Opinion of the ECSC Consultative Committee on the European Commission's Green Paper "Towards a European strategy for the security of energy supply"

(adopted unanimously during the 356th session of 21 June 2001)

(2001/C 220/02)

I. INTRODUCTION

The ECSC Consultative Committee hereby expresses its opinion on the Green Paper approved by the European Commission on 29 November 2000 "Towards a European strategy for the security of energy supply"(1), with reference to:

- its Resolution of 27 June 1996 on the White Paper on "An energy policy for the European Union"(2),

- the Council Resolution of 8 July 1996 on the White Paper on "An energy policy for the European Union"(3),

- the Council Decision of 14 December 1998 adopting a multiannual framework programme for actions in the energy sector (1998-2002) and connected measures(4),

- the Council Conclusions of 14/15 May 2001 on the Green Paper "Towards a European strategy for the security of energy supply"(5),

- its Declaration on the role of coal in the Europe of the 21st century(6) of 29 June 1999 and its Declaration on the role of steel in Europe at the beginning of the 21st century(7) of 5 April 2001,

- its Resolution of 1997(8) as well as its Opinion of 2001(9) on the restructuring of the Community framework for the taxation of energy products,

- its most recent opinion on the ECCP and emissions trading(10), and

- various opinions on the Green Paper "Towards a European strategy for the security of energy supply" issued by coal and steel associations, companies etc. and already forwarded to the Commission or in preparation.

The European Commission's Green Paper on the security of energy supply published 29 November 2000 arose from its awareness that the European Union's energy policy was facing structural weaknesses as regards both the protection of the environment and of the climate and sufficient security of supply. "If no measures are taken", states the Green Paper, "in the next 20 to 30 years 70 % of the Union's energy requirements, as opposed to the current 50 %, will be covered by imported products. This dependence can be witnessed in all sectors of the economy".

The ECSC Consultative Committee welcomes the revival of an energy-policy discussion which aims to achieve greater security of supply in the context of sustainable development in Europe and adherence to the subsidiarity principle reconfirmed by the Nice reform of the Treaty. The Committee expressly endorses the European Commission's endeavours to shift the focus of the multidimensional policy discussions to the diversity of energy sources and the long-term risks for the supply chain.

In the interest of energy consuming economy and the citizens of the European Union, the main energy policy aim must be a secure, diversified and sustainable supply of energy under conditions of fair competition and free market prices.

II. THE COAL AND STEEL INDUSTRY AND THE SUPPLY OF ENERGY IN EUROPE

General remarks

The Union's energy policy aims are security of supply, economic viability and environmental protection. These also correspond to the three dimensions of sustainability - the economic, the social and the ecological - none of which we can afford to ignore in the field of energy, either. For a correspondingly multidimensional approach, a sustainable balance needs to be struck between all three aims, and that balance needs to be maintained.

Consumers must have the right to purchase energy every time at the most economic prices available within a framework that meets environmental objectives. In the long term this can only be ensured by access to diverse and competitive energy supplies from inside and outside EU. Allowing the European energy market to be dominated by suppliers could leave consumers exposed to rising prices in scarcity of resources. The Commission should ensure that consumers are protected by the adaption of a secure, diverse and sustainable energy policy.

These challenges can be met only if energy systems which are as flexible as possible and work efficiently even in crises are developed and utilised consistently. The ECSC Consultative Committee thus supports the European Commission's proposal that all energy resources and options available in the EU should be used to solve Europe's long-term supply problems.

The ECSC Consultative Committee acknowledges the European Commission's endeavours to devise overall policies that will produce a reversal of the present energy-use and transport trends, bearing in mind the rigorous climate protection objectives and increasing import dependence of the European Union. Political intervention and other action to be taken should concentrate more on the demand side.

Potential savings by energy consumers

By dint of enormous investments overall, most industrial concerns have already been able to achieve considerable increases in energy efficiency, even though it is precisely in the energy-intensive branches of industry that there is always a great deal of pressure on costs as a result of market forces. These savings by industrial concerns mean that nowadays only around one-quarter of total final energy consumption can be attributed to the industrial sector.

