The EU’s energy package a step in the right direction

Press release
10 January 2007

The EU has made a strong commitment to combating climate change and developing an internal energy market

Approved by the European Commission on 10 January 2007, the energy package lays out the energy policy of the EU for the near future. The growing dependence on energy im-ported from outside the area has inspired both the Commission and the Member States to jointly look for new solutions. According to Fortum, the package can be considered an im-portant step forward. Nevertheless, it lacks solutions central to the Nordic power market.

Emissions trade is the most important way to prevent climate change

The EU sets the fight against climate change as the primary aim of its energy policy. The EU will strive to minimise any possible adverse effects on competition. At the same time, it wishes to guarantee the security of supply.

The emission target for greenhouse gases is two-fold. The Commission’s primary proposal is that industrialised countries commit to a 30 per cent reduction of their 1990 greenhouse gas emissions level by the year 2020. If global commitment cannot be achieved, the Com-mission proposes that the EU sets a unilateral reduction target of 20 per cent for itself.

"Without commenting on the actual percentages at this stage, this is a sensible approach in a matter which the EU cannot solve by unilateral actions," estimates Esa Hyvärinen, Vice President, Public Affairs at Fortum.

The emissions trade will remain the EU’s primary method of limiting carbon dioxide emis-sions also in the future. Reform of the legislation concerning emissions trade is scheduled to start at the end of this year, at which point it will be possible to rectify defects discov-ered in the system. Among other things, Fortum calls for enhanced openness and transpar-ency in the reporting of emissions. According to Fortum, transferring to a auctioning of emissions allowances is important. At the same time, however, competition from outside the emissions trade area in different sectors must be taken into consideration.

TSO cooperation a prerequisite for the development of the Nordic market

The EU is firmly promoting the creation of an internal electricity market, a project which was initially launched at the end of the 1990s. According to the Commission, a functioning internal market is a prerequisite for the achievement of other targets. In its analysis of mar-ket activities, the Commission has concentrated mainly on Central European countries.

When preparing the package, the principal controversy concerned the unbundling of transmission system operators (TSO), in other words whether electricity producers should be able to exercise authority in TSOs.

Before proposing legislative amendments towards the end of 2007, the Commission will look into two alternative models, unbundling and establishment of independent system op-erators. The latter alternative means that an independent system operator, or ISO, would be responsible for the operation, maintenance and development of main grids, regardless of who owns them. The Commission notes that the ownership of Nordic TSOs is already un-bundled, and they are operated independently, unlike those of many Central European countries.

"In order to promote development in the Nordic countries; here the aim should be to inten-sify the cooperation between national TSOs by creating a common Nordic independent system operator, or even a TSO," Hyvärinen explains.

Green certificate to promote the use of renewable energy sources

The package sets a target for the use of renewable energy sources: 20% by the year 2020. However, it does not take a stand on the harmonisation of support mechanisms, which would be in line with the aims for an internal electricity market. “We are of the opinion that the so-called green certificate system would be the most cost-effective and best adapted to the function of the electricity market. It would support power production based on renewable sources of energy,” says Hyvärinen.

The EU energy package also sets targets for energy efficiency, the development of energy technology, carbon dioxide recovery, increase of transmission connections, as well as the external energy relations of the EU.

Fortum Corporation
Corporate Communications

More information:
Esa Hyvärinen, Vice President, Public Affairs, +358 40 82 62 646