pnbsp;EN EN nbsp; EN EUROPEAN COMMISSION Brussels, 10.11.2010 SEC2010 1346 final COMMISSION STAFF WORKING DOCUMENT State of play in the EU energy policy Accompanying document to the COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Energy 2020 A strategy for competitive, sustainable and secure energy {COM2010 639} nbsp;2 nbsp; Recent milestone developments nbsp;The past five years have significantly accelerated the construction of a comprehensive EU energy policy based on mutually complementing pillars of competitiveness, sustainability and security of supply. These developments go back to October 2005 when the European Council, gathered at the Inal Summit in Hampton Court, concerned by the pressing need to address the climate change challenge and to react to oil price increase which approached 70 per barrel, requested the Commission to develop a long term and coherent energy policy. nbsp;The first step in this process was the Commission39;s Green Paper 39;39;A European Strategy for Sustainable, Competitive and Secure Energy39;39;1. nbsp;Next, in October 2006, the Commission adopted a comprehensive Energy Efficiency Action Plan to create a coherent framework of legislation, policies and measures for achieving the 20 energy efficiency objective compared to what was expected to happen under business as usual scenario. nbsp;In January 2007, the Commission issued the first EU Energy Action Plan2which was endorsed by the European Council in March 2007. At present, most of the Action Plan measures have been largely cuted through new legislation and ongoing proposals that will soon be agreed. nbsp;In September 2007, in order to complete the integration of the EU gas and electricity market, the Commission proposed further energy market liberalisation measures, the so called 39;third package39;. This legislation was agreed by the Council and the Parliament in July 20093. nbsp;The Strategic Energy Technology SET Plan4, presented by the Commission in November 2007 and agreed in March 2008, introduced priorities for future energy technologies. nbsp;In January 2008, the Commission proposed the Energy and Climate package with quot;20-20-20 by 2020quot; goals reduction in greenhouse gas emissions to 20 below 1990 levels, 30 in the context of a global agreement on climate; 20 share of renewables in the final energy consumption; reduction in primary energy use to 20 below the baseline projection for 2020, which were subsequently translated into legally-binding frameworks for greenhouse gas emissions and renewable energy5. As part of the Energy and Climate package, the legal framework for CO2capture and storage CCS technology was also created6. In 2008, an action plan to strengthen EU energy security was put forward in the Second Strategic Energy Review7. It emphasized the importance of infrastructure links needed to strengthen energy security and solidarity between Member States, as well as introduced the perspective of low carbon economy to be achieved by 2050, which will necessitate a major shift towards low carbon energy technologies. nbsp;1COM2006 105. 2COM2007 1.3Directive 2009/72/EC, Directive 2009/73/EC, Regulation EC No 714/2009, Regulation EC No 715/2009, Regulation EC No 713/2009. 4COM2007 723. 5Directive on the Promotion of the use of energy from renewable sources 2009/28/EC, Emission Trading Scheme Directive 2009/29/EC and the Effort Sharing Decision 406/2009/EC covering non-ETS sectors 6Directive on the geological storage of carbon dioxide 2009/31/EC. 7COM2008 781. nbsp;3 nbsp; To speed up and secure investments in infrastructure and technology projects in the energy sector, the European Energy Programme for Recovery8was agreed in July 2009 allocating €3.98 billion to finance mature energy infrastructure and technology - CCS and offshore wind - projects during 2010 and 2011. This unprecedented financing stimulus package was added to the various existing energy financing instruments. nbsp;Also in the framework of the European Economic Recovery Plan9, the European Regional Development Fund ERDF Regulation was amended in May 200910, expanding the scope for sustainable energy investments in buildings. Whereas Regional Policy has traditionally financed energy efficiency investments only in public and commercial buildings, it is now possible to use these funds to improve resource efficiency in the residential sector in all Member States. Up to 4 of the national ERDF allocations are now available for energy investments in housing, thus adding a potential EUR 8 billion total throughout the EU. In addition, to encourage greater use of market instruments, another regulatory amendment was approved in June 201011, extending the use of financial engineering instruments to investments in energy efficiency and renewable energy in buildings, including existing housing. Further measures to strengthen EU internal energy supply security have been adopted. A legally