The European Commission's energy strategy, which is geared to taking due account of environmental aims and security of supply, should therefore in future concentrate on improving the energy efficiency of transport and private households/the tertiary sector, where there is the greatest potential for energy savings and emissions reduction, since private households and the tertiary sector account for 75 % of total final energy consumption and are lagging a good way behind industry when it comes to energy utilisation technology. The agreement by the EU automotive industry to improve the energy consumption of road vehicles is an excellent example of how to achieve this.

Therefore, the ECSC Consultative Committee supports measures for the enhancement of the thermal efficiency in new as well as in existing buildings and for the promotion of greater investments in transport and infrastructure.

As regards energy taxation, the ECSC Consultative Committee would like to re-emphasise the views expressed in its opinion of 5 April 2001, on the proposed Directive on the restructuring of Community guidelines for the taxation of energy products.

Shaped by the market

The market must be the reference frame for European energy policy. The reality of the single energy market means that in all their activities and operations energy supply undertakings must abide by that market's rules.

The ECSC Consultative Committee:

- advocates consistent application of the single market rules and rejects market-distorting regulations,

- calls for liberalisation measures relating to economic activities in the electricity and gas supply chain to be speeded up,

- supports equal opportunities as regards access to the energy markets,

- calls for a general framework of economic, political and social stability which will act as an incentive for investments, including major, long-term ones,

- advocates reducing the risks associated with certain sources of supply by intensifying the international dialogue and drawing up more trade and cooperation agreements with the major supplier countries concerned.

The Commission, national governments and public institutions must restrict their intervention to the minimum required to ensure that the internal energy market is an efficiently working reality and that the necessary security of supply and environmental protection are safeguarded. The European Commission should promote agreements with non-member countries which enable the energy industry to operate in a market system which offers sufficient protection for investment.

Research for the future

Public authorities, including the European Community, often play a decisive role where undertakings involved in Community research are faced with the decision whether or not to take on major financial risks in developing innovative technologies and improving energy-saving ones. Against this backdrop it is important that the European Commission allows sufficient scope in its research framework programmes for supporting research and development into environmentally-friendly innovations in the energy sector.

The coal and steel industry must have an equal right of access to these research funds so as to be able to make its contribution to tackling the wide range of energy policy challenges facing the European Union, which are set out in the Green Paper.

COAL INDUSTRY CONCERNS

The general assertion - too sweeping a statement as it stands - that hard coal production in Europe is uneconomic and uncompetitive and therefore has no chance of survival is a matter of profound concern to the ECSC Consultative Committee. The Green Paper ignores the fact that the use of indigenous coal can both reduce the risks of supply and make a substantial contribution to the protection of the environment and the climate.

The environmental contribution of coal

In order to ensure that coal makes a contribution to the secure and environmentally acceptable supply of energy in Europe, the answer to the ecological challenges must lie in the promotion of modern, even more efficient clean coal producing and using technologies. Their introduction and further penetration should be supported by the Community at all levels.

Modern coal technologies in connection with new regulations on air quality and new emission limit values for large combustion plants and national emission ceilings will lead in the coming years - after considerable and partially enormous progress in the past - to large reductions of SO2, NOx and other pollutants on both existing and new plants.

Along with other modern coal-utilisation technologies, coal gasification would be an environmentally acceptable way of guaranteeing the security of the EU's energy supply. The considerable flexibility of gasification means that coal gasifiers can provide an alternative to conventional gas supplies. The ability to utilise coal gas in clean coal stations or conventional gas power plants will place a cap on gas prices and thus provide a predictable cost to the European economy.

Innovative coal technologies thus represent an enormous and as yet barely explored field for climate protection research. The experts even assume that it will be possible in the medium term for coal-fired stations to sequester CO2 so that in future no more emissions will be released. Captured CO2 is already being used in oil production, to achieve the highest possible output. CO2 recovered from coal-fired plant could thus be used in this sector as well, in order to increase the lifetime of petroleum reserves (in the North Sea, for example). In the USA and Japan, intensive research and development efforts are already under way in this field. Europe must beware of being left behind.

