Brussels Energy Brief - November 2007
November 2007
Full Printable Version in PDF Format
(Adobe Acrobat Reader required, available for free download here)
Please note that due to the closure of the Commission and other European institutions over the Christmas period, the next Brussels Energy Brief will be sent on Friday 25 January 2008.
KEY DEVELOPMENTS
Commission Approves Acquisition of IES by MOL
Frank Schoneveld
On 31 October 2007, the European Commission announced that it has decided, under the EC Merger Regulation, to approve the acquisition by MOL Hungarian Oil and Gas Plc (MOL) of sole control of Italiana Energia e Servizi S.p.A. (IES) (COMP/M.4895). MOL is a Hungarian company that is active in the exploration and production of crude oil, natural gas and gas products, the refining and marketing of crude oil products at both retail and wholesale level; the transmission of natural gas; and the production and sales of petrochemical products. Italian company IES is active in the refining of crude oil and subsequent sales of each derivative oil product, retail sales of fuels, sale of bitumen and the provision of catering services along roads. The transaction was examined under the simplified EC merger review procedure.
EU and US Set to Strike Biofuels Deal
Kate DaSilva
The first meeting of the EU-US Transatlantic Economic Council took place in Washington DC on 9 November 2007. The aim of the meeting was for the European Union and the United States to agree upon common standards for trading biofuels with a view to increasing EU-US trade and investment. The Council aims to harmonise standards and reduce obstacles to business cooperation in areas varying from intellectual property rights to accounting and financial markets. The biofuels agreement is principally concerned with opening the European market for jatropha, a shrub found in tropical and subtropical climates, which some producers claim to be one of the world’s most suitable biodiesel crops. Under a 2003 EU Directive, 5.75 per cent of transport fuel, excluding aviation fuel, should come from biofuels by 2010.
Proposal for Harmonised Value Added Tax (VAT) Regime for Energy Products
Elena Kostadinova
The European Commission has adopted a proposal for the amendment of the VAT Directive with regard to, amongst other things, VAT on energy products. The Commission proposes to extend the VAT scheme for natural gas currently applicable to supplies and imports via the distribution system to the supply and import of natural gas by all types of pipeline and vessels transporting natural gas. The same rules would apply to the supply and import of heat or refrigeration via heat and/or refrigeration networks. The proposal also simplifies the procedure whereby EU Member States may apply a reduced VAT rate to the supply of natural gas, electricity and district heating. To be adopted, the proposal must be accepted unanimously by the EU Council.
Commission and Jordan Sign Declaration for Energy Cooperation
Geert Dierickx
In the context of the Energy Security Conference, the European Commission and Jordan have signed a joint declaration on priorities for cooperation in the energy sector between Europe and Jordan. This declaration aims to consolidate Jordan’s policy on sustainable energy development. It also provides for technical assistance to establish a regulatory framework promoting high standards of nuclear safety. The declaration builds on the strong energy cooperation that the European Union is establishing with other partners in Algeria, Egypt and Morocco.
CFI Upholds German Adjustments to Emissions Allowances
Elena Kostadinova
The European Court of First Instance (CFI) has ruled that the German rules on ex-post reduction of emissions allowances granted to installations covered by the EU Emissions Trading Scheme (ETS) are compatible with EU rules. Under the ETS, Germany determined the total amount of allowances and their allocation to the different installations in Germany for the period 2005 to 2007. The German rules required the withdrawal of allowances in a limited number of cases where the amount of the allowances became disproportionate to the actual emissions. According to the Commission, however, Germany had no right to adopt such ex-post adjustments because they would dissuade installations from reducing the volume of their emissions. The CFI analysed the ETS rules and concluded that they do not preclude Germany from applying the particular ex-post adjustments in question and that these adjustments would not prejudice the objectives of the ETS.
Nuclear Energy: Inauguration of the European Nuclear Energy Forum
Bróna Heenan
Initiated by the European Commission, the European Nuclear Energy Forum has had its first meeting in Bratislava. The Forum will now meet twice a year and bring together high level representatives from public authorities, the European Parliament, the EU's Economic and Social Committee, electricity producers, nuclear industry, consumers and finance. The representatives will conduct a broad and open discussion on the opportunities and risks of nuclear energy. While EU Member States decide for themselves whether or not to use nuclear energy, the Forum is expected to contribute to the debate in areas such as research and safety, while offering a platform for an open dialogue.
Switzerland and EU Negotiate Agreement on Electricity
Elena Kostadinova
The European Union has started negotiations with Switzerland on an electricity agreement. Due to its geographical situation and significant expertise in hydroelectric power, Switzerland is considered an important partner for the European Union. The agreement, which aims to integrate Switzerland into the EU’s internal market in electricity, would mainly benefit the neighbouring Member States, including Italy, France and Germany. It would cover organisation of the sector, security of supply, rules applicable to cross-border trade and environmental questions. The agreement would also address issues such as the promotion of renewable energy. Technical discussions are expected to start in January 2008.