binding framework for nuclear safety was agreed in June 2009. Finally, the aim of a resource efficient and low-carbon economy that is efficient in the way it uses all resources and the aim to decouple EU economic growth from resource and energy use, reduce CO2emissions, enhance competitiveness and promote greater energy security are integral parts of the Europe 2020 Strategy for smart, sustainable and inclusive growth12, and notably the Flagship Initiative 39;Resource efficient Europe39;. nbsp;This uation report aims to present in a comprehensive manner main achievements under the above mentioned EU energy policy initiatives, structured around four sectors i energy efficiency and savings; ii internal energy market, including consumers39; rights, and infrastructures39; development; iii actions for a sustainable, secure and competitive energy supply within the EU; and iv external supply security and promotion of sustainable use of energy worldwide. For each of the sector, an overview is given for already achieved results as well as for identified shortcomings which require further action during the Energy 202013period to achieve the 2020 EU binding targets and to prepare transition towards low carbon economy by 2050. 8Regulation EC No 663/2009 of the European Parliament and of the Council establishing a programme to aid economic recovery by granting Community financial assistance to projects in the field of energy. 9COM2008 800 , 26.11.2008. 10REGULATION EC No 397/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 6 May 2009 amending Regulation EC No 1080/2006 on the European Regional Development Fund as regards the eligibility of energy efficiency and renewable energy investments in housing. 11REGULATION EU No 539/2010 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 June 2010 amending Council Regulation EC No 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund as regards simplification of certain requirements and as regards certain provisions relating to financial management. 12COM2010 2020. 13COM2010 639 [39;39;A strategy for competitive, sustainable and secure energy39;39;]. nbsp;4 nbsp; I - Reducing energy demand and promoting energy savings Energy efficiency and savings is the most immediate and cost-effective way of addressing the EU39;s strategic energy and climate policy objectives of fighting climate change, ensuring security of energy supply and establishing competitive and resource efficient economies, while creating jobs and making citizens benefit from lower energy bills and better living conditions. It is widely recognized14that at least 20 of EU39;s primary energy demand or 368 Mtoe can be reduced by 2020 compared to business-as-usual PRIMES scenario of 2007 with cost-effective measures. Though a number of initiatives were undertaken at EU level since the mid-1990s, the European Energy Efficiency Action Plan EEAP15adopted by the Commission in October 2006 created a coherent framework of legislation, policies and measures on energy efficiency and savings with a view to intensify the process of realising the 20 energy efficiency and saving objective. It identified six key areas with the highest potential for energy saving and proposed 85 actions and measures to be taken at EU, national and local level. EU Heads of States and of Governments endorsed, at the Spring 2007 Council, the EEAP and the 20 EU objective16. nbsp;After years of growth, the EU primary energy consumption has stabilized in 2005 and 2006 around 1 825 Mtoe and slightly decreased in 2007 and 200817to reach around 1 800 Mtoe. Although the economic crisis contributed to this decrease in energy consumption in the EU, the recorded stabilisation provides a certain confirmation of the decoupling of energy consumption and economic growth18. In addition, EU-27 energy intensity, measured as the ratio of gross inland energy consumption and the gross domestic product, has kept improving, decreasing from 187.3 in 2003 to 167.4 in 2008 kgoe / EUR 1000 see Annex I EU–27 energy intensity in kgoe/EUR 1000, 2000 – 2008. The latest business-as-usual scenario projections PRIMES 2009 for the first time show a break in the trend of ever increasing energy demand19. However, EU is far from reaching its 20 objective. The projections indicate that with the rates of implementation of the current energy efficiency policies in Member States until December 2009, a bit more than 8.9 primary energy consumption reduction will be achieved in 2020. nbsp;14For example SEC2006 1174 and Fraunhofer et al. 2009. Study for the ESD. 15COM2006 545. 167224/1/07 REV 1. 172008 Eurostat data are the latest official data. 18See SEC2008 2871 and SEC2009 1734, Annual reports of the Market Observatory of the European Commission. 