SPEECH/06/711
José Manuel Barroso, President of the European Commission, External energy policy conference, Brussels, 20 November 2006

Opening speech External energy conference

Your Excellencies,

Ladies and gentlemen,

Let me start by welcoming you all to this conference, and to thank my colleagues, and especially Benita Ferrero Waldner, for their work to set up this event. I am very encouraged to see so many ministers and high level experts gathered together in Brussels to discuss the external aspects of energy policy.

I would imagine a rather different audience a few years ago. Experts, yes, but not so many of them – and not so many senior political figures as well. The fact is that energy was, until recently, a forgotten subject in the European agenda. Now it is back at the heart of European integration, where it began with the creation of the Coal and Steel community, and the EURATOM Treaty. And where it belongs.

If we needed a reminder of why energy has returned to the centre of European integration, we have recently received one.

When the lights went out across Europe two weekends ago, our energy interdependence as Europeans was laid bare for all to see. In a flash, greater integration ceased to be some abstract ideal. For millions of our citizens, it became a necessity.

None of us should forget this. Energy policy, just as European integration, is not just about abstract ideas. It is about every day life.

Europe’s energy landscape is changing, and changing fast. It is easy to see why.

Firstly global energy demand is expected to increase by 60% by 2030, in part because of the rising economic dynamism of China and India.

Secondly mature hydrocarbon reserves in Europe are declining. Today the EU imports about 50% of its energy. Without policy reform, this will rise to 70%. The percentage for gas will be even higher.

Thirdly, the price of oil and gas is rising. From an admittedly very low price of $10 a barrel in the winter of 1998-99, oil prices have increased more than six times over the past seven years, and become more volatile.

Fourthly, our climate is changing. According to the Intergovernmental Panel on Climate Change, climate change has already made the world some 0.6°C hotter. In the worst case scenario, temperatures could rise by up to 5.8°C by the end of the century.

So the facts are changing. And we in the European Union must change our policies to fit these facts. In doing so we must recognise the enormous energy presence of the European Union. The European Union is the largest importer and second largest consumer of energy in the world.

The European Union’s combined weight on the world energy market, as in so many other areas, is a great strength. We are already world leaders on key energy technologies, and the policies needed to get them out of laboratories and into markets.

We intend to continue our global leadership in this area. But we will only do so if we look ahead, and act together.

Fortunately, a quiet revolution has been taking place across Europe. A revolution that acknowledges the need for a common, integrated energy policy.

The European Commission has been quick to seize this opportunity. Our energy Green Paper, endorsed by Europe’s leaders at their Spring Summit in March this year, set out the overall approach.

It started from first principles: that the European Union needs an integrated, European Energy Policy that maintains Europe’s competitiveness, safeguards our environmental objectives and ensures our security of supply. By ‘integrated’ I mean a policy that takes account of all aspects of energy, both internal and external. We cannot, we must not separate one from the other. They must be part of one coherent whole.

Now we are starting to put flesh on these bones. We started o the external side, with a joint paper with Javier Solana, whom I am delighted to see here today, endorsed by the EU leaders in June. The Commission followed this up with a paper to the recent informal EU leaders’ meeting in Lahti, at the request of the Finnish Presidency.

I know this conference is here to discuss external aspects of energy policy. It’s an important subject. But if I have one message for you today, it is that the external aspects of energy policy must be seen together with the internal aspects. The two must go hand in hand, not walk in separate directions. And to have a successful external policy, we must have a strong internal policy. That is the clear lesson of 50 years of European integration. There are many examples of this – not least in the area of climate change, where the EU is showing global leadership because it has a strong, coherent internal policy. And what is true of climate change already must now become true for energy policy.

So allow me to set out, briefly, the shape of the package of measures which the Commission will propose in January to turn the aspirations of EU leaders, and EU citizens, into reality.

