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2003 – ANNUAL ENERGY
AND TRANSPORT REVIEW
December 2004
European Commission
Directorate-General for Energy and Transport
Includes a CD-Rom with globalenergy balances and indicatorsfor the EU’s 25 Member Statesand its main trading partners
pages i-ii 2/05/05 14:02 Page 1
This publication was produced by Global Insight, SA (Paris, France) and IWW (Karlsruhe,Germany) for the Directorate-General for Energy and Transport and represents thoseorganisations’ views on energy and transport facts and figures. These views have notbeen adopted or in any way approved by the Commission and should not be relied uponas a statement of the Commission’s or the Directorate-General’s views.
The European Commission does not guarantee the accuracy of the data included in thispublication, nor does it accept responsibility for any use made thereof.
The analysis made in the publication is based on the most recent and most reliable data,which in general date from the year 2001. To ensure the coherence of this analysis, thesame data base has been kept throughout the publication, although in some cases newstatistics have been made available.
Design and layout by Wardour Communications (London, UK).
The manuscript was completed on 7 December 2004.
A great deal of additional information on the European Union is available on the Internet. It can be accessed through the Europa server (http://europa.eu.int).
Cataloguing data can be found at the end of this publication.
Luxembourg: Office for Official Publications of the European Communities, 2005
ISBN 92-894-7889-6
© European Communities, 2005
Printed in Belgium
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INTRODUCTION.......................................................................................................................................................................................................................18
1. The importance of the energy and transport sectors for the economy..........................................................................................................................19
2. Special characteristics of the energy and transport sectors.............................................................................................................................................20
3. Structure of the industries .........................................................................................................................................................................................................20Energy ...................................................................................................................................................................................................................................................21Transport ..............................................................................................................................................................................................................................................21
EUROPEAN UNION ENERGY AND TRANSPORT DEVELOPMENTS........................................................................................22
1. Policy, market opening and competition................................................................................................................................................................................23Policies..................................................................................................................................................................................................................................................23Changes in the structure and ownership of the two sectors ..............................................................................................................................................30Progress with market opening ......................................................................................................................................................................................................31
2. Completion of European infrastructure..................................................................................................................................................................................33The TEN process.................................................................................................................................................................................................................................34The energy TEN ..................................................................................................................................................................................................................................34The transport TEN .............................................................................................................................................................................................................................37
3. Costs and accessibility of energy and transport ..................................................................................................................................................................43Cost drivers and comparative costs for users...........................................................................................................................................................................44Household expenditure and accessibility...................................................................................................................................................................................494. Links between the economy, transport and energy .............................................................................................................................................................51
EXECUTIVE SUMMARY......................................................................................................................................................................................................6
1. Introduction......................................................................................................................................................................................................................................7
2. Energy.................................................................................................................................................................................................................................................7Main initiatives since 2000..............................................................................................................................................................................................................7Primary energy composition.............................................................................................................................................................................................................8Indigenous production/self-sufficiency ......................................................................................................................................................................................10Prices.....................................................................................................................................................................................................................................................10Quality of service and accessibility .............................................................................................................................................................................................10Market opening..................................................................................................................................................................................................................................11Emissions..............................................................................................................................................................................................................................................11
3. Transport .........................................................................................................................................................................................................................................12Main community initiatives since 2000 ....................................................................................................................................................................................12Freight transport ...............................................................................................................................................................................................................................13Passenger transport..........................................................................................................................................................................................................................15Infrastructure policy.........................................................................................................................................................................................................................16Market opening and competition ................................................................................................................................................................................................16Environmental concerns and safety ............................................................................................................................................................................................17
Contents
3
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Overview ..............................................................................................................................................................................................................................................87CO2 emissions.....................................................................................................................................................................................................................................87Acidifying emissions.........................................................................................................................................................................................................................88Development of local emissions per transport mode.............................................................................................................................................................90
NEW MEMBER STATES’ ENERGY AND TRANSPORT DEVELOPMENTS ...........................................................................94
1. Policy market opening and competition.................................................................................................................................................................................95Policies..................................................................................................................................................................................................................................................95Changes in the structure and ownership of the two industries.........................................................................................................................................97
2. Progress with market opening ..................................................................................................................................................................................................98
3. Completion of European infrastructure..................................................................................................................................................................................99The energy TEN ..................................................................................................................................................................................................................................99The transport TEN ...........................................................................................................................................................................................................................100
4. Costs and accessibility of energy and transport ................................................................................................................................................................102Energy.................................................................................................................................................................................................................................................102Transport............................................................................................................................................................................................................................................104
5. Links between the economy, transport and energy...........................................................................................................................................................105Economic drivers common to the energy and transport sectors .....................................................................................................................................105Energy-specific drivers ..................................................................................................................................................................................................................107Transport-specific drivers .............................................................................................................................................................................................................107Changes in activity levels .............................................................................................................................................................................................................107
Economic drivers common to the energy and transport sectors........................................................................................................................................52Energy-specific drivers ....................................................................................................................................................................................................................53Transport-specific drivers ...............................................................................................................................................................................................................53Changes in activity levels ...............................................................................................................................................................................................................56Energy and transport in the context of the economy ...........................................................................................................................................................61
5. Energy developments...................................................................................................................................................................................................................63Changes in the structure of final energy demand..................................................................................................................................................................63The energy transformation sector................................................................................................................................................................................................64Energy infrastructure .......................................................................................................................................................................................................................68Changes in the structure of gross inland consumption ........................................................................................................................................................70Primary energy production.............................................................................................................................................................................................................72Renewable energy production.......................................................................................................................................................................................................75Import dependency and supply security ....................................................................................................................................................................................78
6. Transport developments..............................................................................................................................................................................................................80Changing activity patterns and their relation to transport .................................................................................................................................................80Transport volume and modal shares............................................................................................................................................................................................81Motorisation .......................................................................................................................................................................................................................................85Safety....................................................................................................................................................................................................................................................86Concluding remarks..........................................................................................................................................................................................................................87
7. Environment...................................................................................................................................................................................................................................87
Contents
4
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Contents6. Energy developments .................................................................................................................................................................................................................110Changes in the structure of final energy demand ................................................................................................................................................................110The energy transformation sector ..............................................................................................................................................................................................111Changes in the structure of gross inland consumption ......................................................................................................................................................112Primary energy production...........................................................................................................................................................................................................114Renewable energy production.....................................................................................................................................................................................................116Energy imports and self-sufficiency..........................................................................................................................................................................................117
7. Transport developments............................................................................................................................................................................................................117Driving forces, political framework ...........................................................................................................................................................................................117Modal shares and transport performance ...............................................................................................................................................................................118
8. Environment and safety ...........................................................................................................................................................................................................120CO2 emissions ..................................................................................................................................................................................................................................120Acidifying emissions ......................................................................................................................................................................................................................121Transportation, including energy use .......................................................................................................................................................................................122Transport safety ..............................................................................................................................................................................................................................123
TRADING PARTNERS' ENERGY AND TRANSPORT DEVELOPMENTS ...............................................................................124
1. Candidate countries and EEA trading partners..................................................................................................................................................................125Common interests, policies and industry structure .............................................................................................................................................................125Energy indicators ............................................................................................................................................................................................................................127
Transport indicators .......................................................................................................................................................................................................................129Environment and safety................................................................................................................................................................................................................131
2. Principal trading partners ........................................................................................................................................................................................................133Common interests, policies and industry structure .............................................................................................................................................................133Energy indicators ............................................................................................................................................................................................................................137Transport indicators .......................................................................................................................................................................................................................138Environment and safety................................................................................................................................................................................................................140
COMPARISON OF MARKET OPENING DEVELOPMENTS IN THE ENERGYAND TRANSPORT SECTORS .....................................................................................................................................................................................142
1. The opening of European energy and transport markets: aims and milestones .......................................................................................................143Historical overview.........................................................................................................................................................................................................................143Implicit expectations and opportunities for market opening ...........................................................................................................................................144Legal milestones of market opening in the energy and transport markets..................................................................................................................144The Acquis Communautaire.........................................................................................................................................................................................................146
2. Regulation policy in energy and transport markets .........................................................................................................................................................147Energy sector ...................................................................................................................................................................................................................................147Transport sector ..............................................................................................................................................................................................................................148
3. The main results from market opening and obstacles to overcome.............................................................................................................................154
Energy ................................................................................................................................................................................................................................................155Transport............................................................................................................................................................................................................................................161Issues to be resolved .....................................................................................................................................................................................................................163
5
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Executive summary
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1. INTRODUCTIONWithin the energy and transport sectors, there are three components
of primary importance for the economic competitiveness of the EU,
and for the social cohesion and welfare of its citizens:
• The level and stability of electricity prices to households,
commerce and industry, coupled with the security of supply
of other fuels (whose prices are largely determined in
international markets);
• A dynamic and competitive transport sector in air, road and short
sea shipping, combined with the continuing improvement of the
rail system for freight and passengers, including high-speed
systems;
• The level of externalities (emissions, accidents, fatalities, and
consequences of the nuclear cycle) and the measures used to
prevent and reduce them.
The two following sections summarise the main developments in the
Energy and Transport sectors in the European Union.
2. ENERGYThe broad guidelines of the EU’s energy policy concerning the
completion of the internal market, energy supply security, the
promotion of sustainability and the promotion of research and
development were laid down by a Green Paper (COM(2000)769)
adopted in 2000. That seminal document has served as the roadmap
underlying subsequent energy policy initiatives.
2.1 Main initiatives since 2000Community initiatives on energy have focussed primarily on three
areas – supply security, market opening and environmental concerns.
Supply security was the main focus of the Green Paper adopted
in November 2000 where the growing dependence upon external
energy sources was recognised and proposals were made for
addressing the issue mainly through demand-side measures. A
Directive on Gas Supply security was adopted in April 2004
which requires Member States to take measures in respect of
strategic reserves.
Further market opening was the subject of two directives adopted
in 2003 (one in electricity and one in gas) which greatly
strengthened non-discriminatory energy network access
provisions, required the establishment of independent regulators
in all Member States, and set the goal of fully open electricity and
gas markets by 2007.
An action plan for energy efficiency was adopted in 2000
and served as an umbrella document outlining a comprehensive
programme of legislative and non-legislative instruments
including building standards and combined heat and
power (CHP).
A Community strategy and action plan promoting the role of
energy from renewable resources was adopted following the
publication in 1997 of a white paper. The action plan has
led to a series of programmes and legislative measures,
including the adoption in 2001 of a directive on the promotion
of electricity generation from renewable resources and a
second directive in 2003 on the promotion of bio fuels.
Three major initiatives were taken with respect to air quality
and climate change. In 2001 the Large Combustion Plant
Directive was adopted in order to further reduce acidifying and
particle emissions. The Commission's commitment to the Kyoto
Protocol was given force through the ratification of the protocol
in 2002 and the adoption of the Emissions Trading Scheme
Directive in October 2003.
In parallel with the above, further progress was made through
the development of Trans European Energy Networks (TEN-E) in
removing bottlenecks in gas and power interconnections,
increasing interconnectivity and developing new routes, serving
the joint objectives of improving supply security and completing
the Single Energy Market.
Table S-1 on page 8 gives an overview of the most recent and
important energy policy initiatives.
EXECUTIVE SUMMARY
7
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EXECUTIVE SUMMARY
8
2.2 Primary energy compositionThe basic characteristic of a country’s energy position is the
structure of its gross inland consumption (GIC). The GIC structure
shapes and is shaped by several factors, including the structure of
the power-generating sector, the structural composition of economic
production, the degree of economic and industrial development, the
endowment of indigenous resources and policy choices, among
others. In fact, it is the combined interaction of these factors, some
of which respond to a simple supply and demand logic, which
ultimately determines fuel choices – from selecting between oil, gas,
wood or coal for heating a home, opting for diesel or electric trains,
to establishing the shares of solid fuels, oil, gas, nuclear and/or
renewables in the power generation sector. The GIC structure will in
turn determine the level of CO2 and other emissions; if abatement
measures are not applied. It will also affect the price (and price
volatility) of energy supplies and will have an effect upon the
country’s reliance on energy imports. Figure S-1 shows that the level
of GIC in the EU and its main trading partners has increased almost
Main initiatives Demand side Renewables Nuclear Supply Opening Otherafter 20001 management energy security market
MAIN FRAMEWORK POLICY DOCUMENT - 2000 Green Paper: Towards a European Strategyfor the Security of Energy Supply
d 2003 Decision adopting a multi annualprogramme for action in the field ofenergy “Intelligent Energy Europe”2004 Decision setting up an executiveagency Intelligent Energy Executive Agency
2003 Decision on Guidelines for TEN-E 2003 Proposal for a new decision onguidelines for TEN-E 2004 Amending regulation on the grantingof community financial aid to TEN2003 Regulation on conditions for the accessto the network for cross border exchanges
2002 Directive on
energy performance
of buildings
2002-2003 Three
directives on the
energy labelling of
air-conditioners and
other household
appliances
2003 Proposal for
a directive on a
framework for the
setting of eco-
design requirements
for energy-using
products
2003 Proposal for a
directive on energy
end use efficiency
and energy services
2004 6th Framework
programme for
R & D
2004 Directive on
the promotion of
cogeneration based
on a useful heat
demand
2004-7 Public
awareness campaign
for energy
sustainability
2001 Directive on
promotion of
electricity produced
from renewable
energy sources
2003 Directive on
restructuring of
energy taxation
2003-06 Intelligent
Energy for Europe
Programme
2004 A Public
Awareness
Campaign for an
Energy Sustainable
Europe
2002 Regulation on
the application of
Euratom safeguards
2004 Directive of
application of Art. 82
of the Euratom
Treaty (“Sellafield
Directive”)
2003 Euratom
Directive on the
control of high
activity sealed
radioactive sources
and orphan sources
2003
Recommendation on
standardised
information on
radioactive airborne
and liquid discharges
from nuclear reactors
and processing
plants
2003 Proposal for
two directives on
management of
radioactive waste
and principles on
the safety of
nuclear installations
2002 Proposal on
the alignment of
measures with
regard to security
of supply for
petroleum products
2003 Proposal on
measures to
safeguard security of
electricity supply and
infrastructure
investment
2004 Directive on
measures to
safeguard security
of gas supply
2003 Directive on
common rules for
the internal gas
market
2003 Directive on
common rules for
the internal
electricity market
2003 Proposal for a
regulation on
conditions for
access to the gas
transmission
networks
2002 Regulation
restructuring state
aids to the coal
industry
1Proposals in italics.
Table S-1: Summary of community energy policies
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EXECUTIVE SUMMARY
9
constantly between 1992 and 2001, a period that, with the
exception of the slump in 1993-1994 experienced equally
uninterrupted economic expansion.
Technological development, environmental concerns and structural
characteristics in the economy's production apparatus affect the
efficiency with which energy is consumed in a country. These
factors are reflected in a country's energy intensity (the ratio of
energy units consumed per unit of economic output), which varies
very widely. Figure S-2 shows two distinct groups of countries.
Above, the modern post-industrialised, service economies of the
EU-25, Japan and the USA which exhibit low and slowly
decreasing intensities; below, the developing, manufacturing-
intensive economies of Russia, but especially China, whose rapid
economic growth has been accompanied by significant advances
in the rationalisation of energy, resulting in a steeply declining
energy intensity (although still far from the levels observed in the
former group of countries).