At the same time, it must be emphasised that in the EU the consumption of hydrocarbons and natural gas has led to a corresponding increase of CO2 emissions. By way of contrast, CO2 from coal use have been declining for many years (the reduction rate of CO2 emissions from coal is 26,2 % since 1990) which is absolutely not the case in the rest of the world.

Scope for national action

According to the forecasts in the Green Paper, coal will also continue to be an important energy source in Europe, providing a secure and exceptionally low-priced contribution to energy supply.

It has to be stated that the resource economy is going world-wide through a far-reaching restructuring and concentration process. One can observe an increasing consolidation among coal producers who are operating worldwide, as well as a worldwide growth in the demand for coal (according to the World Energy Council demand will be up 55 % by 2020). At the same time, the European Union is the biggest energy and coal import region in the world.

As the Commission stresses, the abundance of coal (over 200 years' reserves), its geographical and geopolitical diversity of sources (more than for other fossil fuels), general stability of prices, together with safety and ease of transportation, are major advantages in term of security of supply.

The ECSC Consultative Committee supports the European Commission's desire to maintain, as part of the common aim to guarantee the EU's energy supply, a minimum level of domestic hard coal output. This would make an active contribution to diversification, and access could be guaranteed to indigenous coal reserves which, given their size, will continue to be Europe's largest reliable energy reserve.

As a result, indigenous coal reserves will continue to be of strategic importance. Furthermore, the coal industry as a whole is a significant factor in providing employment and a guarantor of economic and social cohesion in the relevant regions. It also plays an important role as the base for a range of technologies which benefit other sectors, too, not least the environment.

To maintain an efficient coal industry in the European Union there needs to be - consistent with maintaining compatibility with the common market - sufficient scope for the Member States to define their respective production and consumption levels. For this purpose, account must be taken of the respective resource situations and national energy policy priorities. In any case these measures may not create further disadvantages and distortions to coal users within the internal energy market.

A sustainable minimum output of domestic coal and accompanying social and regional policy measures for the readaptation process in coalmining areas will need a political framework, in other words, a new specific code for coal aid based on the EC Treaty will have to be devised in the relatively near future, given that the ECSC Treaty expires in 2002. Here, as in other ECSC succession issues, time is short, especially because in the negotiations on the enlargement coal and steel sectors are of particular relevance.

The idea suggested in the European Commission's Green Paper of a national primary energy mechanism for domestic energy sources (especially hard coal and renewable energies) could be a step in the right direction. It could help to strengthen the Community's security of supply on a lasting basis, in a manner consistent with the powers of the Member States and the principle of subsidiarity. However, for that to happen, this measure must be proportionate to the actual needs and must not imply inappropriate burdens for the energy consumers.

A factor to be taken into account in this equation is also the 15 % priority quota for indigenous energy sources already introduced as part of the Directive on the internal market in electricity which should, where appropriate, be extended to cover uses of solid fuels in other markets.

SPECIFIC FEATURES OF THE STEEL INDUSTRY

For energy-intensive sectors such as the steel industry, security of energy supply in the long term, underpinned by a broad-based energy mix, is vitally important. Similarly, it is important for companies that the policy does not concentrate too heavily on security of supply and environmental protection to the point of ignoring economic viability. An energy demand policy which is geared to sustainability must address itself with the same intensity to the efficiency of companies in global competition.

In this context, one should also keep in mind that the issue of security of supply is of increasing importance across the whole range of mineral resources.

Coal as a reducing agent

It is often overlooked in political debate - and unfortunately also in the European Commission's Green Paper - that coal is an energy source that is used in the steel industry primarily as a reducing agent and therefore not only as fuel; it is, above all, a raw material. Other reducing agents can perform this role, but only to a limited extent. Coal, which is crucial to the blast furnace/oxygen steel production process, will remain for the foreseeable future an absolutely crucial energy source and chemical raw material for the steel industry.

One facet of security of supply, from the steel industry's point of view, is that energy sources (e.g. coal, natural gas, oil, electricity) must not only be available in sufficient quantities, but must also be of the necessary quality for the respective production process. This applies in particular to metallurgical coal.