Our aim is clear. The European Union needs to lead the world in accelerating the shift to a low carbon economy. We need to do that in a way which keeps Europe competitive in the global marketplace. And in a way which increases Europe’s security. At the heart of this must be ambitious but credible targets for further reductions in greenhouse gases beyond 2010. That is what will show our determination to keep leading the fight against climate change. It is what will give private investors the clarity and confidence to make long term decisions. It is what, in the end, will strengthen our energy security.

There are several pillars to our policy.

First, the creation of a true single market in energy. We have one on paper. We don’t have one in practice. That is why Commissioner Kroes has been conducting a full review of the energy sector. That is why the Commission has supported Andris Piebalgs in launching legal proceedings against those member states who have not implemented EU energy law. That is why I can tell you now that we intend to propose new measures on ownership unbundling and on regulatory authority, to free up energy markets to the benefit of energy consumers.

A true single market will not just boost Europe’s competitiveness. It will encourage sustainability, through allowing more renewable energies to compete fairly with traditional sources of energy. And it will increase security and solidarity through ending energy islands within Europe and stimulating diversity. Let me be clear; open markets, not narrow nationalism, are the way to energy security and sustainability.

Second, energy efficiency. Last month, the Commission launched its energy efficiency action plan; including 10 priority actions to help reduce our energy consumption by 20 per cent by 2020. This will strengthen our competitiveness; help consumers, by saving between €200 and €1,000 for an average household; and create a cleaner environment – by sparing the damage caused by pumping an extra 780 million tonnes of carbon dioxide into the atmosphere annually.

Third, we must substantially increase the amount of energy we use from renewable, and low carbon energy sources. These include wind energy, photovoltaic energy, wave energy, biofuels and, for those countries which so wish, nuclear energy. It is for the Member States, not the Commission, to decide on whether they use nuclear energy. But an honest debate on the costs and benefits of nuclear energy, underpinned by a rigorous economic analysis, must not be taboo.

Fourth, the development of new energy technologies. The EU must pursue this objective more actively and in a more coordinated way – particularly technologies which reduce the carbon emissions from hydrocarbons, for example through the capture and storage of carbon dioxide.

So we will propose the basis of a new internal energy policy. And yet, to put it simply, Europe cannot do this on its own. Many of the challenges we face are faced by the whole world, and we have to act together, now. We need an external policy to accompany our internal policy.

Let us take greenhouse gas emissions. The International Energy Agency forecasts that in a ‘business as usual’ scenario, global energy related Carbon Dioxide Emissions will rise by 55% by 2030. At present the EU accounts for around 14% of global greenhouse gas emissions. This will fall to around 8% by 2050 while those of developing countries will expand to over 50%. US emissions are already higher than those of the EU. Soon that will be true for China as well.

The problem which faces us all is called global warming, not just European warming. European action is necessary but not sufficient to solve it.

So I welcome the action which is being taken outside as well as inside Europe.

In his State of the Union address this year, President Bush condemned America’s addiction to oil. He announced a 22% increase in clean energy research, investing in areas like solar and wind technologies, hybrid and electric cars, and biofuels.

China has announced its objective to reduce energy consumption per unit of GDP by 20% by 2010, in particular in the transport, industrial, construction and commercial sectors – a move we very much welcome. India too is developing new policies to improve energy efficiency.

But international action remains patchy, at best. That is why the external dimension of any European energy policy remains crucial, and why today’s event is so important.

Steps have already begun to address this external dimension, and more are planned.

Let me start with the energy efficiency action plan I mentioned earlier. One of its priority actions is: fostering energy efficiency worldwide. In 2007 the European Commission will take the initiative to reach framework agreements with relevant trading partners and international organisations. These will focus on improving energy efficiency in end-use sectors and in energy transformation.

It is also my hope that the many standards and minimum performance requirements the action plan sets will become international benchmarks.

In its review of the EU’s Emissions Trading System, the Commission must consider whether and how to find appropriate ways to link the scheme with other programmes around the world as they develop.

