 n.i ]38,9 )399 ,1 
Natural gas } 1 32,7 56,4 63,2 49,7 J J 2 J 
2650,0 Solid fuels 192,7 2 754,8 934,0 21,0 27,1 718,4 J 
2650,0 
Nuclear 57,6 0,7 732,3 865,5 559,3 35,5 629,8 2880,7 
Electricity, 6,2 69,6 13,1 88,9 
district heating & other 3 1230,3 Conservation 56 ,4 98,0 194,3 17, 9Ö 168,2 1,8 430,1 0,01 25,0 256,5 1230,3 
Renewables 7,1 17,0 208,7 62,0 0,4 19,8 42,5 357,5 
among which: 4 
52,3 4 
30,4 1264,94 # # 4 
579,5 4,04 4 
414,6 4 
60,9 4 
392,5 2799 ,1 
R&D 
Total 323,6 125,75 2070,1 2086,l8 100,8? 1092,56 121,6 1686,1 7606,5 
id. per toe consumed 7,82 7,48 8,46 12,03 12,71 8,65 2,18 8,99 8, 91 
Der caDita 32,8 24,5 33,6 38,6 29,8 19,1 8,6 30,1 29,1 
1983 : · 
Oil 15,9 )0,6 61,0 - - - [1,0 27,9 /294,0 
Natural gas } j 52,2 31,8 113,6 ; J 
(700) J 
2729,4 Solid fuels 192,7 2 (750) 1000 53,6 31,1 J 
(700) J 
2729,4 
Nuclear 43,0 0,5 653,1 950,9 416,4 30,8 617,7 2712,4 
Electricity  & other 12,8 95,8 12,4 166,3 121,0 
Conservation 126,2 54,0 296,1 174,7 1,0 673,8 23,2 166,3 1515,3 
Renewables 10,9 29,0 222,1 0,4 19,7 27,9 310,0 
among which: 
R&D 89,6 
Total 391,5 86 ,15 2130,3 2125.6 8 7 
86,8 1203,86 118,2 1539,8 7682,1 
id. per toe consumed 9,40 5,10 8,70 12,20 10,80 9,50 2,1 8,20 8,90 
Der capita 39,7 16,8 34,5 39,4 25,2 21,0 8,3 27,5 29,4 
(1) national currencies converted at January exchange rates 
Sources: national data,  if not  otherwise stated 
(2) Memorandum  on financial  support  ... the  coal industry  in 1982 (C0M-(82) 817  final] 
(3) Dir. XVII-E:  "National demonstration  schemes 1982 
(4) Statistics  published  by "CREST" 
(5) Without  investment  in exploration  and development  by concessionaires  (1982: 1853 Mecu; 1983: 1739  Mecu) 
(6) Without  "dotazione"  ENEL (1982: 2475 Mecu; 1983: 2154  Mecu) 
(7) Without  investment  in the  electricity  sector (1982: 332 Mecu; 1983: 355  Mecu) 
(8) Without  investment  in the  nuclear sector  (1982: 3285 MecU; 1983: 3426  Mecu) 

ANNEX 2 
ENERGY CONSUMPTION 
(Prices at  1.1.1982) 
(Consumption  data  1981) 
***** 
i . . (*) . 
I | Total value | Value of | Value of | 
I 1 of | household  j industrial  | | 
| Product | consumption  | consumption  | consumption  | B / A C / A | 
j | (ex tax)1 | (ex1 tax)  j (ex tax) | j 
I j bn ECU  (A)  j bn ECU (B) | bn ECU (C) | | 
| 1. GAS 1 40,3 | 18,2 | 16,3 | 45,2 % 40,4 X | 
| 2. ELECTRICITY 1 80,7 | 27,7 | 32,2 | 34,3 X 39,9 X | 
| 3. COAL 1 11,4 I 
I * 3,9 | 6,3 | 34,2 X 55,3 X | 
| 4. OIL I 97,3 | 45,8 I 27,0 | 47,1 X 27,7 % | 
| TOTAL  (1+2+3+4) | 229,7 95,6 I 81,8 | 41,6 X 35,6 X | 
Deliveries into  consumption  for all industrial  and non-industrial  uses. 
Non-energy  uses are also included  except for oil. All deliveries  of fuels for 
transformation  into other fuels are excluded. 

ANNEX 3 
Incidence  of Energy Consumption  Tax 
Tax o <3>" Base Assumed 
tax 
revenue Tax 
y Di11  ion 
Ecu Assumed 
tax 
revenue Incidence 
(1) All consuription  of coal, gas,electricity 
(2) All consuription  of coal, gas,electricity 
(2) 
and oil products 100 230 1,5 bn 0,65 X 
Industrial  consumption  exempt 64 147 1/5 bn 1,02 X 
All VAT tax-payers  exempt 42 96 1/5 bn 1,56 X 
(1) All deliveries  of fuels for transformationinto other  fuels are excluded. 
(2) Oil products used  for non-energy  purposes  are excluded. 
(3) Based  on prices at 1.1.1982  and on  consumption data  for 1981. 
(4) On value exclusive  of national taxes.