Oil continues to be the principal energy source in the EU and for
many of its main trading partners. The variation in oil’s share of
total energy consumption seen in Figure S-3 mainly reflects the
differing levels of motorisation and road transport performance,
hence motor fuels consumption, as well as its share within other
sectors such as power generation (c.f. Figure S-4). Coal and natural
gas are the other two main components of the primary energy mix
in most countries, both of which are invariably among the main
energy sources for power generation. Their shares vary most widely
amongst the countries considered as a direct result of the particular
natural resources available. China and the US have high proportions
of solid fuel which helps keep generating costs down but leads to
very high CO2 emission rates. Power generation usually accounts for
a large part of a country's energy consumption, which explains the
correlation observed between the power generation and GIC
structures in most countries.
40
1401992=100
130
120
110
100
90
80
70
60
50
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
World
USA
Russia
Japan
China
EU-25
Figure S-1: Evolution of GIC
Figure S-3: Primary energy mix in the EU and its maintrading partners (2001)
0
20%
100%
40%
60%
80%U
SA
Japa
n
Chin
a
Russ
ia
EU-1
5
New
MS
EU-2
5
Renewables
Nuclear
Natural Gas
Solid Fuels
Oil
Figure S-4: Power generation in the EU and its main tradingpartners (2001)
0
20%
100%
40%
60%
80%
USA
Japa
n
Chin
a
Russ
ia
EU-1
5
New
MS
EU-2
5
Renewables& Other
Nuclear
Hydro
Natural Gas
Oil
Coal
0.00
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
USA
Japan
EU-25
toe/
'000 1
995 E
UR
Figure S-2: GIC energy intensity in the EU and its maintrading partners (2001)
Russia
China
0.00
3.00
2.50
2.00
1.50
1.00
0.50
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
toe/
'000 1
995 E
UR
Source: Eurostat and IEA
T006-017 2/05/05 14:03 Page 9
EXECUTIVE SUMMARY
10
The growing role of renewables in power generation is seen in
Figure S-5, which illustrates that biomass and windpower are the
main sources of growth.
2.3 Indigenous production/ self-sufficiency The next dimension to a region’s energy supply position is its self-
sufficiency, both by fuel and in total. The Commission is aware of
the importance of sourcing for supply security and this was the
focus of the 2000 Green Paper. The levels of supply security are set
out in Figure S-6 illustrating that the EU-15 is slightly more than
50% self-sufficient (marine bunkers excluded), as compared with
70% for the 10 New Member States (mainly due to their solid fuels
production), 73% for the USA, 20% for Japan or 100% for China
(also due to a large solid fuel production industry). Figure S-7
presents the evolution of overall production and net import
positions of the EU-25 and its main trading partners
2.4 PricesThe price and reliability of electricity supplies is the most
important element of a country’s energy supply and the most
critical in respective of international competitiveness, including
competitiveness between Member States within the European
Union. This is because electricity is among the highest proportion
of energy market costs to industry and is also the area where
there is the greatest price range at an international level. Fossil
fuels, which are traded within global markets, have relatively
more uniform prices.
Figure S-8 shows recent developments in industrial electricity prices
for the EU-15 and its main trading partners. Between 1999 and
2003, the EU-15’s electricity prices were higher than the average of
its principal trading partners, coming second only to Japan, whose
lack of indigenous resources and gas importing policy drive high
power prices. The figure also shows some convergence between
prices in the EU-15 and its principal competitor, the USA - although
prices remain lower in the latter country.
Figure S-9 shows the average, maximum and minimum electricity
and gas prices to industrial customers between 1999 and 2001.
Whereas electricity prices to industrial customers have declined
slightly and the spread between Member States has reduced, they
have returned to an upward sloping trend from 2002 onwards
(not shown in the figure). On the contrary, industrial gas prices
have risen –mainly driven by oil price rises– whilst the spread
across Member States has also increased.
2.5 Quality of service and accessibilityAccessibility of electricity supply is virtually 100% in the EU-15
with only buildings in remote areas left unconnected. The
accessibility of gas is lower, partly because it is not economic to lay
low pressure pipelines in more sparsely populated regions of Europe.
0% 0
18%
Total Generation(right axis)
Geothermal
Wind Turbines
Biomass
Hydro
1500
2500
2000
1000
500
16%
14%
12%
10%
8%
6%
4%
2%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
TWh
3000
Natural Gas
Total Production/GIC
Self Sufficiency
Indig
enous
Pro
duct
ion /
GIC
Crude Oil & Feedstocks
Hard Coal & Derivatives
200%
150%
100%
50%
0%
USA
Japa
n
Chin
a
Russ
ia
EU-1
5
New
MS
EU-2
5
2000
1500
5000
500
0
-500
USA
Prod
uct
ion
Prod
uct
ion
Prod
uct
ion
Prod
uct
ion
Prod
uct
ion
Net
Im
port
s
Net
Im
port
s
Net
Im
port
s
Net
Im
port
s
Russia Japan China EU-25
Net
Im
port
s
0.00
0.02
0.06
0.10
0.14
0.16
0.040.04
0.08
0.12
1995
1999
2000
2001
EU-15
USA
Japan
Russia
EU
R/k
Wh
Figure S-5: Evolution of generation from renewable sourcesin the EU-15 (including hydro)
Figure S-7: Production and net imports 1990-2001 (mtoe)
Figure S-8: Electricity prices to industry in the EU-15 andits main trading partners (excluding VAT)
Figure S-6: Self sufficiency by trade block (2001)
T006-017 2/05/05 14:03 Page 10
EXECUTIVE SUMMARY
0.00
0.08
0.10
0.12
0.14
0.16
0.18
0.20
0.06
0.04
0.02
EU
R/k
Wh
Electricity
1999
2000
2001
Weightedaverage
Min
Max
There is systematic information on power cuts, gas and oil
shortages. Storms that cut across Europe in 1997 and 1999 tore
down high-tension cables in a number of countries (notably
France) and in general power supplies were restored within a few
days. Italy was totally blacked out in the summer of 2003 when a
sudden cut in power supplies from Switzerland triggered a
cascade effect that ran right across the country.
2.6 Market openingAlthough the oil sector has been fairly competitive in most
countries, the situation was very different for gas and electricity,
where much of the Community’s supply was undertaken by
monopolists. The first directives on market opening were adopted
in 1996/8 and new directives were adopted in 2003 with
implementation due by July 2004. The aim of the directives is to
allow third party access to the networks and to enable customers
to choose their suppliers. The pace of development has varied
widely across Member States, with the main objectives being
achieved in most of the EU-15. In a recent survey of large energy
buyers, it was found that 75% of electricity buyers and 59% of gas
buyers have switched suppliers with the position by country shown
below. Whilst there is still more work to undertake to reach the
goal of full competition, the level of switching is a clear sign of
the progress being made.
2.7 EmissionsAmbient emissions, mainly carbon dioxide (CO2) and acidifying
compounds (SO2 and NOX), are one of the main externalities arising
from energy use, a large part of which are produced by the power
generation sector. However, only CO2 constitutes a global problem as
it contributes to the greenhouse effect; the problems posed by
emissions of acidifying compounds are more local.
Figure S-10 shows the trends for CO2 emissions in the EU-15 and
how the position currently compares both with the New MS and
the Community’s main trading partners. The figure underlines the
following important points:
• With the exception of Japan, the EU-15’s emission intensity is
lower than in all other regions, especially relative to that of
developing economies such as the New MS, China and Russia.
Reductions over the last decade are the result of the several
community initiatives, which are encouraging electricity
production away from coal and towards other less polluting
energy sources. Reductions have also arisen from the structural
transformation of the EU’s industrial sector.
• Absolute emissions levels in the USA and China have
increased considerably since 1992 but the emissions
intensity (emissions per GDP) is decreasing everywhere,
particularly in developing countries.
The EU is introducing a CO2 Emissions Trading Scheme (ETS) from
January 2005 as a means of meeting the Kyoto obligations in an
economically optimal manner. The aim of the scheme is to assist
in the reduction of emissions within the period 2008-2012 by 8%
in relation to the 1990 levels.
6.0
5.0
4.0
3.0
2.0
1.0 1000
00
3000
5000
6000
20002000
4000
Intensity - 1992
Intensity - 2001
Emissons - 1992 (right axis)
Emissons - 2001 (right axis)
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
mm
tonnes
CO
2
tonnes
CO
2 /
'000 1
995 E
UR
Figure S-10: CO2 emissions and intensity in the EU and itsmain trading partners
Table S-2 : Proportion of respondents switching
power supplier
BE FR DE IT NL UK
Power 40% 45% 85% 83% 67% 86%
Gas 50% 38% 38% 64% 80% 80%
Source: Global Insight Large Buyers' Survey (Oct. 2004)
1999
2000
2001
Weightedaverage
Min
Max
0
2
4
6
8
10
12
14
EU
R/G
J
Gas
Figure S-9: Electricity and gas prices to industrial customers in the EU-15 (at 2001 constant prices, excluding VAT)
11
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EXECUTIVE SUMMARY
12
3. TRANSPORT
In the transport sector, the White Paper on European
transport policy for 2010, adopted in 2001, is the
framework policy document.
3.1 Main community initiatives since 2000Four main areas of Community’s initiatives on transport can be
identified: transport services, infrastructure, market opening and
environmental and safety issues. The White Paper on European
transport policy for 2010 addresses all these dimensions.
• The goal to place users at the heart of transport policy, as
defined in the White Paper, aims at a higher quality of transport
services, increasing safety standards and a clear definition of
users’ rights. Safety programmes for all modes and a
straightforward regulation of air and rail passengers’ rights
underline this intention. Transport services will be further
enhanced by the Galileo radio-navigation system.
• The alleviation of transport bottlenecks and the continuous
upgrading of the TEN-T network are necessary conditions for
increasing the quality of transport services. The development of
the high-speed rail network is a good example of this. Travel
time reductions combined with increasing frequencies and
punctuality have clearly improved the quality for passengers, all
while being an environmentally friendly transport mode.
Infrastructure development has recently been influenced by the
revision of guidelines for the development of the trans-
European networks in April 2004. Directives and regulations on
interoperability, as set out in the three adopted railway
packages, as well as the establishment of the Marco-Polo
Research Programme on intermodal transport constitute
additional efforts to shift the balance between modes.
• The railway packages can also be seen as the starting point of
market opening in the rail sector. After the successful opening
of the markets for air and road transport, and the market
opening in maritime transport being almost complete, the
railway packages mark a most promising step towards a highly
competitive transport market across all modes.
• Table S-3 below provides an overview of the most recent and
important transport policy initiatives.
Infrastructuredevelopment,intermodality
2000: Proposal for a regulation on action by Member States concerning publicservice requirements and the award of public service contracts in passengertransport by rail, road and inland waterway
2004: Directive2004/52/EC on thewidespread introductionand interoperability ofelectronic road tollsystems in thecommunity
2003: Proposal for adirective amendingdirective 1999/62/EC onthe charging of heavygoods vehicles for the useof certain infrastructures[COM(2003)448]
2004: Decision No 884/2004/EC amending Decision No 1692/96/EC on community guidelines for the development of thetTrans-European transport network
2003: Regulation (EC) No 1382/2003 on the granting of community financialassistance to improve the environmental performance of the freight transportsystem (Marco Polo programme)
2001: Directive2001/12/EC amendingdirective 91/440/EEC onthe development of thecommunity’s railways
2001: Directive 2001/13/EC amending councildirective 95/18/EC on the licensing of railwayundertakings
2004: Directive 2004/50/EC amending council directive 96/48/EC on the interoperability of the trans-European high-speed rail system and directive 2001/16/EC on the interoperability of the trans-Europeanconventional rail system
2001: Directive 2001/14/EC in respect of theallocation of railway infrastructure capacity and thelevying of charges for the use of railwayinfrastructure
2004: Directive 2004/51/EC amending councildirective 91/440/EEC on the development of thecommunity’s railways
2004: Regulation (EC) No 793/2004 amendingcouncil regulation (EEC) No 95/93 on common rulesfor the allocation of slots at community airports
2004: Regulation (EC) No 785/2004 on insurancerequirements for air carriers and aircraft operators
2004: Regulation (EC)No 552/2004 on theinteroperability of theEuropean air trafficmanagement network
2002: Council regulation(EC) No 876/2002setting up the Galileojoint undertaking
2004: Regulation (EC) No 549/2004 laying downthe framework for the creation of the singleEuropean sky
2001: Directive 2001/106/EC amending Council Directive 95/21/EC concerningthe enforcement, in respect of shipping using community ports.
2002: Regulation (EC) No 894/2002 amending council regulation (EEC) No 95/93 on common rules forthe allocation of slots at community airports
Table S-3: Summary of community transport policy to date
Market access and Road transport Rail transport Maritime transport Air transport Galileo
infrastructure and inland waterways
charging
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EXECUTIVE SUMMARY
13
3.2 Freight transportFreight transport activity in the EU-15 between 1990 and 2001 was
characterised by two main trends: an increasing activity level, which
grew by 30% over the period accompanied by transport intensities
(tonne-kilometres (tkm)/economic output) that remained relatively
constant. Indeed, the nearly uninterrupted GDP growth that took
place between 1993 and 2001 was also characterised by profound
structural change within the EU-15’s economies, which became
increasingly service-oriented. However, the reduction in the demand
for transport services that could have been expected from less
material-intensive production processes, was offset by higher
absolute output levels and growing trade volumes, along with the
reorganisation of production processes in modern industries. In
particular, new production, inventory and logistics management
schemes such as ‘day-by-day deliveries’ and ‘just-in-time production’
require a flexible supply of transport services which is often
accompanied by an increasing number of journeys and a decreasing
size of the transported units. Road carriers’ response to the modified
Social conditions
Directive 91/671/EEC onthe approximation of thelaws of the Member Statesrelating to compulsory useof safety belts in vehiclesof less than 3,5 tonnes(April 2003)
2004: Directive 2004/54/EC on minimum safetyrequirements for tunnels in the trans-European road network
2002: Directive2002/15/EC on theworking time for mobileroad transport activities
2001: Proposal for a regulation on the harmonisation of certain sociallegislation relating to road transport
2004: Proposal for aregulation oninternational railpassengers’ rights andobligations[COM(2004)142]
2004: Regulation (EC) No881/2004 establishing aEuropean railway agency
2004: Directive2004/49/EC on safety onthe community's railwaysand amending councildirective 95/18/EC on thelicensing of railwayundertakings anddirective 2001/14/EC ofFebruary 2001 in respectof safety certification
2002: Directive2002/59/EC establishinga community vesseltraffic monitoring andinformation system andrepealing councildirective 93/75/EEC
2002: Regulation (EC) No 1592/2002 on commonrules in the field of civil aviation and establishing aEuropean Aviation Safety Agency
2002: Directive2002/84/EC amendingthe directives onmaritime safety and theprevention of pollutionfrom ships
2002: Regulation (EC) No1406/2002 establishing aEuropean MaritimeSafety Agency
2004: Regulation (EC) No 550/2004 on theprovision of air navigation services in the singleEuropean sky
2004: Regulation (EC) No 551/2004 on theorganisation and use of the airspace in the singleEuropean sky
2003: Directive2003/24/EC amendingcouncil directive98/18/EC on safety rulesand standards forpassenger ships
2001: Directive2001/106/EC amendingcouncil directive95/21/EC concerning theenforcement, in respectof shipboard living andworking conditions
2003: Regulation (EC) No 1726/2003 amending Regulation (EC) No 417/2002on the accelerated phasing-in of double-hull or equivalent single-hull oiltankers
2004: Directive 2004/36/EC on the safety of third-country aircraft using community airports
2004: Regulation (EC) No 849/2004 amendingregulation (EC) No 2320/2002 establishing commonrules in the field of civil aviation security
2004: Regulation (EC) No 261/2004 establishingcommon rules on compensation and assistance topassengers in the event of denied boarding and ofcancellation or long delay of flights, and repealingRegulation (EEC) No 295/91
2001: Directive2001/106/EC amendingcouncil directive95/21/EC concerning theenforcement, in respectof internationalstandards for ship safetyand pollution prevention.