The European Union must also form international partnerships to work on specific projects. For example, we have signed an agreement with China to co-operate on near-zero emissions power generation technology, through carbon dioxide capture and storage.

Coal will continue to be an important energy source for the EU, and it will continue to be important for China, too. So it makes sense that together, we maximise our resources to reduce its negative environmental impact.

We must work more closely with Sub-Saharan Africa. Several African countries have substantial energy resources, and yet their populations have the lowest rate of access to energy services in the world, hampering all aspects of development. Reconciling this, in the framework of the search for energy security, is going to be a challenge for both the EU and Africa. Last week, I met many African leaders here in Brussels, during the European Development days. I was stuck by how many of them referred to energy as one of their main challenges.

Clearly, building an integrated European energy policy touches on many areas: trade, development, R&D, environment and foreign policy to name just a few. That is why so many parts of the Commission will join you over the next two days to share their insights.

But the importance and scale of this challenge demands my personal engagement, too. At last month’s informal meeting of European leaders at Lahti, for example, external aspects of energy was one of the three main subjects we discussed.

I made clear that Europe needs to speak with one voice on energy, and was encouraged to see a real determination among European leaders to make this happen. Chancellor Merkel announced that energy would be a high priority for the incoming German Presidency of the EU.

As a result of this meeting, we agreed to set up a network of experts to help us tackle external energy shocks, and increase our energy diversity by deepening relations with our neighbours.

Lahti also provided an opportunity to meet President Putin, and for me to present the EU’s position on energy to him.

We agreed that Russia needs predictability from Europe, just as Europe needs predictability from Russia. We need to acknowledge, and exploit, this interdependency to our mutual benefit. That requires transparency, the rule of law, reciprocity, non-discrimination and a level playing field in terms of market opening, market access and fair competition.

By turning into practice the principles which Russia agreed at the St Petersburg G8 Summit in July, it will encourage the investment necessary for Russia to fulfil its energy commitments; investment worth 5% of GDP per year for 25 years, according to the International Energy Agency.

Russia is an important partner for the EU in energy. But it is not, and should not be, the EU’s only partner. That is why the EU has started to develop energy agreements with several of our partners.

Last December I signed the first of these, with Ukraine. It provides a comprehensive framework for co-operation in key energy sectors, like nuclear safety, the integration of electricity and gas markets, enhancing the security of energy supplies and the transit of hydrocarbons, and improving environmental standards in the coal sector. We have also since been working with Ukraine on energy efficiency, renewables and climate change.

This month I signed a second such agreement with Azerbaijan, and one with Kazakhstan will follow in two weeks.

With Algeria, which is already a reliable, traditional gas supplier to the EU, we are finalising an Energy Strategic Partnership. This aims at fully integrating Algeria into our internal market and, not least, doubling our gas supplies from this source.

Meanwhile we are expanding the EU energy market beyond our frontiers, through the South East Europe Energy Community which met for the first time last week. I welcome that so many countries, from Turkey to Norway are showing an interest in this Community.

In fact, the external dimension of Europe’s common energy policy is so important that I would like to make clear today my intention to make energy a central issue at every EU Summit with third countries throughout 2007.

Ladies and gentlemen,

Energy was at the start of European integration. For some time, energy was forgotten. Now we have turned full circle. The Messina Declaration of 1955 established as European priority " Putting more abundant energy at a cheaper price at the disposal of the European economies…". Abundant energy at a competitive price is still a European objective. Now, fifty years on, we must add the fight against climate change and the need for greater energy security.

These are European problems. But they are also global problems. Europe has shown leadership. It will continue to do so. But it must work with its partners all over the world – energy producers, energy transit countries, energy consumers. It must do so with the weight of 27 members and 500 million citizens. It must do so with a common purpose, and a common voice. The era of 27 EU mini markets, and mini policies, must end. In its place must come a common approach, internally and externally.

In short, we must give Europe the power to ensure that Europeans get the power they need.

Thank you.