WRITTEN QUESTION E-2259/01

by Piia-Noora Kauppi (PPE-DE) to the Commission

(31 July 2001)

Subject: Diversity in the energy sector and security of supply

In its Green Paper on energy supply strategy(1) the Commission considers harmonisation of the Community's energy taxation, in competition terms, to be an essential instrument for preventing distortions in the energy sector. Energy consumption already varies between the Member States both because of the structure of industry and because of everyday energy requirements. The Scandinavian countries, for example, have developed efficient and environmentally friendly energy production thanks to their northerly geographical situation, with a view to achieving diversity in the energy sector and thus security of energy supply. The work which has been done in terms of development is already visible as a significant improvement in the environment, greater efficiency of energy consumption and the continual renewal of the infrastructure of production installations. Excessively high taxation would have a negative effect on the development of industry and energy production and thus also on the environment.

That energy taxation thus has an effect in regulating behaviour can be seen for example in the energy taxation decisions made in Finland in 1997, when tax on domestic biofuel was increased. This very recent information unfortunately does not appear in this Green Paper. As a result of past taxation decisions the use of local fuel dropped by as much as a third from 1997 to 2000. At the same time the use of imported fuel and imported energy increased. This cannot surely be the objective of harmonising fuel taxation. On the contrary, as I understand it the objective of the Green Paper was to increase the EU's self-sufficiency in energy. One threat being conjured up is that the share of imported energy may grow to as much as 70 % by 2030. However, in Finland, for example, imported energy accounts for 72 % of the total, even higher than the EU's own horror scenario. So energy taxation is an important matter, and in harmonising it the Member States must be allowed some freedom of movement.

1. How can the purchase of imported energy within the Community be treated equitably and in such a way that industry in the northern Member States and in locations involving long-distance transport is not forced into an unfavourable position?

2. How can the development and special position of local energy production be secured?

3. How can the northern dimension and security of supply in the Baltic region be coordinated with security of energy supply for the whole EU?

(1) COM(2000) 769.

Answer given by Mme de Palacio on behalf of the Commission

(22 October 2001)

The analysis of energy imports in the Commission's Green Paper on the security of energy supply assesses the situation for the Community as a whole. In fact, almost half of the Member States have a level of import dependence of 70 % or over. However, this is counterbalanced by the use of indigenous reserves, mainly of fossil fuel, in some Member States. Reducing the exposure to risks arising from high levels of energy imports, including from more distant destinations, is one of the themes of the Commission's Green Paper. Among the most promising policy instruments are improved energy efficiency, energy saving and exploitation of indigenous renewable resources.

In terms of pricing, the production, transport and distribution of energy, whether imported or domestic, is a matter of commercial arrangements between privately or publicly owned companies. This means that the price of imported energy is determined by taking into account the costs involved and the specific features of the respective energy market and energy sector. The fiscal regime covering production, import and use of energy is broadly left to the discretionary powers of Member States; except in the case of mineral oil products, where Council Directives 92/81/EEC of 19 October 1992 on the harmonization of the structures of excise duties on mineral oils(1) and 92/82/EEC of 19 October 1992 on the approximation of the rates of excise duties on mineral oils(6) establish a set of rules, including minimum tax rates. Actual gross tax rates in the Scandinavian countries significantly exceed these minimum rates.

As the Commission points out in its Green Paper, taxes on energy products vary from product to product and from Member State to Member State. This situation is not always consistent with the aims of the internal market and often runs counter to the objectives of environmental policy. To address this problem, the Commission in 1997 made a proposal(2) to restructure the Community framework for the taxation of energy products which would increase minimum rates for mineral oil products and widen coverage to include more products, such as electricity, natural gas or coal, thus reducing distortions. This proposal is stalled in the Council.

The development of local energy resources is an important instrument in securing reliable energy supplies and can make a positive impact on the local economy. However, its environmental impact also needs to be considered. It is important that local energy production can develop within a secure environment and economic framework, while being flexible enough to adapt to local circumstances and needs. Member States have set up specific regimes, adapted to national requirements, for the exploration and production of domestic energy sources, in particular renewables. The efficient exploitation of renewable sources plays a significant role in increasing local energy production and in enhancing the energy supply security of more remote areas. The Commission's proposal(3) for a more proactive approach to renewable electricity production adopted last July 2001 should help to contribute to the speedier adoption of renewable energy technologies across the Community. Likewise, the Gas(4) and Electricity(5) directives designed to liberalise the European gas and electricity market with a view to establishing a single energy market aim to prevent discrimination against smaller, local suppliers.

Most of the states in the Baltic region are Member States or intend to join the Union in the foreseeable future. In its report on the progress achieved in the framework of the Action Plan on the Northern Dimension, adopted by the European Council of Feira (19 and 20 June 2000), the Commission underlined the importance of energy for the Northern Dimension. Increasing emphasis will be put on security of supply. Regular meetings and close co-operation between Commission and relevant organisations/institutions representing the Northern Dimension countries ensure that the requirements of security of supply and other relevant topics of the energy sphere are appropriately dealt with and integrated into the overall security of supply policy of the Union.

With regard to security of energy supply, the Commission's Green Paper analyses the energy supply situation for the current 15 Member States as well as for an enlarged Union with 30 Member States, which includes most Baltic region states. It marks the first

stage in establishing a strategic framework for sustainable and secure energy supplies for the whole of an enlarged Union. Security of supply in more remote areas will be an important aspect of such a strategy. The Green Paper confirms the essential importance of the Northern Dimension in regard to the Union's energy supplies and invites all interested partners to contribute to the debate; the outcome of this process will undoubtedly influence future activities in the Northern Dimension energy area.

(1) OJ L 316, 31.10.1992.

(2) OJ C 139, 6.5.1997.

(3) COM(2001) 445 final.

(4) http://europa.eu.int/comm/energy/en/gas_single_market/index_en.html.

(5) http://europa.eu.int/comm/energy/en/elec_single_market/index_en.html.

(6) OJ L 316, 31.10.1992.