2002: Directive2002/30/EC on theestablishment of rules andprocedures with regard tothe introduction of noise-related operatingrestrictions at communityairports
2003: Proposal for acouncil regulation on theestablishment of structuresfor the management of theEuropean satelliteradionavigationprogramme[COM(2003)471]
Table S-3: Summary of community transport policy (continued)
Traffic control, Road transport Rail transport Maritime transport Air transport Galileo
traffic monitoring, and inland waterways
safety and
environment
T006-017 2/05/05 14:03 Page 13
EXECUTIVE SUMMARY
14
demand for these services resulted in renewal of the vehicle fleet
with a clear tendency towards Light Goods Vehicles (LGV).
The demand for highly flexible transport services favoured road
transport and steadily increased its competitiveness over rail
transportation in the last decades. Consequently, rail transport
services continuously lost market shares in the 80s and early 90s.
In fact, rail did not only lose market shares to road transportation
but also to inland waterways, where activity increased by
approximately 20% between 1990 and 2001. More recently,
European and national transport policies have aimed at
rebalancing the modes and have made significant efforts to
revitalise the rail market. As a result, the performance of rail
freight (measured in tkm) increased by 3% in 2001 compared to
1990, although these policy efforts have not yet allowed rail and
inland navigation to recover the level of market share they
exhibited in the 1980s.
Between 1990 and 2001, the trend in the New MS’ road haulage
sector was similar to that observed in the EU-15. In the railway
sector, activity dropped significantly more than in the EU-15,
although its modal share in the New MS is still higher than for its
EU-15 counterparts. That modal balance can only be maintained
through significant efforts in transport policy. Inland waterway is
of minor importance for the New MS, exhibiting declining market
shares over the period considered.
With the exception of Japan, where long-distance freight transport
is mainly performed by short-sea shipping, rail transport is the
predominant mode of freight transport among the EU’s main
trading partners; the most efficient system is in place in the USA.
Apart from the EU, inland waterways have significant shares in
freight transport mainly in the USA (Great Lakes) and, to a lesser
extent, in Russia. With long transport distances from production
to consumer centres, considerable amounts of oil transport by
pipeline takes place in Russia and in the USA.
Figure S-11 and Figure S-12 show the development of freight
transport performances for inland transport modes for the EU and
its main trading partners.
1990
1996
1998
2001
0
400
1000
1800
200
600
800800
1400
1600
1200
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n t
km
Road
1990
1996
1998
2001
0
1000
2500
3000
500
1500
20002000
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n t
km
Rail
1990
1995
1998
2001
0
200
800
1000
300
100
400
500
900
600
700
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n t
km
Oil transport in Pipelines*
1990
1995
1998
2001
0
100
400
500
600
200
300300
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n t
km
Inland Waterway*
Figure S-11: Freight transport performance for road and rail in the EU and its main trading partners
Figure S-12: Freight transport performance for inland waterways and pipelines in the EU and its main trading partners
Source: Eurostat
* No data avalible for China and Russia
T006-017 2/05/05 14:03 Page 14
EXECUTIVE SUMMARY
15
Figure S-13 shows the relative shares of the different transport
modes for inland transport for the EU and its main trading partners.
In contrast to the EU-15, the USA shows significantly higher rail
shares. Rail activity in the USA even exceeds that for road, which is,
amongst others, due to long transport distances, nearly unrestricted
lengths of train formations and the non-existence of border
crossing procedures. The pressing need for revitalisation of the
European railways for freight transport is evident from a
comparison of the modal splits.
In addition to inland transport modes, maritime transport is the
second key element of a region’s transport system. In 2000, intra-EU
sea transport accounted for more than 1.2 billion tkm, more than
40% of the overall freight performance and roughly the same as
road freight performance. If external trade is included, the share of
EU sea transport performance rises to more than 80%.
3.3 Passenger transportEU-15 passenger transport grew by 18% between 1991 and 2001,
roughly half the increase in freight transport. The growth by modes
was however differently distributed. Although passenger rail
transport performance exhibited a significantly higher growth (11%)
relative to the freight sector, it lost market share to road
(passenger-kilometres (pkm) by car increased by 17%) and air
transportation. Indeed, the air market was the most dynamic, with
a growth of 72% between 1991 and 2001. This trend was
somewhat affected by the 9/11 terrorist attacks, which imposed
incremental costs on airlines in the form of security measures and
forced them to increase their competitiveness relative to road and
rail in a context of reduced demand.
Increasing road shares in most EU-15 countries have usually been
driven by increasing levels of motorisation (the number of cars per
inhabitant), which was in turn a consequence of the economic
expansion of the second half of the 1990s. More recently, this
process has decelerated in most Member States as motorisation
levels begin to show first signs of saturation. Interestingly enough,
motorisation in some countries with low motorisation levels is
stagnating (e.g. Denmark) while it continues to rise in other
countries which show higher motorisation levels (e.g. Italy).
Structural reasons, such as fuel prices, disposable incomes, the
availability and quality of public transport and the spatial
organisation of urban centres are among the drivers of motorisation,
but other factors such as cultural characteristics and behavioural
patterns, also explain these trends. In most New MS and Candidate
Countries, the growth of motorisation significantly exceeds the
growth of real incomes.
Data availability on individual transport activity has reached a high
level for all EU-15 countries but shows serious gaps for the New MS
and some of the trading partners. Nevertheless, there is a clear global
trend towards individual road transport and air transportation.
Oil Pipeline
Inland Waterways
Rail
Road
0
20%
10%
80%
70%
100%
90%
40%
30%
60%60%
50%
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
Figure S-13: Freight modal shares (2000)
1993
1996
1998
2001
0
2000
6000
7000
1000
3000
5000
40004000
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n p
km
Private Cars *
1994
1998
2001
0
200
600
700
100
300
500
400400
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n p
km
Bus
Figure S-14: Passenger transport performance in the EU and its main trading partners
Source: Eurostat
* No data avalible for China, Russia and the New MS
T006-017 2/05/05 14:03 Page 15
EXECUTIVE SUMMARY
16
Figure S-14: Passenger transport performance in the EU and its main trading partners
1990
1995
1998
2001
0
500
200
100
300
400
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n p
km
Rail
1996
1998
2001
0
300
800
900
200
100
400
700
500500
600600
USA
Japa
n
Chin
a
Russ
ia
New
MS
EU-1
5
billio
n p
km
Air
Figure S-14 compares these developments for the different
transport modes in the EU and its main trading partners.
Passenger rail transportation is high in Japan, a consequence of
its excellent high-speed rail system. On the contrary it is
remarkably low in the USA, where only some corridors (e.g.
North-East) have important transport performances. There,
limited rail passenger transport shares are compensated by a
very high share in domestic air transport, where activity is even
higher than in the the enlarged EU. Due to its large population
and low motorisation, China shows the highest activity for bus
and rail transport. The use of private cars, which is still at a low
level, is expected to increase rapidly.
3.4 Infrastructure policyTransport infrastructure is among an economy’s most important
public goods. Higher network quality ensures a smooth
functioning of the transport system, which in turn contributes
to citizens’ welfare. Infrastructure policy is therefore a major
component of transport policy. European infrastructure policy is
mainly determined by the guidelines for the development of the
Trans-European Transport Networks (TEN-T). Due to the large
capital costs of infrastructure developments, focus must be
given to priority projects. The original “Essen List” of 14 projects
established in 1994, was extended to 30 priority projects
(including Galileo) in 2004. Projects concern the infrastructure
of all modes of transport (including intermodal links) but have a
particular focus on railway links. Nearly all priority projects are
corridors characterised by a high level of internationality. The
corridor concept has proved to be a most efficient instrument to
foster trans-border interconnectivity between countries.
Besides the development of the TEN-T, European transport policy
focuses on a more rational use of infrastructure capacity
through the implementation of tolling schemes. According to
the White Paper on European transport policy for 2010,
imbalances in the transport system partly derive from the fact
that transport modes do not fully bear for the costs they incur.
Whereas infrastructure charging for the rail sector was included
in the first rail package (Directives 2001/12/EC to 2001/14/EC),
infrastructure charging for motorways was laid down by
Directive 1999/62/EC and is presently up for revision. The
Commission has adopted four main principles of road charging:
first, tolls should reflect the costs of constructing, operating,
maintaining and developing the network and they should further
account for the costs of accidents. Second, tolls should reflect
the distance travelled and may vary by geographical locations,
infrastructure types and speed, vehicle characteristics and
(potential) congestion level. Third, charging should target all
users over 3.5 tonnes and the main itineraries, which are defined
by the TEN-T. Finally, revenues from fees should be reinvested
into the transport sector, such that a balanced development of
transport networks can be promoted.
3.5 Market opening and competition The transport system plays a central role in the larger
community objective of establishing a single market that
ensures the free movement of people, goods, services and
capital. Thus, the opening of the transport markets has become
a central issue on the Commission’s agenda. Market opening is
not only a question of promoting competition in the trade of
goods and services, and is especially true for the transport
market. The opening of transport markets additionally requires
common standards and policies in order to ensure the
interoperability of networks, their interconnection and adequate
capacity. In some transport sub-sectors, market opening is well
advanced, especially in the air and road freight sectors. The air
sector in particular has seen the entrance of low-cost companies
that have quickly captured large market shares, exerting major
pressure on the incumbent airlines. The road freight sector is
also competitive and benefits from high flexibility and low costs.
In contrast, competition is comparatively low in the rail sector.
Nevertheless, market opening of the railway sector has been
pushed forward significantly as a result of the first railway
package adopted in 2001. Inter alia, the package ensures free
access to the trans-European rail infrastructure for freight
services and defines the charging rule. The second railway
package deals with common principles of interoperability and rail
safety and, through this, will open the market for railway service
and technology to international competition. Market opening is
not only an issue for inland transport modes but for maritime
transport as well. Although major steps to open this market have
been made, the access to port services is still widely discussed.
Source: Eurostat
T006-017 2/05/05 14:03 Page 16
EXECUTIVE SUMMARY
17
As a result of the opening of their respective markets, increased
competition has brought about a very dynamic development in
the road freight and air transportation markets. The rail and
maritime transport markets are expected to follow, once the
appropriate Directives have been transposed.
3.6 Environmental concerns and safetyMainly due to increasing road transport activity, CO2 emissions
from the transport sector grew by almost 30% between 1991
and 2001. With emissions from other sectors being stable or
beginning to recede, the transport sector increased its already
high share of aggregate CO2 emissions to 28,7% in the year
2003. The abatement of emissions from transport is therefore
bound to play an important role, if the reduction target of 8%
by 2008-2012 relative to 1990 defined by the Kyoto Protocol is
to be achieved. In contrast to the increase in the emissions of
greenhouse gases, acidifying emissions from transport clearly
decreased in the same period, largely due to technological (e.g.
the requirement of catalytic converters in cars and modifications
in the composition of petrol). These reductions in NOx and SO2
emissions have mostly concerned passenger cars however, and
their development is less favourable for Heavy Goods Vehicles
(HGV) and for maritime transport. For the latter, the production
of nitrogen oxides even increased between 1991 and 2001. For
HGV, the implementation of new legislation including the EURO
IV and EURO V norms will lead to a continuing decrease of
acidifying emissions from transport sources in the future years.
Safety is another externality of major concern in the transport
sector. The relatively high number of observed vessel casualties
during the past years, combined with increasing acidifying
emissions from that sector led maritime safety and emissions to
the top of national, European and international agendas. In
order to define clear standards and strategies to counter these
problems, the Commission developed diverse packages and
measures in this area (e.g. Erika I and II, Directive 1999/32/EC).
Lastly, we record the accidents and fatalities resulting from the
transport sector. With respect to the number of road fatalities,
the situation has improved over the decade, exhibiting a
sustained decline in a context of increasing road transport
performance. This is the result of improved safety standards,
which have continuously been promoted by the Commission,
national governments and technological advances in car
manufacturing. Despite these efforts, the number of road
accidents remains high, meaning there is still scope for road
safety-enhancing measures. The Commission has responded by
introducing a Road Safety Action Programme which sets the
target to halve road fatalities by the year 2010.
Accidents
12751275
1325
1300
1350
12501250
1225
1200
35000
30000
50000
45000
40000
60000
55000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Acc
iden
ts (
1000)
Road
fat
alit
ies
Road fatalities
Figure S-15: EU-15 development of road accidents and fatalities
Source: Eurostat
T006-017 2/05/05 14:03 Page 17
Introduction
T018-021 2/05/05 14:03 Page 18
1. THE IMPORTANCE OF THE ENERGY ANDTRANSPORT SECTORS FOR THE ECONOMY
Transport and energy together represent the arteries of modern
industrial societies. The two sectors have a strong mutual
dependency with all forms of transport relying on energy and
accounting for 30% of its total consumption (and nearly 60%
of total oil consumption). Energy supply in turn relies upon
transport – waterways, rail, road and pipelines. The prominent
role of both sectors for a sustainable development can shortly
be illustrated from the economic, ecological and social points
of view:
• They contribute significantly to economic gross value added
(GVA), with energy representing some 4.3% and transport
slightly more than 6% of GVA including auxiliary transport
services such as travel agencies, transport intermediaries and
warehouse and storage services. Not to mention that the
output of transport and energy-related industries such as
car or gas turbine manufacturing, inter alia, leads to
contributions estimated at an additional 2%, such that the
two sectors approximately account for an estimated 12.3% of
the economic gross value (all percentages refer to the direct
contribution of the sectors). Their smooth functioning not
only ensures a sound development of both sectors but also
generates productivity increases in other sectors, hence
contributing to the Community’s international
competitiveness. Such indirect effects further increase the
two sectors’ high relevance within the economy.
• They strongly influence the path of economic growth which is
widely dependent on the functioning of international trade
and the stimuli stemming from innovative energy
production/processing, mobility and logistics.
• They open equal opportunities for the development of regions
and provide low-income groups access to mobility (in
particular by public transport).
• They are jointly responsible for the largest share of emissions
of greenhouse gases and other pollutants and are thus a
major vector to achieving sustainability.
• Figure 1-1 and Figure 1-2 show the share of GVA accounted
for by the two sectors divided by fuel and sector/mode.
Due to their high economic importance, it is very important to
minimise production costs without sacrificing flexibility or
reliability. In the energy sector, the cost of electricity is
particularly critical as it represents about half of the
economies’ energy bill (see Figure 1-1), where prices vary
widely across the Community and its trading partners. In
contrast, the price of fossil fuels (excluding taxes) is more
uniform because it is determined by global markets.
In the transport side, the ongoing market opening has resulted
in high competition and very low transport service costs and
market prices for the air and road sector. However, current
attempts to internalise external costs into infrastructure
charging schemes might result in somewhat increasing figures.