19The scenarios of the quot;Energy trends 2030quot; update 2009 are accessible at the following address http//ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2030_update_2009.pdf nbsp;5 nbsp; 20 energy saving objective vs. expected achievements of some major EEAP energy efficiency policies adopted until 2009 as projected by the energy model PRIMES The above projections do not take fully into account policies in the pipeline, especially the forthcoming Eco-design implementing measures and the recast Energy Perance of Buildings Directive, which could provide further decrease in the consumption. Nevertheless, these projections give a good indication of the probable gap in reaching the EU39;s energy saving objective. Furthermore, while the economic crisis contributed to this decrease in energy consumption, it has also negatively impacted energy efficiency investment decisions at all levels - public, commercial and private. The European EEAP has given a considerable impetus to the adoption of a number of legislative and soft-law tools to capture energy savings potential. To date, progress has been achieved on most measures, with only a very limited number seeing little progress or facing delays see Annex II Main achievements for the six EEAP key areas. Due to the overlapping effects and the early stages of the EEAP39;s implementation it is not possible to make concrete quantitative uation of its39; overall impact. However, individual ex-ante quantitative impact assessments of some already adopted measures are available20and Commission is currently preparing a progress report on the current implementation status of the EEAP. Considering the insufficient uptake of the energy savings potential, it is clear that more actions in this area are needed. In fact, EEAP was conceived as a first step towards reaching the 20 objective and its revision was foreseen for 2009. Despite the measures taken at EU and national levels, the existing cost-effective opportunities for energy savings and the related social, geopolitical and environmental benefits are yet not fully used in all economic sectors. This can be explained by the prevailing market failures, such as asymmetric 20Impact assessment reports http//ec.europa.eu/governance/impact/ia_carried_out/cia_2010_en.htm nbsp;6 nbsp; ination, split incentives, missing or incomplete markets, as well as regulatory failures, including missing norms or poor implementation of the existing ones that in many cases do not allow for the legislation to have the expected impact. Therefore, in addition to full implementation of the current policy framework as set out in the EEAP of 2006, further concerted action is needed to eliminate the barriers in each sector. New action should take into account what has been achieved so far and the needs of particular sectors in order to establish a coherent policy mix, keeping in mind that many studies indicate that best results in energy savings are reached only via a set of parallel policy measures. Priorities should focus on energy perance requirements for products, buildings and services, on strengthening energy efficiency in the utility and transport sectors, on reviewing financing mechanisms and addressing pricing aspects, as well as on changing energy use behaviour. nbsp;7 nbsp; II – Deepening the internal energy market integration, strengthening consumers39; rights and developing infrastructures Integrating the EU internal energy market The competitive, integrated and fluid internal energy market is a strategic instrument in order to secure energy supply, give EU consumers a choice between different companies supplying gas and electricity at reasonable prices, and to make the market accessible for all suppliers, especially the smallest and those investing in renewable s of energy. The integrated internal market is also crucial for the proper functioning of CO2emission trading mechanism. Over the coming two decades, the EU - like other parts of the world - has to address the need for major investments in all types of energy infrastructure which will be crucial to overcome the longstanding fragmentation of EU energy markets21. However, only a properly functioning internal electricity and gas market can send the right price signals to encourage investments. The integration of the EU energy market is set to continue but it may take some time because the planning and building of relevant infrastructure requires long time-horizons. The process of opening the EU energy markets to competition started ten years ago. It has allowed EU citizens and industries to gain many benefits, such as more choice, more competition for better service and improved security of supply. Since July 2004, small-business customers in all EU countries have been free to switch their supplier for gas and electricity. In July 2007 all remaining consumers gained the same freedom see Annex III on market opening for gas and electricity. nbsp;Independent national regulatory authorities have been established in each EU country to ensure that suppliers and network companies operate correctly and actuall/p