Esa Hyvärinen
Posted by: Esa Hyvärinen
3.3.2014

“EU sets targets of 40% carbon cut and 27% share of renewables by 2030”. This is an example of a recent headline referring to the EU target setting for the 2030 energy and climate policy framework. It is definitely a catchy title but at the same time gives rise to many questions. What is meant by the EU? Who actually decides, and what? Division of competence between the Member States of the European Union is probably not the most fascinating topic to the general public, but it is certainly important in energy policy. This is why arguments related to the European constitutional law count and have to be explained.

In the past energy was not a very interesting policy area in the EU. In  practice, each EU Member State decided its own energy mix – in other words, what kind of energy it produced and how. Horizontal EU policies, like environment, internal market and competition, also covered energy. In addition to general political declarations, there was no EU energy policy nor legal basis for it in place. The shift in thinking took place after the gas crisis between Russia and Ukraine at the end of 2005. This event had an impact on the EU as well and made energy, especially energy security, one of the top issues. This was also reflected in the Lisbon Treaty, which came into force at the end of 2009 and included for the first time a specific article for energy.

Shared competence can lead to a jungle of schemes

The EU energy policy aims to promote the functioning of the internal energy market, security of energy supply, energy efficiency, renewable energy and interconnection of energy networks (EU Treaty article 194). Decisions concerning energy taxes, like any other taxes, require unanimity. However, the energy mix remains completely a competence of the Member States, i.e. it is a shared competence within the EU. And this, of course, reflects on all decision making on energy – for better or worse.

Nonetheless, in practice, a great deal of decisions that steer national energy policy are made in Brussels. Let’s take the current Directive on renewable energy sources as an example: based on burden sharing, it obliges the Member States to achieve a determined percentage of renewable energy in their final energy consumption by 2020. Doesn’t that violate the Member States’ right to decide on their energy mix? This dilemma has been overcome by letting the Member States to decide on their subsidy schemes for renewable energy. This is an illustration of shared competence leading to a less-than-optimal outcome at the EU level; someone has counted more than 300 different subsidy schemes for renewable energy in the EU.

Long way to getting the 2030 proposal into an implemented directive

The good news is that the European Commission is trying to get things right with the aim to fully exploit the mandate established by the Lisbon Treaty. In January 2014 the Commission presented its proposal for the EU energy and climate policy targets for 2030. We must bear in mind that the Commission alone does not equal  “the EU”, although that is the usual way of seeing things. A legally binding 40% target for CO2 reduction and the proposed binding EU-level target for renewable energy represent only the Commission’s view on how things should be.

In such a politically important issue, it’s nevertheless up to the European Council, consisting of Member States’  Presidents and Prime Ministers, to decide on the content of the upcoming climate and energy package. This applies to both the nature (binding or non-binding) and the level of ambition of the targets. The European Council can go whichever way it considers the best. Period.

Once the European Council has taken a political stand on the climate and energy policy framework, the ball will be kicked back to the Commission’s half of the pitch. In the EU energy policy, the Commission has a monopoly on legislative initiatives. The Commission then analyses the way forward and, reflecting the political guidance of the European Council,  presents the proposal(s) for legislation. These proposals most probably take the form of a Directive, but the choice is ultimately in the hands of the Commission.

This is when the Council, which is the playground of EU Member States, and the European Parliament (EP), i.e. elected MEPs, come into play. They are hence the co-legislators, who deal with the Commission’s proposal together with the aim to find a compromise on the substance of the directive(s). This makes the Council and the EP jointly responsible for agreeing upon EU legislation.

Is that the end of the story? No, it isn’t, as the EU Directives have to be implemented or transposed as the EU jargon goes. This means adopting national legislation that puts the national law in line with EU law.  As EU law is always superior to the national, even vis-à-vis national constitutions, Governments and national parliaments have rather restricted room to maneuver. Lex superior derogat legi inferiori.

The Commission’s proposal for the 2030 energy and climate package indicates that it has started to take competitiveness and the internal energy market seriously again. We strongly support the Commission in that pursuit and hope that the rest of the process will proceed as quickly and smoothly as possible, as it is the uncertainty with regard to the future framework that is the worst poison hindering energy investments.

Esa

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