Apart from costs, flexible and responsive transport of
passengers, goods and energy is particularly important for the
completion of the Single Market. It enables manufacturers at
different stages of the chain to connect and to use advanced
management schemes such as JIT (just in time) to minimise
0
0.5
4.5
4.0
1.5
2.5
3.5
1.0
2.0
3.0
By Sector By Fuel
Industry
Transport
Households
Others
Natural Gas
Motor Fuel
Electricity
2.1%
1.2%
0.9%
2.3%
1.2%
1.0%
% o
f G
VA
Figure 1-2: Value of transport by mode as a % of GVA in
the EU-15 (2000)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
Transport equipment
Auxiliary transportservices
Maritime and air transport services
Inland transport services
1.0%
% o
f G
VA 2.24%
1.30%
0.57%
2.31%
Source: Global Insight
Source: IWW
Figure 1-1: Value of final energy demand by sector and fuel
source as a % of GVA in the EU-15 (2001)
INTRODUCTION
19
T018-021 2/05/05 14:03 Page 19
their inventory costs. Reliable high-speed/low-cost connections
assist international diversification of production and allow
manufacturers to exploit the potentials of international work
sharing. In combination with rapidly developing telematics,
reliable supply chains can be scheduled which overcome the
obstacle of physical distance.
Rapid passenger services also contribute to industrial
productivity and in addition help Community citizens enjoy a
high standard of social life. Tourism is one of the most
important consumer service industries which presupposes a
variety of high-quality and low-cost opportunities for
international travelling.
Three sets of adjustments are needed to give a more complete
picture of the overall economic roles of energy and transport:
• The extensive subsidies granted to the transport sector and to
coal mining;
• The economic costs of under-performance and limitations to
accessibility in the two sectors. Examples for the energy
sector include the consequences of power blackouts and
potential gas shortages; for the transport sector, the results
of congestion on the roads, delays, cancellations or generally
slow speeds in the rail and air sectors, together with limits in
access to transport for citizens and business;
• The externalities arising from their activity – environmental
emissions, noise, visual intrusion, injuries and loss of life as
well as costs and hazards associated with the nuclear cycle.
The levels of accidents, noise, air pollution and greenhouse
gas emissions from these sectors are such, that they are the
focus of environmental and safety policy.
2. SPECIAL CHARACTERISTICS OF THE ENERGYAND TRANSPORT SECTORS
A number of special characteristics of the transport and energy
systems lead to constraints and social considerations that do not
apply to most other industrial sectors.
1. The transport and energy industries are classic network
industries with three specific elements – a fixed network
infrastructure, a control system for the operations and a set of
activities/services of/for firms and consumers. In the absence of
any state regulation, these industries would develop into natural
monopolies. The supply sides of the energy and transport markets
were either managed by public enterprises or by strictly regulated
private industries. For more than two decades (in the European
Community starting with the path-breaking decision of the
European Court of Justice in 1985), worldwide political initiatives
have started to reorganise these industries so as to introduce
market forces and competition.
2. They are very capital intensive, which leads to low flexibility
and long lead-times when inducing changes as well as long
payback periods. Various kinds of network or indirect effects occur
such that a private network provider might not be able to capture
all benefits produced by network provision. This causes complex
problems if private investors are going to commit themselves in a
public/private partnership and carry a part of the project risks.
3. The networks are visually intrusive and can occupy large areas
of land. Operations on them may cause external diseconomies
such as noise, air pollution, accidents and other types of social
risks. This leads to a public resistance to infrastructure
investments such that parallel competitive networks cannot be
built, necessary extensions of existing networks are delayed and
improvements are suppressed. This can then lead to serious
consequences such as a temporary breakdown of energy supply
or heavy congestions on transport networks.
4. Competition and price mechanisms work differently for the
three specific elements of network economies. In respect of
infrastructure and control systems, complex pricing schemes
must be used to ensure an adequate provision is complemented
with sufficient incentives to invest over the long term. Prices
are normally set by public regulation (usually on the basis of
the cost of efficient provision) and show little flexibility. In
respect of activity/services, prices are set for the consumers:
here competition can work as in other markets and prices may
be very flexible and competition-driven. The energy sector has
become very competitive with flexible market-driven prices in
countries where the liberalisation process is very advanced. In
the transport sectors, the situation varies considerably: whereas
in the road and air sectors competition is strong and prices
adjust rapidly to cost or demand changes (e.g. low-cost flight
carriers), in the highly state-influenced railway and public local
transport sectors, there is generally much less competition.
3. STRUCTURE OF THE INDUSTRIES
The special characteristics and importance of the energy and
transport industries have largely been responsible for the
structure and ownership levels which have existed over time.
Fifty years ago, the “essential service” nature of the industries
resulted in a widespread wave of nationalisation so that
national vertically-integrated monopolies were created in many
countries. In others, such monopolies (on a regional basis) were
vested in the private sector. The process of forming strong
national monopolies continued up to the late 80s. In that
decade, the process of unwinding these monopolies began as
well, with the UK taking the lead.
Now, the structure of the industries is undergoing radical
transformation. Many of the changes have been prompted by
Community policies aimed at completing the Single Market and
improving international competitiveness. Following the 1985
White Paper on the Completion of the Internal Market and the
decision of the European Court of Justice on the opening of
transport markets in the same year, considerable changes have
been introduced in the energy and transport sectors, albeit with
a rather uneven intensity across sub-sectors and Member
States. In the energy sector in particular, the market opening
process is going on at highly different speeds across Member
States. In the transport sector, it is predominantly railways and
maritime ports which show cases of different country solutions
that only slowly converge to the European standard of an
open market.
3.1 EnergySince the adoption of the first two directives on electricity
(1996, entered into force 1998) and gas (1998, entered into
force 2000), significant changes have taken place in the
structure of the industry and the level of competition among
fuels. (Two types of competition are possible – inter-fuel and
INTRODUCTION
20
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within-fuel. Inter-fuel is possible in a large number of
applications where there are at least two types of technically
feasible energy sources– e.g. gas, oil and electricity for space
heating, gas or oil for industrial process steam, and all three
fossil fuels together with nuclear power and renewables for
electricity generation.) All EU-15 gas and power markets have
been opened in varying degrees with all the larger (and most
medium-sized) consumers now able to choose their suppliers.
By 2007, the process will be complete, except in two Member
States with dispensations. Some Member States have moved
much more rapidly than required by Community legislation.
Non-discriminate accesses to the network and network
unbundling from trading have been cornerstones of the process.
They have been taken to a logical conclusion in some countries,
where the network is owned by a totally separate company from
the traders –offering open –rather than third party– access and
therefore eliminating any possibility of discrimination.
In parallel, a number of former state-owned energy companies
have been partly or completely privatised and a great deal of
mergers and acquisitions activity has taken place both within
individual Member States, across the EU-15 and, to a lesser
extent, in the New MS.
Whilst many changes have been made following the first
Electricity and Gas Directives, the Commission was forced to
complain when on 1st July 2004 only two out of 15 Member
States had transposed the second Directives into national
legislation. The Community is still far from having a truly Single
Market for either electricity or gas, and at a more local level,
the situation is often inferior. Necessary improvements include
better co-ordination of the TSOs and a more favourable climate
to encourage new power plant investors.
3.2 TransportIn order to analyse the company structure and the development
of competition in the transport sector, three specific elements
of transport systems must be considered: the provision of
infrastructure, the operation control of the transport activities
and the services/activities performed on the networks.
In the air sector, these levels are perfectly separated.
Historically, airports were public enterprises, but in the past 20
years, a number of public-private partnerships have been
established. This responds to the fact that the management of
airports is predominantly a commercial activity and that the
state can limit its role to the provision of land and the
interconnection of the airport to the main transport networks.
The second level, air traffic control, is in most countries
allocated to public enterprises, partially under private law, which
in Europe is co-ordinated by EuroControl. The third level
summarises the service activities of carriers for passenger and
freight, which have been opened in the EU to private
involvement through a staged process of market opening. The
formerly designated carriers have partially formed successful
alliances or even merged. Competition is further pushed by the
strong appearance of several low-cost airlines.
In the road sector, infrastructure provision is, in most cases, a
state-driven activity that is financed by taxes. In special
segments such as motorways, urban freeways, bridges or
tunnels, public-private partnerships have been established and
finance is based on user charging. Due to internationally agreed
standards, the operation of the system is, to the widest extent,
decentralised and is subject to the individual decisions of users.
The public role is limited to the organisation of traffic control
and rescue activities. The type of companies in the road freight
sector changed completely alongside market opening. In
contrast to the dominance of medium-sized companies before
the deregulation process, the current market is characterised by
a more atomised structure dominated by small owner-operator
firms that fight for every consignment through high flexibility,
adjustment to the clients’ needs and low prices.
Different models exist in the rail sector. First, railway companies
can be established as regional monopolies as in Japan or in the
USA. Second, the level of infrastructure/operation control system
can be separated from the service provision as occurs in Sweden
or in the UK. Finally, national companies can be left integrated
with respect to infrastructure, operation control and services
while having to open the network for competitors. This third
regime is the most widespread in the EU. However, it
presupposes a state-controlled market opening, requiring a
permanent monitoring by a regulation authority. This
institutional framework has not yet been established in most
countries, which in turn enables national companies to control
third party access to their network. However, due to the
implementation of the so-called “first railway package” and the
recently approved “second and third railway packages”,
structural changes have started. These included the formation of
new internationally operating companies, such as the Railion
company, which is owned by the Deutsche Bahn AG, and
established daughter companies or close co-operations in
Denmark, the Netherlands, Italy and Switzerland.
The opening of the inland waterway and maritime markets has
almost been completed. Still to be resolved is the issue of the
monopolistic structures of port services. This point is still under
consideration. All the same, maritime cabotage, i.e. an
operating company’s right to provide services between foreign
ports, was implemented with Regulation (EEC) 3577/92.
However, the possibility to operate without restrictions within
the EU has been unable to deter the long-running trend of
drifts towards “flags of convenience” at the cost of the EU
fleet. Unfortunately, the ship-owners’ choice to operate under a
flag of a country outside the EU, offering lower taxes and
requiring lower environmental and safety standards, has come
along with a significant loss of jobs in this sector.
INTRODUCTION
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European Union energy andtransport developments
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1. POLICY, MARKET OPENING AND COMPETITION
• Since January 2000, Energy and Transport DG is the body in charge of Energy and Transport issues at theCommunity level.
• Major energy policy objectives are completion of theinternal market, energy supply security, affordable energyservices with limited environmental impact.
• Major transport policy objectives are to shift the balancebetween modes of transport, to eliminate bottlenecks, toplace users at the heart of transport policy and to managethe globalisation of transport.
• Among its policy objectives, the improvement ofenvironmental quality is perhaps the one that calls for themost coordinated efforts on behalf of the energy andtransport sectors and across Member States.
1.1 PoliciesAt the European level, energy and transport issues fall under the
jurisdiction of the Directorate-General for Energy and Transport
(Energy and Transport DG), in operation since 1 January 2000 after
the merging of the Directorate-General for Transport and the
Directorate-General for Energy. In June 2002, the Euratom Safeguards
Office – the body charged with following the development of nuclear
energy and ensuring the regular supply of nuclear fuels – became
part of the Energy and Transport DG. In addition to developing
Community policies in the energy and transport sectors and handling
State aid dossiers, Energy and Transport DG manages the funding
programmes for trans-European networks (TEN) and technological
development and innovation (EUR 850 million per annum for the
period 2000-2006).
General policies affecting both sectors
The framework within which the energy and transportation sectors
evolve in the EU is formed from a wide range of guidelines and goals
comprising legislation, regulations and policies.
The Community overall goals are to:
1. Complete the internal European market in energy and transport • Accompany the opening up of the market with new forms of
regulation to ensure the creation of a truly European market and
to safeguard the quality and security of services.
• Support the implementation of the Directives in force on theopening of the electricity and gas markets and take steps toensure that the new measures are properly applied, so as tocreate a fully integrated market.
• Continue efforts to gradually open up Europe's rail transport market.
• Take measures to open up port services.
2. Ensure sustainable development of transport and energy • Shift the balance of the transport system by promoting less
polluting modes and energy-efficient technologies, and by
making intermodality a practical reality.
• Place users at the heart of a more efficient transport system
and public transport services; improve user rights.
• Take specific measures to control energy demand and efficiency,
actively promote renewables and step up research efforts,
including nuclear activities.
3. Expand and improve major networks in Europe • Revise the guidelines on trans-European transport and
energy networks, giving priority to funding the elimination
of bottlenecks.
• Link the major trans-European networks to current projects in
the candidate countries.
• Introduce intelligent traffic management systems to ensure that
traffic flows smoothly and safely.
• Develop a new approach to pricing with the aim of charging for
external costs and for the construction and use of major
infrastructure.
4. Space management• Implement the "Single European Sky" package to reform
air traffic management and reduce congestion in the skies over
Europe.
• Successfully complete and commercially launch the European
satellite navigation programme (GALILEO).
5. Improve safety and supply security• Organise safety improvements in Europe by setting up European
agencies in the air, sea and rail transport sectors
in particular.
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• Implement a set of proposed packages to substantially boost
maritime safety.
• Place technology and expertise at the service of safety
throughout Europe.
• Adopt mechanisms for the management of strategic oil and gas
stocks at European level in order to ensure that regular supplies
are available on the Single Market at stable prices.
• Establish a regulatory framework to ensure the safety of
nuclear installations in Europe and the proper management of
radioactive waste. Ensure non-proliferation of nuclear
materials and their peaceful use through a system of
authorising supply contracts and monitoring stocks and
movements of civil nuclear fuels.
6. Accomplish enlargement• Verify and support the effective application of Community
legislation on transport and energy by the New MS and the
candidate countries.
• Put the accent on safety issues, social standards,
the development of infrastructure and the safety of
nuclear installations.
7. Develop international cooperation• Foster dialogue and cooperation with the major international
players in the energy sector, the establishment of a strategic
partnership with Russia being a high priority.
• Take the initiatives required to ensure the interconnection of
transport and energy networks with our Mediterranean
neighbours, and ensure safe maritime transport in this region.
• Negotiate a framework for transatlantic relations in the civil
aviation sector, to safeguard the competitiveness of the
European air transport industry.
• Give the EU the means required to speak with a single voice and
strengthen its position in multilateral bodies such as the
International Maritime Organisation and the International Civil
Aviation Organisation.
• Develop specific cooperation initiatives with developing
countries in the fields of energy and transport.
Energy policies
The Commission’s main energy policies concern energy supply
security, promotion of renewable energy sources, market opening
and competition, energy efficiency, management of the energy
aspects of the enlargement process and climate change, although
not necessarily in that order of priority. Other policy areas include
international cooperation and specific regulations for the
domestic coal and nuclear industries.
The EU supply security strategy: a policy objective that
encompasses every dimension of the energy chain
In 2001, the EU imported just over half of its total energy
requirements. Forecasts indicate that the EU’s energy imports
will represent 70% of its total energy requirements by 2030.