EU-Turkmenistan Energy Cooperation
Elena Kostadinova
The EU Commissioner for Energy, Andris Piebalgs, has expressed the European Union’s interest in energy cooperation with Turkmenistan. The European Union’s interest is expressed to be two-fold. First, it aims at increasing its gas supplies from Turkmenistan by, amongst other things, assessing the feasibility of a Trans-Caspian and Trans-Black Sea energy corridor. Second, the European Union is interested in ensuring a safe business environment for EU companies looking to invest in Turkmenistan’s energy sector, in particular offshore gas exploration and renewable energy. An expert level group is now expected to continue discussions on the best ways to formalise the framework for EU-Turkmenistan energy cooperation.
Emissions Trading: Denial of Allegation of Double Counting
Frank Schoneveld
In response to allegations that there has been double counting of carbon emissions allowances under the European Union's Emissions Trading Scheme, the European Commission issued a press release on 23 November 2007 explaining what had actually occurred. The Commission says it "Has verified and can confirm that the number of allowances put out of circulation (retired) in 2005 and 2006 corresponds to the number of verified emissions reported by companies in 2005 and 2006." The Commission explained that companies must surrender, to their respective governments, allowances equivalent to their actual emissions each year. Governments must then, in turn, retire units to the responsible United Nations Agency (the UNFCCC) for the country's overall emissions. It was emphasised by the Commission that this retirement of units can involve not only allowances, but also certified and uncertified emissions reduction units as well as other units. This means that a country is not required to retire the very same allowances that were surrendered by companies, but only an amount equivalent to the allowances surrendered and this surrender of allowances can take a number of forms. As a result of this flexibility, it is possible that in several cases EU Member States allocate allowances several times over in the same year, or take out of circulation allowances that have never been given to companies but were reserved for new entrants. The Commission concludes that this way of accounting for allowances complies with relevant EU legislation.
Mergers: Commission Clears Proposed Acquisition of Saar Ferngas AG by Arcelor Mittal Group
Mélanie Bruneau
The European Commission has cleared the proposed acquisition by Arcelor Luxembourg SA (Arcelor) of Saar Ferngas AG (SFG). Arcelor is a wholly owned subsidiary of the Arcelor Mittal group, the world's largest steel producer and also active in the distribution of various steel products. SFG is a German natural gas supplier and gas transportation network operator. The Commission was of the opinion that the transaction does not, therefore, give rise to any horizontal overlaps or vertical competition concerns. As a result, the Commission’s investigation found that the proposed transaction would not impede effective competition in the European Economic Area, or any substantial part of it.
Establishment of Industrial Ethanol Association
Patricia Armesto
In October 2007, the Industrial Ethanol Association (IEA) was established in Brussels. The IEA comprises the synthetic ethanol producers INEOS, Petro SA Europe and Sasol Solvents Germany and aims to represent the interests of the sector to policy makers and other industry groups in order to promote fair competition and maintain a healthy European ethanol market. Synthetic ethanol is derived from fossil fuels such as coal and gas and is used in the industrial market in high-value products such as pharmaceuticals, cosmetics, paint and ink. The IEA intends to differ from other European Associations representing agricultural ethanol producers, which have attracted criticism from environmental NGOs. IEA Secretary General Emmanuel Desplechin said “There was a need to represent the industrial ethanol sector in areas like trade and customs, where all ethanol is treated the same regardless of origin or use.”
Third Option Mooted on Energy Liberalisation
Chen Dingsheng
The European Commission has given EU Member States two options to complete the liberalisation of the EU gas and electricity sector: (i) ownership unbundling, forcing large energy companies to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production; or (ii) allowing companies to maintain ownership of their transmission assets but assign their management to an Independent System Operator (ISO). The Commission made it clear that ownership unbundling is the preferred option to guarantee non-discriminatory access for smaller firms and conceded that the ISO option was a fallback that could achieve similar results by imposing tougher regulation. There is widespread opinion amongst those Member States whose energy sectors are not yet fully liberalised that the Commission's proposals are not satisfactory because they would interfere with the property rights of large energy companies. For this reason a third option—regulated unbundling—has been suggested, which would involve an independent regulator setting prices for access to energy grids and reviewing investment decisions. However, it is still unclear exactly how regulated unbundling would differ from the Commission's proposed ISO option.
EU Biodiesel Producers Threaten Action Against “Unfair” US Subsidies
Juan Gutiérrez
European biodiesel manufacturers have threatened to file complaints with the European Commission concerning US biodiesel subsidies, which they say are threatening both European industry and the European Union's ambitious target of achieving a 10 per cent share for biofuels in transport fuel by 2020. Imports of biodiesel from the United States have increased since January 2007 and have already reached over 700,000 tonnes, compared to just 90,000 tonnes for the whole of 2006. According to the European Biodiesel Board, this sharp increase is only explainable by “unfair” US support measures and may delay EU efforts to increase the share of biofuels in the transport sector. If the investigation concludes that subsidised biodiesel is being dumped on EU markets, the European Union would be entitled to impose trade sanctions to balance the injury caused to European biofuel companies.
MERGER NOTIFICATIONS
End October – November 2007
M.4892 - INFINEON / SIEMENS / JV (23 October 2007)
M.4908 - STV FUND / SMITH / @BALANCE (12 November 2007)
M.4977 - AGIPFUEL / CAMPETROLI (16 November 2007)
M.4841 - ENEL / EMS (16 November 2007)
MEETINGS
December 2007
Transports, Telecommunications and Energy Council (Energy) (3 December 2007)