The energy-purchasing patterns of the steel industry will hardly change in the coming years. At present they break down approximately as follows: coal 60 %, electricity 20 %, natural gas 15 % and oil 5 %. The predicted increase in EU electric steel production will not have a substantial influence on the steel industry's dependency on coal.

In order to avoid distortions of competition between the various steel production processes, there is a need for an equal tax exemption of energy sources used both for chemical reduction in blast furnaces as well as for electricity for electric steel production.

A natural interest in energy-saving

The steel industry is an energy-intensive sector of industry which has a major interest in minimising energy consumption, inter alia for reasons of profitability. The issue of how to use energy raw materials economically for steel production is, next to the structural changes and technological revolution in process technology, one of the persistent challenges to improving energy efficiency and achieving the attendant reduction in environmental pollution. Unilateral regulatory or fiscal measures taken by the Member States or by the EU - in the form of energy taxes for instance - are not appropriate. In fact, they are counterproductive, because they deprive steelmakers of the financial resources to develop more potential ways of saving energy in all areas of technical development.

Approaching the limit of energy-saving

By achieving notable increases in efficiency throughout the energy utilisation chain, the steel industry has already made a major contribution to environmental protection and to reducing pressure on the energy consumption side. Over the last 25 years, specific energy consumption has been reduced by about 40 % by optimising production processes and increasing raw material and energy efficiency. In this way, the steel industry has gone a long way towards achieving the minimum level that is currently technically feasible.

III. FINAL CONCLUSIONS

In view of the external risk factors which the EU can do little to control (world market prices, the distribution of raw material reserves, economic developments and investments in producing countries, geopolitical factors, etc.), the best guarantee for the security of supply is to maintain a diversity of energy and supply sources. As the Green Paper suggests, this includes securing/expanding indigenous energy sources (renewable energies in particular but also indigenous coal), diversifying sources of energy and supply, cultivating relations with external supplier countries, strengthening transport networks and a properly functioning internal energy market.

Given present general conditions and forecasts, it is impossible for the Union to reduce its dependence to any substantial degree in quantity terms, let alone achieve self-sufficiency. Wide-ranging diversification is thus all the more important. And yet, under pressure owing to environmental protection concerns, solid fuels and nuclear energy are now beginning to lose ground where electricity production is concerned. In the short- and medium-term, however, reducing the shares of those two energy sources would lead to intolerable economic tensions and pressure on supplies in Europe, as the Green Paper rightly points out. Renewable energies alone certainly cannot solve the supply problems - in particular when distortions of competition and disadvantages are created at the expense of other energy sources. Therefore all the energy sources will be necessary to meet the future demand and to alleviate energy supply tensions.

The ECSC Consultative Committee therefore wishes to emphasise that, from the point of view of security of supply as well as from the point of view of employment and social conditions, no energy source should be ruled out and barred access to the market for the sake of ideological or unilateral environmental concerns in the long term, either. For example, closing down coal-fired and nuclear power stations in the near future would in many cases lead either to serious electricity shortages or to shortfalls being made up by the building of additional gas-fired plant, for example, or electricity imports from third countries. This would have negative effects on gas prices which should not be underestimated and which would drastically increase the dependence of European energy supplies on imports from third countries, with all the risks that that would entail.

In energy terms, a global prospective and balanced approach is necessary, taking into account the demand side but also the supply side measures. Instead of an extreme energy supply solution, it is preferable to have a diversified, medium and long term oriented mix of coal, other fossil fuels, nuclear and renewable sources with the proper technology in relation to central challenges of energy policy, climate change and security of supply.

(1) COM(2000) 769 final.

(2) OJ C 232, 10.8.1996, p. 3.

(3) OJ C 224, 1.8.1996, p. 1.

(4) OJ L 7, 13.1.1999, p. 16.

(5) 2347th meeting of the Council on 14 and 15 May 2001.

(6) Doc. 1675/1/1999.

(7) Doc. 2151/4/2000.

(8) OJ C 356, 22.11.1997, p. 3.

(9) OJ C 170, 14.6.2001.

(10) OJ C 170, 14.6.2001.