This reality called for a comprehensive energy supply security
strategy, whose guidelines, as well as a set of issues that were
opened for debate, were summarised in the Green Paper,
Towards a European strategy for the security of energy supply,
adopted in 2000 (COM(2000)769). The main conclusions
resulting from that debate were summarised in a
Communication from the Commission to the Council and the
Parliament adopted in June 2002 (COM(2002) 321). The debate
confirmed the Commission’s view that supply security is not a
question of seeking to maximise energy self-sufficiency or to
minimise dependence, but rather to produce policies aimed at
reducing the risks linked to such dependence by balancing
between and diversifying across the various sources of supply by
energy source and by geographical region. Specific objectives
involve the entire energy chain:
• Rebalance the EU’s supply policy by clear action in favour of a
demand policy. Conscious that the scope for increasing supply is
limited, the Commission, Member States and industry agreed
that there is more promising scope for action by addressing
demand. The focal point is to prompt a real change in consumer
behaviour. Market-based incentives and other measures will be
used to steer demand towards better controlled consumption
and efficiency enhancement.
• With regard to supply, the development of new and
renewable energies (including bio-fuels) is seen to be a
catalyst for change. The Commission plans to double the
share of these energies in the EU’s gross inland consumption
from 6% to 12% and raise their part in electricity production
from 14% to 22% by 2010. However, it is acknowledged that
only financial measures (aids, tax deductions and financial
support) will be able to support such an ambitious aim. In
addition, as a response to growing oil and gas imports, the
Commission proposes to set forth a stronger mechanism in
order to build up strategic stocks, to encourage new import
channels and to develop strategic relationships with key
suppliers such as Russia, with which energy supply
negotiations have been taking place since 2001.
• Still on supply side, the strategy underlines that the
contribution of nuclear energy in the medium term must
be analysed. The Commission expects some debate within
Member States on the role of nuclear power. Finally, a
Directive (2004/67/EC) on the security of gas supplies in
the framework of the energy internal market was adopted
in 2004.
Renewable energies
The development of renewable energy sources, particularly from
wind, water, biomass and solar power, is one of the pillars of the
Commission's energy policy. Several of the technologies, especially
wind energy, but also small-scale hydropower, energy from
biomass, and solar thermal applications, are being successfully
and increasingly developed by several Member States. The others,
especially photovoltaic cells, depend among other things on
increasing demand and thus a greater production volume to reach
the economies of scale necessary to arrive at an adequate level of
competitiveness with centralised generation.
Following the broad guidelines laid down by the section on
renewable energies of the 1995 white paper on Energy Policy
(COM(95) 682), the cornerstones of the EU’s renewable energy policy
were established in 1997, through the adoption of the White Paper,
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“Energy for the Future: renewable sources of energy” (COM(97) 599)
and in 2000 through the adoption of aforementioned Green Paper on
Supply Security, which set the goal of doubling the share of
renewable energies in the EU’s 1997 gross inland consumption by
2010 (i.e. from 6% to 12%) and presented a timetable of actions to
achieve this objective in the form of a strategy and action plan. The
Community Strategy and Action Plan introduced by that document
included internal market measures in the regulatory and fiscal
spheres, reinforcement of those Community policies which have a
bearing on increased penetration by renewable energies, proposals
for strengthening co-operation between Member States, and support
measures to facilitate investment and enhance dissemination and
information in the renewables field. The major activities and pieces
of legislation adopted since then are:
• The Intelligent Energy for Europe (2003-2006) programme,
the Community’s support programme for non-technological
actions in the field of energy and which encompasses
previous separate Community efforts in the fields of
renewable energy and energy efficiency. The Altener
(see below) and SAVE (see the section on energy demand
management) programmes’ actions will continue to be carried
out as part of this broader programme.
• Directive 2003/30/EC of the European Parliament and of the
Council of 8 May 2003 on the promotion of the use of biofuels
and other renewable fuels for transport.
• Council Directive 2003/96/EC of 27 October 2003 restructuring
the Community framework for the taxation of energy products
and electricity.
• Directive 2001/77/EC on the promotion of the electricity
produced from renewable energy source in the internal
electricity market (legislation in force).
• The Campaign for Take-Off for Renewables, designed to kick-
start implementation of the Community Strategy and Action
Plan and expected to have met its objectives in 2004.
Focusing on certain key sectors, the Campaign for Take-Off
established a framework for action to highlight investment
opportunities and attract the necessary private funding. The
Campaign also sought to encourage public spending to focus
on the key sectors, and, in the process, to complement and
trigger private investment.
• The Altener II programme (1997-2002), the extension of the
Altener Community initiative started in 1992 and focused
exclusively on the promotion of renewable energy sources.
Completion of the internal energy market
The completion of the internal energy market, one of the
Commission’s major policy areas, is part of this report’s special
topic on market opening and is introduced in the section Opening
and treated in detail in Chapter 5.
Energy demand management and efficiency
Adopted in 2000, the Action Plan for Energy Efficiency, has served
as an umbrella document outlining programmes of Community
legislative and non-legislative actions on energy efficiency.
Numerous instruments and measures implementing the Action
Plan for Energy Efficiency have been or are planned to be carried
out. They include:
• The Intelligent Energy-Europe Programme (see the section on
Renewable energies), which also includes provisions for the field
of energy efficiency. The SAVE programme’s objectives have
been incorporated into this broader programme.
• The SAVE Programme (1998-2002), promoting energy efficiency
and encouraging energy-saving behaviour in industry, commerce,
and in the domestic and transport sectors.
• The EU’s 5th and 6th Framework Programmes for Research and
Technological Development with its energy research,
demonstration and dissemination.
• Proposal for a Directive on the promotion of end-use efficiency
and energy services (December 2003) intended to enhance the
cost-effective and efficient end-use of energy in Member
States by providing the necessary targets, mechanisms,
incentives and institutional, financial and legal frameworks to
remove existing market barriers and imperfections (in
legislative process).
• Proposal for Directive (COM(2003) 739) on establishing a
framework for the setting of eco-design requirements for
energy-using products aiming at creating a comprehensive and
coherent legislative framework for addressing eco-design
requirements (in legislative process).
• Directive (2004/8/EC) on the promotion of cogeneration aiming
at consolidating and, where feasible, promoting new high-
efficiency cogeneration installations in the internal energy
market (legislation in force).
• Directive on the energy performance of buildings adopted in
December 2002 and set to improve the energy efficiency in
private and public buildings (legislation in force).
• A range of legislative measures for EU labelling schemes and
minimum efficiency requirements in the domestic sector
(legislation in force).
• A range of voluntary agreements and other self-commitments
by industry.
• A series of promotional initiatives on energy efficiency for office
equipment, motor driven systems and lighting.
• A Public Awareness Campaign for an Energy Sustainable Europe
(2004-2007) - This campaign will cover the four areas of the
Intelligent Energy Programme and will build on the success
achieved by the Renewable Energy Campaign for Take Off
(1999-2003). The Campaign will cover a variety of public
awareness measures to encourage European citizens to invest in
technologies and practices.
The instruments and actions that are expected to achieve
the largest increases in savings and efficiency are briefly
discussed below.
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Combined heat and powerDue to its potential for increased energy efficiency and its lower
impact on the environment, the promotion of CHP (or
cogeneration) is a priority area for many Member States. The
Commission began promoting cogeneration through the
introduction of a Directive (92/42/EEC) on efficiency requirements
for new hot-water boilers fired with liquid or gaseous fuels in
1992. Later in 1997, the Commission’s strategy was outlined in a
Communication on cogeneration (COM(97)514) that set an overall
indicative target of doubling the share of electricity production
from cogeneration to 18% by 2010. A new Directive (2004/8/EC)
adopted in 2004 concentrates on providing a framework for the
promotion of this efficient technique in order to overcome
existing barriers, to advance its penetration within increasingly
open energy markets and to help mobilising unused potential. This
new cogeneration Directive, urges Member States to carry out
analyses of their potential for high efficiency cogeneration
(defined as cogeneration providing at least 10% energy savings
over separate production).
Promotion of end-use efficiency and energy servicesEstimates suggest that the Community’s energy consumption is
approximately 20% higher than can be justified on economic
grounds. Significant energy savings can be realised through energy
services and other end-use efficiency measures. The Commission
has published in late 2003 a new proposal for a Directive (COM
(2003) 739) on the promotion of end-use efficiency and energy
services to enhance the cost-effective and efficient end-use of
energy in Member States. The proposal sets out clear mandatory
targets for annual energy savings at Member States’ level and for
the share of energy-efficient public procurement for the period
2006-2012. For the same period, the Directive gives Member
States strong incentives to ensure that suppliers of energy offer a
certain level of energy services.
Energy efficiency in buildingsIn 2001, final energy demand (FED) from the residential and
tertiary sector, the major part of which is buildings, accounted
for over 40% of the EU’s total FED. The sector therefore offers
the largest single potential source for energy efficiency
improvements. Research shows that more than one-fifth of the
present energy consumption and up to 30-45 million tonnes of
CO2 per year could be saved by 2010 by applying more ambitious
standards when constructing or refurbishing buildings. The aim of
improved energy efficiency has been set out in earlier existing
legal instruments. Among the main EU legislation for the sector
are the Boiler Directive (92/42/EEC), the Construction Products
Directive (89/106/EEC) and the buildings provisions in the SAVE
Directive (93/76/EEC). The Directive on the energy performance of
buildings (2002/91/EC), in force since January 2003 builds on
those measures with ambitious aims to increase the energy
performance of public, commercial and private buildings in all
Member States.
Climate change and environmental quality
Climate changeThe EU is by far the largest group of countries to have jointly
signed the Kyoto Protocol on GHG emissions. Under the
Protocol, the EU agreed to reduce its GHG by 8% from 1990
levels by 2008–12. The EU and its Member States agreed in
2002 on different emission limitation and/or reduction targets
for each Member State according to economic circumstances in
what has been termed the “burden-sharing” agreement. Eight
Member States agreed to reduce their absolute emissions by
2008-12 (Austria, Belgium, Denmark, Germany, Italy,
Luxembourg, the Netherlands and the United Kingdom). Two
Member States (Finland and France) agreed to stabilise
emissions by 2008-12, whereas five Member States (Greece,
Ireland, Portugal, Spain, Sweden) agreed to limit their increases
by 2008-12. Targets range from a reduction of 28% for
Luxembourg to an increase of 27% for Portugal. The largest
absolute emission reduction has to be achieved by Germany, of
about 250 million tonnes CO2-equivalent.
As part of its commitment to complying with the Kyoto
Protocol, Directive (2003/87/EC) was adopted in 2003 to
implement an EU-wide emissions trading scheme (ETS), due
to start in January 2005. To this end, the Directive has
requested Member States to submit a National Allocation
Plan (NAP), specifying the sources of emissions where
abatement is to occur. The ETS is expected to give countries
flexibility in their abatement efforts. In particular, it will allow
countries to choose their preferred method of abatement as
well as offering countries and sources that reduce emissions
beyond the targets agreed under the burden-sharing agreement
to trade excess emissions with others having difficulty in
achieving their own targets. The European ETS is the first
programme of its kind, prompting coordinated abatement
efforts by a large number of countries.
The Commission has been active in promoting greenhouse gas
abatement policies as far back as 1991, several years before the
signing of the Kyoto Protocol. In that year, the Commission
introduced the first Community strategy to reduce CO2 emissions
and improve energy efficiency. Later in 2000, it created the
European Climate Change Programme (ECCP), charged with
identifying and developing the components of an EU strategy to
implement the Kyoto Protocol. The two-phased programme
produced important policy milestones, including the ratification
of the Kyoto protocol by the EU and its Member States in 31
May 2002, the proposal for the aforementioned ETS Directive,
the proposal for a Directive on the use of Biofuels (see the
section on Renewable energies above), as well as a proposal for
a Directive on the promotion on Combined Heat and Power (see
the section Energy Demand management above), all of which
have now been adopted as Directives of the European
Parliament and of the Council.
Air qualityAir quality is one of the areas in which the EU has been most
active and where much progress has been made. The
Commission’s aim has been to develop a comprehensive strategy
through the setting of long-term air quality objectives. To this
end, a series of Directives to control the levels of certain
pollutants and to monitor their evolution have been adopted.
Throughout the 1980s and 1990s, the EU designed and
implemented an ambitious programme to reduce the causes of
acid rain and acidification –sulphur dioxide and nitrogen oxides–
as well as other air pollutants (which are produced mainly from
coal-fired power generation units and other sites using large scale
combustion of solid fuels). The legal framework for that program
was the Large Combustion Plant Directive (88/609/EEC or LCPD)
adopted in 1988 and its amending Directive (94/66/EC) adopted in
1994, which set emission ceilings for certain air pollutants
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emanating from large combustion plants. The scope of this
instrument was enhanced in 1996 through the introduction of a
broader regulation, the Integrated Pollution Prevention and Control
(IPPC) Directive, which extended the coverage of emissions
limitations to other stationary sources. The IPPC is essentially a
permit-based system requiring polluting sources to have an
authorisation in order to operate. Permit allocations are
conditional on the sources’ implementation of the Best Available
Techniques (BAT), sometimes requiring sources to implement costly
and complex technology conversions. To mitigate the economic
and social impact of these measures, the sources covered by the
programme have benefited from a transition period that is due to
end in 2007.
The very significant reduction of acidifying pollutants and other
harmful emissions achieved through these programmes have
been given continuity through the new Large Combustion Plant
Directive (2001/80/EC), which was adopted in 2001. The LCPD
gives Member States two options to comply for so-called
“existing plants” (i.e. licensed before 1 July 1987). One option
requires each plant to comply with specified emission limit
values (ELVs) for sulphur dioxide (SO2), nitrogen oxides (NOx) and
dust by 1 January 2008. Alternatively, a national emission
reduction plan can be implemented. This must reduce the total
annual emissions of SO2, NOx and dust to the levels that would
have been achieved by applying the ELVs to the existing plants in
operation in the year 2000, on the basis of each plant’s
operational performance averaged over the last five years of
operation up to and including 2000. Although the achieved levels
of abatement have been impressive, there is still significant
scope for improvement, especially in view of the 10 New MS,
whose power generation structure relies heavily on solid fuels, a
major source of polluting emissions.
Broader EU air quality policies and regulations of relevance toenergy sector include:
• Directive 2001/81/EC of the European Parliament and of the
Council on National Emission Ceilings for certain pollutants
(NECs), adopted in 2001. The Directive sets upper limits for each
Member State for the total emissions of SO2, NOx, VOCs and
ammonia by 2010, but leaves it largely to the Member States to
decide which measures to take in order to comply.
• The Clean Air for Europe (CAFE) programme, launched in
March 2001. It provides for technical analysis and policy
development which will lead to the adoption of a thematic
strategy on air pollution under the Sixth Environmental Action
Programme by mid 2005. The major elements of CAFE are
outlined in the Communication on CAFE (COM(2001)245)). Its
aim is to develop a long-term, strategic and integrated policy
advice to protect against significant negative effects of air
pollution on human health and the environment. The
integrated policy advice from the CAFE programme is planned
to be ready by the beginning of 2005. The European
Commission will present its Thematic Strategy on Air Pollution
during the first half year of 2005, outlining the environmental
objectives for air quality and measures to be taken to achieve
the meet these objectives.
• Directive 1999/32/EC of 26 April 1999 relating to a reduction in
the sulphur content of certain liquid fuels and amending
Directive 93/12/EEC.
• Framework Directive 96/62/EC on ambient air quality
assessment and management, adopted in 1996. This Directive
covers the revision of previously existing legislation and the
introduction of new air quality standards for previously
unregulated air pollutants, setting the timetable for the
development of daughter directives on a range of pollutants.
The list of atmospheric pollutants to be considered includes
sulphur dioxide, nitrogen dioxide, particulate matter, lead and
ozone – pollutants governed by already existing ambient air
quality objectives- and benzene, carbon monoxide, poly-
aromatic hydrocarbons, cadmium, arsenic, nickel and mercury.
Besides setting air quality limit and alert thresholds, the
objectives of the daughter directives are to harmonise
monitoring strategies, measuring methods, calibration and
quality assessment methods to arrive at comparable
measurements throughout the EU and to provide for good
public information.
Nuclear energy
With nuclear generation currently supplying one-third of the EU's
electricity, the subject of nuclear energy is part of a much wider
debate on the security of Europe’s future energy supplies, the EU’s
competitiveness, the Single Energy Market, state aids and
greenhouse gas emissions. Regardless of the future trends in the
nuclear sector, existing nuclear installations must continue to be
operated at a high level of safety, and radioactive waste and
stocks of spent fuel must be managed in a safe and
environmentally sound manner. At the end of their operating lives,
nuclear facilities must be decommissioned in accordance with
agreed safe practice, and high standards are required in the
transport of radioactive materials.
Given the widely diverging strategies of individual Member States
concerning the future of nuclear energy, the harmonisation of
decommissioning practices in the Member States and the
development of specific regulations covering decommissioning
have become central policy objectives. As part of a package of
legislative proposals adopted on the 30th of January 2003, the
Commission proposed two Directives on the management of
radioactive waste and on the setting out of basic obligations and
general principles on the safety of nuclear installations, including
binding requirements affecting decommissioning funds. In June of
the same year, the European Parliament adopted a resolution on
the internal electricity market that involves a compromise on the
matter of decommissioning funds.
The nuclear safety and waste management proposals provoked a
diverse set of reactions from Member States, and ultimately led
the European Parliament to introduce a series of modifications
to the Commission’s initial version. The Commission
acknowledged the changes and responded by submitting in
September 2004 two modified proposals for the aforementioned
Directives. The main changes introduced in the Nuclear Safety
Directive proposal are:
• Reduced scope for interference from the Commission in
national legislation by declaring that the responsibility
for nuclear safety rests with the national authorities and
the operators.
• Member States would no longer be required to provide securely
ear-marked funds for dismantling nuclear power stations.
• A proposal to establish a regulatory committee, composed of
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national regulatory bodies and chaired by the Commission. This
committee would define guidelines for national reports on
nuclear safety and assess them.
As for the Nuclear Waste Management Directive proposal, the
main changes included are:
• Deep geological waste disposal would no longer be a legal
requirement, but Member States would be asked to give priority
to this treatment when feasible.
• Whereas Member States would still be required to draft long-
term national management programmes for radioactive waste,
the original approach of a firm timetable has been abandoned.
Nevertheless, the Commission should have the power to act if it
failed to receive the management programmes.
Expiration of the European coal and steel community
(ECSC) treaty
The European Coal and Steel Community Treaty, the starting point of
the current EU and historically the foundation of State aids to their
coal industries, expired in July 2002, 50 years after coming into
force. In June 2002, the Council of Energy Ministers approved a
Council Regulation that restructured State aids to the coal industry
(Council Regulation 1407/2002 of 23 July 2002). Under the new
framework, State aid may be granted for the restructuring of the
hard coal industry, taking into account the social and regional
aspects of the restructuring as well as the need to maintain, as a
precautionary measure, a minimum quantity of indigenous
production to guarantee access to reserves.
The legal basis of the changeover lies in a Protocol on the financial
consequences of ECSC Treaty expiry and on the establishment and
management of a "Research Fund for Coal and Steel", drafted by the
Council of Ministers and annexed to the new Treaty adopted at the
Nice European Council in 2000. The financial Protocol has been
endorsed in February 2002 by EU Member States as an inter-
governmental agreement. 73% of annual interests on ECSC net
assets will be devoted to steel research, while 26% will go to coal
research. The Commission will keep shaping EU steel and coal policy,
not only in the research area, but also as far as industrial policy,
energy and international trade are concerned, with an eye on
enlargement. New MS and Candidate countries still have sizeable,
and not yet fully restructured, steel and coal sectors that need to be
fully integrated in an enlarged European economy.
Transport policies
Since its inception, the free movement of passengers, goods,
services and capital in the Single Market has become one of the
core elements of the European idea. In order to realise this,
European Transport policy has pursued a consequent liberalisation
of the transport market.
The objective of free movement within a common Europe points to
the importance of connecting people. In this respect, the smooth
functioning of the transport market is of the utmost importance in
achieving the goal of the European single market. However, until
the mid 1980s, the development of a Common Transport Policy
was hampered by heavily-regulated road haulage and air
transportation in key Member States such as France and Germany.
Clearly, the strong regulation aimed at the protection of the
domestic rail operators. The slow progress in this field finally
resulted in the indictment of the Commission by the European
Parliament in 1983 and the following judgement of the European
Court in 1985 when the Commission was accused for failing to
achieve a Common Transport Policy. Afterwards, the deregulation
of road haulage and air transport proceeded rapidly, leading to the
complete opening of these markets by 1998.
This was true for both passenger transportation and particularly
for freight transport. As for the railway sector, in 1991 the
European Commission instructed the national governments to
reorganise national railway undertakings by adopting Directive
91/440/EEC, which allowed third party access to the rail network.
But while the opening of the road and air market helped to push
the transport performance for these modes, national railway
companies constantly lost market shares in most countries. This
was partly because not all countries followed the Directive
immediately so that the possibility to use the rail network against
payment of track charges was limited to companies other than
incumbent national railway companies. Thus, in order to support
restructuring processes, the European Commission established ‘A
strategy for revitalising the Community’s Railways’ (White Paper,
1996) in order to rapidly build an integrated railway area.
In 2001, the European Commission published the White Paper
“European transport policy 2010: time to decide”, which can be
seen as the central document on European transport policy. In
general, the Commission refocused its Common Transport Policy
on the demands and needs of the citizens, proposing an action
plan for bringing about improvements in transport quality and
efficiency as well as proposing a strategy for uncoupling the
growth of transport performance from economic growth. The
White Paper defines the current policy guidelines in the field of
transport which aim to a) shift the balance between the modes of
transport, b) eliminate infrastructure bottlenecks, c) place the user
at the heart of transport policy and d) manage the globalisation
of transport.
Shift the balance between modes of transport
Together with the market opening of road transport which took
place in the 1980s, road transport performance has been growing
rapidly for more than a decade. In 2001, roads carried 45% of
freight and 78% of passenger transport causing saturation of
industrialised urban regions (Ruhr, Randstad, northern Italy,
southern England) and congestion on one tenth of the trans-
European road network. Furthermore, the share of CO2 emissions
of road traffic accounted for 84% of total CO2 emissions in the
field of transport. The road haulage sector experienced very fierce
competition, partly due to the lacking of social regulation and
enforcement, which makes this sector vulnerable to rises in fuel
prices. The breach of social provision also raises safety issues on
the roads. In the White Paper, the Commission proposed measures
for tightening up controls and penalties by promoting further
harmonisation and uniform interpretation of legislation across
Member States in this field.
As a consequence, and also because of the slow implementationof Directive 91/440, the share of rail transport shrank to 13.1%for inland freight transport and 6.4% for passenger transport upto the year 2001. In response, the European Commissionlaunched a strategy for the revitalisation of European railwaysby opening freight services on the trans-European network by2003 and throughout the whole network by 2008.Accompanying measures have been presented on the issues of
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safety standards, technical and contractual interoperability and
the quality of rail services as well as on intensifying the industrial
dialogue on air and noise pollution. A major step was the
adoption of the first rail package by Council Directives
2001/12/EC to 2001/14/EC in the year 2001, including the
separation of essential functions, the establishment of a new
regulatory body, guaranteed access rights, rules for the setting of
track charges and the definition of a transparent procedure for
the allocation of train paths.
Air transport turned out to be the most dynamic European
transport sector within the last decade. Annual traffic growth
averaged a considerable 6.1% between 1991 and 2000 and has
been set to double every 10 to 14 years with the consequences of
reaching capacity limits at major airports and air traffic control,
causing delays and additional pollution. Air transport policy is
tackling these issues with the concept of the creation of a single
European sky. It includes legislative measures to improve safety,
the restructuring of the European airspace according to traffic
flows instead of national borders as well as the allocation of
additional capacities and measures to improve the efficiency of
the air traffic management system.
In order to link up sea, inland waterway and rail traffic and
to provide alternatives to bottlenecks on land-borne transport,
the TEN-T priority project of “motorways of the sea” was
proposed by the European Commission in 2001 together with
rules on market access in port services. Thus, operation rules for
ports have been simplified and all relevant actors have been
brought together in a so-called “one-stop-shop”. Adding to the
goal of enhancing the intermodality of transport services, the
European Commission also launched the Marco Polo
programme, which replaced the PACT2 programme ending in
2001. The Marco Polo programme aims for the improvement of
the intermodal transport chain by creating better technical
conditions. Important elements are the standardisation of
containers and swap bodies and the promotion of international
freight integrators.
Eliminate bottlenecks
The unblocking of the major routes is the central goal of European
infrastructure policy by means of redefining and implementing the
trans-European transport network. Investments focus on
multimodal priority corridors for freight transport by building new
capacities and prioritising freight transport on existing lines and
by facilitating rail access to sea ports. Furthermore, the
development of the high-speed rail network for passenger
transport and the improvement of traffic conditions on all links by
promoting and co-ordinating traffic management systems are part
of the action plan.
With regard to limited national budgets, infrastructure funding
must still be considered a key issue of European transport
policy. Therefore, the Commission pursues the plan to develop
major transport corridors, which define the core axes of the
TEN-T. In this light, the Commission proposed two major
revisions to the TEN-T programme in the years 2001 and 2003
which were adopted by the European Parliament and the
Council in April 2004, including amendments to the list of the
TEN-T priority projects. Furthermore, the revision of the
guidelines includes an increase of Community co-financing
levels and the concept of pooling funds. The idea was to use
part of the charging revenues to finance missing links on the
concerned corridors, possibly of another mode. The latter
measure required a change in legislation on infrastructure
charging and led to the adoption of new directives for rail and
road transport in the years 2001 and 2003. Additional measures
aim to regain involvement of private investors in public-private
partnerships by clarifying the rules on concessions and
introducing greater flexibility into public contracts.
Place users at the heart of transport policy
In its White Paper on transport, the Commission stated that to
meet the needs and expectations of all European citizens, it is of
the utmost importance to place users back at the heart of
transport policy. This goal includes the harmonisation of the very
diverse infrastructure charging systems across Europe as well as
the harmonisation of fuel taxes in order to enhance the
transparency of the real transport costs and the fairness of
pricing levels between modes and countries. The Commission’s
charging policy is based on the “user-pays” and “polluter-pays”
principles, thereby including the costs of maintaining and
operating the infrastructure as well as the external costs of
congestion, accidents, pollution and noise in a charging system
that is non-discriminatory and ensures an efficient use of
transport infrastructure. At the same time, the system should be
able to provide additional financial resources. Following the
White Paper, the legislative initiatives in this field included the
railways Directive 2001/14, the “Eurovignette” Directive 1999/62
and the proposal for a Directive of the European Parliament and
of the Council amending Directive 1999/62/EC on the charging of
heavy goods vehicles for the use of certain infrastructures of
2003. The objective of this proposal is the alignment of the
national systems of tolls and of user charges for infrastructure
use on common principles.
Further goals of the Common Transport Policy are the halving of
road fatalities by 2010 compared to 1998, the further promotion
of intermodality for passenger transport, the reinforcement of
passenger rights in rail and air traffic together with definitions of
passenger obligations as well as the promotion of good practice in
the field of urban transport.
Manage the globalisation of transport
In May 2004, the European Union was enlarged from 15 to 25
Member States. This enlargement stands for another challenge
as regards the financing of transport infrastructure but also for
the new opportunity of a well developed rail network in the
New MS. It is the objective of European transport policy to find
new methods of financing infrastructure and to maintain a
railway share in freight transport of 35% in the New MS by the
year 2010.
Transport is to a great extent regulated on the international
level by multilateral conventions and bilateral agreements.
Thus, the European Union aims to become more assertive on
the world stage by claiming its own voice in the relevant
international bodies in aviation, sea transport and inland
waterway transport. Further objectives cover the international
dimension of air transport and the development and
deployment of the European Galileo civil satellite radio-
navigation system by 2008.
2 Pilot Action for Combined Transport.
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1.2 Changes in the structure and ownership of the two sectors
• As a result of market opening and increased competition, anew breed of energy companies – the large trans-Europeanenergy player – has emerged.
• National, state-controlled electricity and gas championshave disappeared in many Member States.
• Simultaneously, large oil companies have moved furtherdownstream and now directly market their products(especially natural gas) to end users.
• Unbundling of transport and trade has enabled new playersto enter the energy markets but has reduced the potentialfor economies of scope.
• Competition is strong in the road and air transport sectors.
• Restructuring of air transport supply side by horizontal(airline alliances) and vertical integration. New no-frillsairlines entered the market.
• National railway carriers continue to defend theirmonopoly position, though first steps of transformationcan be observed.
• Trend to complex logistics solutions leads to increasedmerging activities in the road haulage business.
The European energy and transport sectors experienced
profound change over the period between 1990 and 2001.
What were once two sectors largely owned and controlled by
State-run monopolies are now a complex web of private, public
and mixed capital companies operating under national and EU
regulatory frameworks. Two main trends underlie the new
structure: the unbundling of accounting, management and
ownership of networks (which are natural monopolies), from
the mobile units that circulate through them (which are not);
and the partial or total privatisation of many of the historically
State-owned and controlled companies that operated and
owned these assets.
Public/private ownership issues
Despite the fact that the legal framework that has prompted
the opening of the energy and transport markets does not
explicitly call for privatisations, it does require that there
should be no benefits (hence distortions) arising from State
ownership of firms within the industries. Member States have
opted for different organisational strategies to comply with
market opening requirements, ranging from full privatisation of
all the components of the two industries, to mixed
private/public ownership structures, sometimes as part of
gradual privatisation schemes. Notwithstanding, several large
State-controlled companies or companies in which the State
has veto power continue to exist, especially in Denmark, France,
Greece, Italy, the Netherlands and in the New MS.
Consolidation, new entrants and vertical integration
Transition of national gas and power incumbents to trans-European energy playersEU electricity and natural gas market opening measures have
required, among other things, the accounting and legal
unbundling of transport from trading operations and the
dismantlement of national monopolies, in some cases leading to
privatisations and compulsory sales of assets. During 2001 and
2002, the implementation of these measures, in particular, along
with the convergence of the gas and power markets resulted in a
rearrangement of the ownership structure of companies in most
Member States, with many companies and assets becoming the
subject of M & A activity. These opportunities led to the rise of a
new breed of company, the large trans-European energy players.
Indeed, leading national companies and incumbents from most
Member States that faced reductions in domestic market shares,
responded by acquiring companies and participations not only in
other EU Member States, but also in the New MS and elsewhere
in the world. The high level of concentration was exacerbated by
the retreat of many North American energy companies from
European energy markets, which augmented the number of
companies and assets made available from privatisations and
unbundling measures alone.
The companies which expanded most rapidly were Germany’s
RWE and E.ON, France’s EDF and Gaz de France, Franco-
Belgian Suez, and Italy’s Eni and Enel. Following compulsory
sales of its generation assets and the sale of some of its
subsidiaries, E.ON acquired large energy companies in the U.K.
(Powergen) and Eastern Europe. It then went on to acquire
Ruhrgas, the country’s leading gas player. E.ON is now the
largest downstream energy company in Europe and one of the
largest in the world. RWE also acquired Innogy, a major U.K.
power company.
France’s public energy companies have begun to shed market
share. However, they have continued acquiring foreign assets. The
two companies have expanded their interests in Germany, the
U.K., Italy, Portugal and Eastern Europe. In turn, the multi-utility
Suez has also become a sizeable energy player, with important
electricity, gas, water and waste disposal operations not only in
Europe but also across the world.
The Italian and Spanish companies’ response to energy industry
restructuring was effectively to swap assets. This is particularly
true in the power sector, where Italian companies bought into
Spanish generation (Enel), while Spanish companies (Endesa) did
the same in Italy. The scenario is likely to be repeated in the gas
sector. Italy’s Eni has already acquired a significant participation
in the Spanish gas sector and the Spanish incumbent gas
company (Gas Natural) recently acquired a distribution company
in the Italian market.
Table 2-1 presents the major mergers and acquisitions in the gas
and power sectors during 2002-2003 and clearly illustrates the
transition of national gas and power companies into major Trans-
European energy players.
Upstream oil companies reposition themselves in the gas marketsA striking feature of the European energy industry is the role of
large oil companies, which are not only large in size in
comparison to the European or global energy industry, but also to
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the global industrial sector. Four companies – ExxonMobil, Shell,
BP and Total – have enormous influence in the industry,
principally at the production level, although their scope of influence
is not limited to this. Though not at the same corporate level, three
other companies could be added to the list: Russia’s Gazprom, with
easily the largest gas reserves in the world, Algeria’s Sonatrach and
Norway’s Statoil. Together, the three companies supply the larger
part of the gas consumed in Europe.
These large suppliers have become increasingly active in the
European gas wholesale business, where they have captured
market shares from wholesale companies, and are often partners
in major transport and import infrastructure developments.
Between 1999 and 2001, some of these companies also entered
the electricity market and acquired or began greenfield combined
cycle ngeneration projects, often to be supplied with their own
gas. More recently however, several of the oil majors have revised
their ambitions in the power sector and have sold off their
generations assets.
Competition, alliances and merging activities in the transport sectorRoad transport is traditionally characterised by a large number of
small freight forwarding companies ranging from one-man-
undertakings to very large carriers with high logistic competence.
Increasing road transport prices, the implementation of new road
pricing systems as well as the trend towards requests for innovative
and complex logistical solutions by the shipping industry have
triggered in the last years increasing merger activity in the haulage
business in many EU-15 countries. This trend is expected to be
continued in the future because of the competitive pressure
resulting from the EU enlargement and the introduction of further
road pricing schemes (e.g. in Germany).
In the rail transport sector, the traditional national carriers
retained their monopoly or quasi-monopoly position in most
countries. Since market opening still suffers from serious
bottlenecks, the degree of competition is still lower than for road
and air transport and varies between countries and their
approaches towards rail market opening. Altogether, only a
limited number of new market entries could be observed.
Nevertheless, first steps of transforming national railway
companies into trans-European players have already taken place.
The most significant is perhaps the merger and alliance of
German, Dutch, Danish, Italian and Swiss freight railway
companies to the international operating freight carrier ‘Railion’.
This restructuring process already proved successful when
business volumes on the central North-South corridors increased
remarkably in 2003.
Arguably the most successful deregulation strategy was
performed in the air transport market, which has been
completely restructured through the formation of alliances
(horizontal integration), co-operation between airlines and
airports (vertical integration) and the market entry of no-frills
airlines. Although the co-operation of certain airports and
airlines (e.g. grandfather rights) reduces the level of competition
at specific airports, the competition between the airports
themselves proved strong enough to over-compensate this effect.
1.3 Progress with market opening
• New electricity and gas Directives were adopted in 2003 inorder to speed up market opening and reinforce crucialissues such as infrastructure, supply security and publicservice, among others.
• By 2003, seven Member States had fully opened theirelectricity markets and five had fully opened their gasmarkets. The Directives in force require complete openingof energy markets by 2007.
• Market opening of railways still lags behind. New railwaypackages adopted by the Commission in 2001 and 2002aim to complete market opening by 2006.
• Road and air markets are completely open since 1998.
Buyer Buyer's country Acquired company Acquisitor’s country
of origin
National Grid Group U.K. Lattice Group Plc U.K.
RWE AG Germany Innogy Holdings Plc U.K.
E.On Germany Ruhrgas AG (58.4%) Germany
E.On Germany TXU Europe Group Plc (U.K. retail business) U.K.
E.On Germany Graninge AB (61.3%) Sweden
E.On Germany Thuega AG (13.7%) Germany
Eni SpA Italy Italgas SpA (56%) Italy
Edipower Italy Eurogen Italy
Gaz de France, Ruhrgas, Gazprom France Slovensky Plynarensky Priemysel AS (49%) Slovakia
EDF SA France Seeboard Plc U.K.
Elsam Denmark NESA (78.75%) Denmark
Eneco Energie Netherlands REMU NV Netherlands
CVC Capital Partners (IBO) U.K. Viterra Energy Services AG Germany
Market Purchase International Public Power Corporation (15.73%) Greece
Weser-Ems-Energiebeteiligungen Germany EWE (27.4%) Germany
Hidroelectrica del Cantabrico Spain Naturcorp (62%) Spain
Source: Global Insight and Platts
Table 2-1: Major mergers and acquisitions in the European gas and power industries between 2002 and 2003
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The development of a competitive internal market is one of the
Commission’s main policy objectives. Although much progress
has been made by Member States in implementing the EU
Energy and Transport Directives, there is still significant scope
for improving citizens’ welfare with respect to quality of service,
prices or security. However, the process of market opening is still
in its infancy and the full benefits of market opening will only
be realised after the remaining barriers are removed and the
internal market becomes fully operational. In order to fulfil the
new institutional requirements which will doubtless come along
with a liberalised single market, the current policy aims to
establish new regulatory capacities at regional, national and
European level. These must not only ensur compliance with
market rules, but will have to react on politically undesirable by-
products (e.g. the preference of environmentally unfriendly
transport modes).
Legislative developments
New electricity and gas directivesIn June 2003, the Commission adopted two new Directives
(2003/54/EC and 2003/55/EC) that repealed the electricity and
gas Directives in force since 1998, along with a package of
measures addressing electricity and gas infrastructure issues. On
the electricity side, the amending Directive has brought forward
the opening of the electricity market for all non-household
customers by July 2004, and for all customers by July 2007. It
also contains further measures in unbundling, establishes a
regulator in all Member States with well-defined functions,
requires published network tariffs, reinforces public service
obligations, introduces monitoring of security of supply and sets
up a mandatory electricity labelling for fuel mix and for some
emission and waste data. The amendment is accompanied with a
regulation that establishes common rules for cross-border trade
of electricity.
The amending gas Directive also speeds up the opening of the gas
market for all non-household (full market opening required by
2004) and household customers (full market opening required by
2007) and provides for further measures in unbundling network
and supply activities, publication of network tariffs, security of
supply monitoring and public service. It also establishes a
regulator in all Member States.
Railway package for freight, right to cabotage and the EurovignetteIn the transport sector, the main legislative changes that have
taken place recently pertain to the railway sector. The first
Railway Package of the European Union (Directives 2001/12/EC,
2001/13/EC, 2001/14/EC), which aims to make rail freight
transport more competitive under a European perspective, became
effective in March 2003.
With respect to road transport, the major steps to enhance
competition and to develop the internal market within the EU-15
were taken in the early 1990s. By 1998, the legislative process of
opening the markets in the road sector had been completed with
the right to perform cabotage in all Member States. Since then, the
attention of European legislation has been directed to
infrastructure charging policy, with a special focus on the road and
rail sectors. The key Directive in the field of harmonising road
charging policies in Europe is the Eurovignette Directive
1999/62/EC, which set out provisions on the charging of heavy
goods vehicles on motorways with a ceiling of average toll levels
defined by the costs of road infrastructure. This Directive was
followed by the recent European Commission proposal for a further
Directive amending Directive 1999/62/EC. The proposal, adopted by
the European Commission on 23 July 2003, sets out to align
national toll systems and infrastructure user charges on the basis of
common principles. The Commission's key message with regard to
its infrastructure charging policy is that transport taxes and charges
should be varied to reflect the cost of different pollution levels,
travelling times and damage costs as well as infrastructure costs.
This harmonisation process is still ongoing.
Of all transport modes, air travel has by far experienced the most
impressive growth in the EU over the last twenty years. Following
the major crisis which hit the industry in the early 1990s, efforts to
restructure and deregulate the European air market have enabled
airlines to operate successfully again. However, the boom in air
travel exacerbated problems relating to airport saturation levels and
overloaded air traffic control systems; airlines complained about the
fragmentation of European airspace, which led to inefficiency and
delays. Up to 2000, there was a sharp and steady rise in delays,
which had major repercussions for users and which placed a
substantial financial burden on airlines. More recently, capacity
limits of European airports continued to limit the access of new
companies wishing to compete with the established carriers.
Furthermore, European air traffic control has not kept pace with
growth in traffic volumes. These factors are further exacerbated by
the fact that the inherited patchwork of national systems of
services, regulation, technology and decision making are still largely
oriented to national markets.
The Commission has therefore proposed a new legislation on
constructing a Single European Sky, an ambitious initiative to
reform the architecture of European air traffic control to meet
future capacity and safety needs. The objectives of the legislation
are to improve and reinforce safety, to restructure European
airspace as a function of air traffic flow rather than according to
national borders, to create additional capacity and to increase the
overall efficiency of the air traffic management system.
Implementation of the electricity and gas directives By January 2003, seven Member States (Austria, Denmark,
Finland, Germany, Spain, Sweden and the U.K.) had fully opened
their electricity markets so that all customers were free to choose
their own supplier. Despite the significant progress achieved,
important barriers to competition and to the free choice of
supplier still remain to be overcome. The remaining Member
States, which according to the Electricity Directive in force have
until 2007 to implement the full set of market opening measures,
had only partially opened their power markets by January 2003.
Greece and France, where national energy companies are still in
operation, were the two countries that exhibited the lowest level
of electricity market opening (just over 37%).
Less progress was made in the gas sector, where only six countries
had fully opened their markets by January 2003 (Austria,
Denmark, Germany, Italy, Spain and the U.K.). Netherlands and the
Flanders region of Belgium are expected to fully open their gas
and power markets in 2004. France was at the bottom of the list,
having only opened 37% of its market. No information was
available for Finland, Portugal and Greece.
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Opening of the transport marketsProgress of market opening varies significantly for the different
transport modes. While road and air markets can be considered
as highly competitive and dynamic markets, quasi monopolistic
structures still dominate the rail transport sector.
The implementation of the measures included in the railway
package were not enforced by all Member States
simultaneously. Whereas measures should have been
implemented by 15th March 2003, only six Member States
(Belgium, Denmark, Finland, France, Italy and the Netherlands)
had transferred the Directive into national law. On 16th
October 2003, the European Commission opened a lawsuit
against the other nine countries.
The single European sky is in progress. The development and
implementation of a future European system for air traffic
management is financed in the framework of the trans-European
networks (TEN) for transport through the promotion of
interoperability, interconnectivity and technological development.
The creation of this system will have to be co-ordinated with the
Member States and with other European international
organisations. Owing to the network's chronic under-capacity, two
simultaneous actions have been pursued:
• Reduce important bottlenecks in the network
• Develop and implement the new generation of networkcomponents to generate uniform and significant increases in capacity
The legislative process itself also made progress. In March2004, the European Parliament and the Council adopted thefollowing regulations:
• Laying down the framework for the creation of the singleEuropean sky
• Provision of air navigation services
• Organisation and use of the air space
• Interoperability of the European Air Traffic Managementnetwork
2. COMPLETION OF EUROPEAN INFRASTRUCTURE
The idea of Trans-European Networks (TEN) emerged in the late
1980s in conjunction with the proposed Single Market. Trans-
European Networks have been defined for the economic sectors
Energy, Transport and Telecommunications and have been
further developed at several stages since the early 1990s. The
development of TEN is considered to be a key element for the
realisation and development of the internal market and for
promoting economic and social cohesion within the EU. The
interconnection of and interoperability between national
networks as well as access to them are central to the concept
of TEN.
Between 1995 and 2001, the Community financed nearly EUR 123
in Energy TEN (or TEN-E) projects, in broad terms, around 10% of
the total cost of those projects. Total planned investments in TEN-E
are of considerable volume. Priority energy projects to be
constructed between 2007 and 2013 are forecast to cost up to EUR
PTFREL
IRLUNLIT
BEUKSEESDEFL
DK
0%
0
20% 40% 60% 80%
% of MarketOpening
Size of Open Market
100%
600
TWh
500400300200100
AU
Electricity
Figure 2-1: Progress in implementing the electricity and gasdirectives in the EU-15 (2003 data)
Liberalisation Index
ES
UK
ELIR
FRBELUFI
AUPTIT
DKNLDESE
0
0
500 1000
40302010
LIB Index
Network length
'000 km
Figure 2-2: Implementation of European railway legislationand degree of market opening
FIPTEL
FRSENLLUBEIRIT
UKESDEDKAU
0%
0
20% 40% 60% 80% 100%
150
bcm
10050
% of Market Opening
Size of Open Market
Gas
Source: Commission Third Benchmarking report on the implementation of theinternal electricity and gas market, 2004
Source: IBM Liberalisation Index, Energy and Transport in Figures 2003
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28 billion. Estimates suggest that between 2003 and 2013, around
EUR 40 billion will have been invested in TEN-E projects (of which
some EUR 14 billion will be invested in projects outside the EU).
Planned investments in Transport TEN are on a totally different
scale, and must be treated with caution. With the information
available, total costs for implementing the TEN-T as developed in
the revision of the guidelines of 2004 are pre-estimated to be
around EUR 600 billion up to 2020. Thus, it is not surprising that
one of the main obstacles to their realisation is funding.
Furthermore, differences in national planning processes and
objectives in priorities hamper the progress of implementation. A
better co-ordination of European and national investment policies,
the improvement of communication between Member States and
the European Commission as well as additional incentives for
national governments to reinforce their efforts for completing their
network parts of the TEN remain on the political agenda.
2.1 The TEN process
Whereas the Treaty of Rome (1957) that established the European
Union provided the legal basis for TEN, it was the Maastricht
treaty (1992) which defined and underlined the importance of
Trans-European Networks. The TEN-E and TEN-T are defined by a
Community Decision that establishes a set of guidelines and by a
Community Regulation containing the framework for financing
TEN projects.
Infrastructure projects that according to the guidelines qualify as a
TEN project may, under certain conditions, receive Community
financial aid for up to 10% of the total cost of investment through
the TEN-budget line as well as through the Structural Funds and
the Cohesion Fund. The European Investment Bank (EIB) also
contributes to the financing of these projects through loans and the
European Investment Fund (EIF) gives loan guarantees for TEN
projects. The framework governing the financing of TEN projects
was established by a Council Regulation (EC) 2236/95 laying down
general rules for the granting of Community financial aid in the
field of Trans-European networks. That regulation was amended by
Regulation (EC) 1655/99 in 1999. In 2002, the Commission
submitted a proposal to amend the existing regulations. Two
additional amendments to 1995 Regulation were adopted in 2004
(Regulation (EC) 788/2004 and Regulation (EC) 807/2004). These
new regulations allow for Community aid to rise to 20% of the
total investment cost for priority projects and for sections of
projects of European interest.
2.2 The energy TEN
The Commission has stressed that the creation of a fully-functioning
single market for electricity and gas is dependent on greater
interconnection between Member States and a better use of the
infrastructure through greater co-ordination and transparency.
Moreover, it believes that a necessary condition for the development
and efficient functioning of an integrated European internal market
is the availability of secure, reliable networks to transport energy
supplies to the load centres. The development of TEN-E are therefore
an important component of the strategy to reinforce the security of
energy supplies by increasing the efficiency of energy systems, in
developing additional supply routes and upgrading existing ones, and
in augmenting the proportion of energy from renewable energy
sources available to and within the EU.
TEN-E guidelines
The TEN-E guidelines in force stipulate the objectives, identify and
define priorities, projects of common interest, priority projects and
axes and lay down the conditions for creating a favourable
context for the development of energy TENs.
The development of TEN-E began in 1994 when the European
Council of Essen identified a list of 10 priority projects. A Decision
in 1996 (1254/96/EC) established TEN-E objectives and priorities,
and identified a list of 43 projects of common interest, in which
the 10 original projects were included. That decision was
subsequently amended in 1997 (97/1047/EC), when 31 more
projects were added and then again in 1999 (1741/99/EC) when 5
projects were redefined and 16 more projects were added, adding
up to a total of 90 projects of common interest.
By 2001, significant efforts had been put into developing the TEN-
E but a Commission report that year revealed that the current level
of interconnection in electricity (in particular) and gas (to a lesser
extent) networks was still insufficient in 2001. As a result, and in
view of the development of the internal electricity and gas
markets, a proposal for a new set of guidelines was proposed in
2001, leading to the adoption of Community Decision
(1229/2003/EC) on TEN guidelines in July 2003, which replaced the
original and amended guidelines of 1996. One of the main changes
introduced by the new guidelines was the identification of “priority
projects” and the broader concept of “priority axes”, that is, those
that have been identified as most important for security of supply
or for the competitive operation of the internal market. The new
decision identified 12 priority axes: seven for electricity networks
and five for natural gas networks. Through the new set of
guidelines adopted in 2003, a series of revised objectives for
Member States were established:
• Ensure a stable and favourable regulatory environment for
investment in new infrastructure. The target for all Member
States is to achieve a level of electricity interconnection of at
least 10% of their installed capacity by 2005.
• Improve the use of existing infrastructure through different
“structural measures” such as improved co-ordination between
system operators.
• Trans-European networks (TEN) form a cornerstone forthe creation of the European internal market
• The TEN concept was introduced by the 1992 Treaty ofMaastricht. The framework within which TEN aredeveloped consists of a Community Decision on TENGuidelines and a Community Regulation on TENfinancing.
• In 2003, a new set of TEN-E guidelines were introduced,incorporating the realities of rapidly changing energymarkets and an enlarged EU. The new guidelines define aseries of priority axes, projects and establish the notion ofprojects of European interest.
• New financial rules for TEN projects were adopted in2004, allowing priority projects and projects of Europeaninterest to receive Community financial aid of up to 20%of the total investment.
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• Refocus Community financial support towards priority projects
to be implemented and increase the ceiling for possible EU co-
financing from 10% to 20% of total investment costs of
Priority Projects.
To take account of the enlargement of the EU to 25 Member
States that took place in 2004 as well as the changes brought
about by two new Internal Electricity and Gas market Directives
(see section on ‘Marketing Opening’ above), the Commission
submitted in December 2003 a proposal (COM(2003) 742) for a
Decision laying down revised guidelines for trans-European energy
networks and repealing Decisions No 96/391/EC and No
1229/2003/EC. Changes suggested by new proposal include:
• the possibility to give a project a “Declaration of
European interest”
• empowering the Commission to designate a coordinator for a
priority axis or project
• enlarges the guidelines of projects of common interest to
account for the EU’s neighbouring countries
The creation of a favourable context for the development of trans-
European networks in the energy sector was established by a Council
Decision (96/391/EC) in 1996, and was followed by a Commission
recommendation (1999/28/EC) on improving the authorisation
procedures for trans-European energy networks. The latter Decision
and Recommendation would be repealed if the proposal for new
guidelines introduced in December 2003 is adopted.
Electricity interconnection
The Commission found that the level of electricity interconnections
within the EU remained critically inadequate in 2002. Indeed,
physical cross-border trade of electricity in the EU only represented
around 9% of total electricity consumption in 2002 and the volume
of cross-border trade was considered to be far from that expected
in a competitive internal market. It is worth noting that those
Member States possessing import capacities below the 10% target
– Spain, Ireland and the UK .– are among the countries that lie
outside what is labelled the European “core” electrical system (i.e.
continental Western Europe excluding the British Isles, Scandinavia,
the Iberian peninsula, Italy and Greece). Regulators in these
peripheral countries have recommended that a minimum level of
interconnection of around 20% of peak demand in any area with
the rest of the EU could help eliminate segmented markets and
create a truly competitive internal market with free movement of
fuels and services.
Due to the lack of interconnector capacity, bottlenecks have been
identified at several points on the EU-15 network. Within the core
network these are: Denmark/Germany, Belgium/Netherlands, Italy
with its neighbours and France/Spain. Bottlenecks that have been
identified in peripheral countries are in Greece (where a direct
connection to the core network is non-existent), U.K./core
network and Ireland/U.K.
Gas interconnection
Gas interconnectivity within the EU is not as critical as with
electricity, due in part, to its physical characteristics (gas can be
stored and consumption is more interruptible), and because
network congestion is less frequent. This is not to say that
congestion does not occur within the network: the Commission
underlined that congestion is being cited with increasing frequency
as the reason for refusal of third party access3 (TPA). Out of 55
cross border nodal points operating in 2001, it is estimated that
only one third had available capacity for TPA. Moreover, several
major links in the European network are notable by their absence.
As the reliance on gas increases, Member States have developed
and planned new gas import infrastructure, but these projects are
often driven by demand and long-term contracts rather than by a
pan-European network and internal market perspective.
An example of this can be found in Spain, which is set to begin
the construction of a new underwater pipeline in 2004 (a project
that will nearly double its import capacity of Algerian gas) and
owns four of the ten LNG import terminals within the EU-15.
Despite the fact that its import capacity will substantially
increase, the capacity required to eventually pass some of this gas
on to France and thus the rest of Europe is not expected to
appear before 2012. Meanwhile, France plans to continue
importing nearly all its Algerian gas in LNG form. Moreover,
substantive parts of the EU still do not have access to gas, and
Finland and Greece are still isolated from the European network.
Table 2-2 presents the maximum yearly capacities at cross-border
gas interconnections between EU-15 Member States, at direct
connections between Member States and non-EU countries.
Development of expenditures and project status (until 2001)
Expenditures for TEN-E rose to nearly EUR 19 million in 2001.
From this, about 53% was destined to gas TEN projects and the
remaining 47% went to electricity projects, which contrasts with
the financing structure of 2000 where 54% of expenditure went to
electricity projects. Total Energy TEN expenditure in 2001 increased
by 36% with respect to the previous year. Between 1995 and
2001, a total of EUR 123 million had been spent on Energy TEN
projects, with some EUR 69 million having gone to gas projects
and the remaining EUR 54 million to electricity projects.
Priority projects in 20014
The TEN-E guidelines adopted in 2003, identified a series of
priority axes and projects. A proposal for a revision of those
guidelines was introduced in December 2003. The priority projects
and axes contained in the approved and proposed guidelines are
presented below.
0 5 10 15
EU Target
25 30 5020 35 40 45
UK
AT
IRESITPTELDE
FRFI
SENLBEDK
%
Figure 2-3: Electricity import capacity as a percentage ofpeak electricity demand in the EU-15 (2003)
3 Commission Second Benchmarking Report on Electricity and Gas markets
4As established in COM(2003) 742 final: Proposal for a Decision of the European
Parliament and of the Council laying down guidelines for trans-European energy
networks and repealing Decisions No 96/391/EC and No 1229/2003/EC
EUROPEAN UNION ENERGY
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Electricity networksEL.1. France – Belgium – Netherlands – Germany: electricity
network reinforcements in order to resolve congestion in
electricity flow through the Benelux.
EL.2. Borders of Italy with France, Austria, Slovenia and
Switzerland: increasing electricity interconnectionc
capacities.
EL.3. France – Spain – Portugal: increasing electricity
interconnection capacities between these countries
and for the Iberian peninsula and grid development in
island regions.
EL.4. Greece – Balkan countries – UCTE System: development
of electricity infrastructure to connect Greece to the
UCTE System and to enable the South-Eastern Europe
electricity market.
EL.5. United Kingdom – Continental Europe and Northern
Europe: establishing/increasing electricity interconnection
capacities and possible integration of offshore wind energy.
EL.6. Ireland – United Kingdom: increasing electricity
interconnection capacities and possible integration of
offshore wind energy.
EL.7. Denmark – Germany – Baltic Ring (including Norway –
Sweden – Finland – Denmark – Germany – Poland – Baltic
States – Russia): increasing electricity interconnection
capacities and possible integration of offshore wind energy.
EL.8. (Proposed) Germany – Poland – Czech Republic – Slovakia –
Austria – Hungary – Slovenia: increasing electricity
interconnection capacities.
EL.9. (Proposed) Mediterranean Member States – Mediterranean
Electricity Ring: increasing electricity interconnection
capacities between Mediterranean Member States and
Morocco – Algeria – Tunisia – Libya – Egypt – Near-East
Countries – Turkey.
Gas networksNG.1. United Kingdom – Northern Continental Europe, including
Netherlands, Denmark and Germany – Poland – Lithuania –
Latvia – Estonia – Finland – Russia: North Transgas natural
gas pipeline and Yamal – Europe natural gas pipeline,
connecting some of the main sources of gas in Europe,
improving the interoperability of the networks, and
increasing the security of supply.
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Category Feasibility Authorisation Under In Total
studies procedures construction operation
Electricity 16 17 5 6 44
Connection of isolated electricity networks 3 0 2 1 6
Development of interconnections between MS 5 6 0 3 14
Development of internal connections related to
interconnections between MS4 7 1 1 13
Development of interconnections with third countries 4 4 2 1 11
Gas 16 5 7 18 46
Introduction of natural gas into new regions 0 0 1 3 4
Connection of isolated gas networks 5 2 1 7 15
Increase in the LNG reception capacities and
gas storage 7 3 2 1 13
Increase in transport capacities (gas delivery pipelines) 4 0 3 7 14
Grand
total 32 22 12 24 90
Source: Commission Report on the implementation of the guidelines for trans-European energy networks in the period 1996-2001.
1995-1999 2000 2001 Total
EUR % EUR % EUR % EUR %
Million Million Million Million
Electricity 38.1 42 7.5 54 8.4 47 54 44
Gas 52.1 58 6.3 46 10.4 53 68.8 56
Total 90.2 100 13.8 100 18.8 100 122.8 100
Table 2-2: Direct international gas interconnections in the
EU-15 (2004)
Table 2-3: Summary of commission decisions on
energy TEN projects
Table 2-4: Status of energy TEN projects in 2001
Bcm/year Import Export
Capacity Capacity
Germany 202 26
Italy 81 2
Belgium 80 49 transit
country
France 62 3
United Kingdom 9 30
Spain 44 3
Austria 41 40 transit
country
Netherlands 24 113
Denmark - 4
Portugal 3 -
Finland - -
Luxembourg n.a. n.a.
Source: GTE
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NG.2. Algeria – Spain – Italy – France – Northern Continental
Europe: construction of new natural gas pipelines from
Algeria to Spain, France and Italy, and increasing network
capacities in and between Spain, France and Italy.
NG.3. Caspian Sea countries – Middle East – European Union:
new natural gas pipeline networks to the European Union
from new sources, including the Turkey – Greece, Greece –
Italy and Turkey – Austria natural gas pipelines.
NG.4 LNG terminals in Belgium, France, Spain, Portugal, Italy and
Poland: diversifying sources of supply and entry points,
including the LNG terminals connections with the
transmission grid.
NG.5. Underground natural gas storage in Spain, Portugal, Italy,
Greece and the Baltic Sea Region: increasing capacity in
Spain, Italy and the Baltic Sea Region and construction of
the first facilities in Portugal and Greece.
NG.6. (Proposed) Mediterranean Member States – East
Mediterranean Gas Ring: Establishing and increasing
natural gas pipeline capacities between the Mediterranean
Member States and Libya – Egypt – Jordan – Syria – Turkey.
2.3 The transport TEN
TEN-T history and scope
The Maastricht treaty, which was the first to officially recognise
the TEN-T as an important part of the European integration
process, marked a turning point in the development of the
networks. With it, the process of defining open networks and
accessibility criteria to regions was launched. The discussion soon
focused on a comprehensive planning approach covering all
transport modes and emphasising the concept of an inter-modal
transport network. Due to the scope of the task of developing a
true European transport system suitable to meet the requirements
for the construction of the internal market, a prioritisation of
projects was indispensable. This understanding led to the
definition of 14 priority projects, the so-called “Essen List” in
1994. In the CEEC countries, the concept of priority corridors was
used to define the TINA core network including complementary
interconnection links. The “Essen List” was an important element
of the Community guidelines for the development of the Trans-
European transport network established in 1996 (Decision No
1692/96/EC) while the so-called “Helsinki Corridors” of the Pan-
European transport network provided a basis for the recent
revision of the guidelines with respect to the accession of the
New MS in May 2004 (Decision No 884/2004/EC). Together with
the TEN financial regulation these guidelines set out the
objectives, priorities and the definition of projects of common
interest. In addition, the TEN-T network developed in the
guidelines defined the scope of application of other legislation, as
Directives on Railway Interoperability (Directive 2004/50/EC) or
Tunnel Safety (Directive 91/671/EEC).
These initial activities were complemented by further proposals for
revisions of the TEN-T criteria in 2001 and 2003 that led to a
major reform of the 1996 TEN-T guidelines and the TEN financial
regulation adopted by the Council and the Parliament in April
2004 that takes up the new challenges connected with the
enlargement of the Union. This process was performed in several
steps. In October 2001, the Commission proposed a revision of the
guidelines for the trans-European network, thereby strengthening
the priority given to the first series of projects and adding six new
priority projects, including the deployment of the Galileo satellite
system and the rail-crossing of the Pyrenees. Given the delays in
many key priority projects, particularly in their cross-border
sections, a revision of the financial rules for the TEN-T was also
proposed, with a view to increase the ceiling of EU co-financing
from 10% to 20% for specific cross-border projects. In order to
involve Member States and the European Investment Bank from
the outset of this extensive exercise and because of the important
territorial and financial impacts of major projects, the European
Commission put forward a new proposal in October 2003. The
initiative was partially based on the results of the high level group
“On the Trans-European Transport Network” which were published
in June 2003 and included important measures as the”Motorways
of the Sea” and the development of important rail transport
corridors in the New MS.
Electricity (2003 - Approved) Gas (2003 - Approved)
Figure 2-4: Priority energy projects in the EU electricity (2003 - approved)
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As a result of these activities, 30 projects were declared to be of
“European interest”. They involve investments amounting to EUR
225 billion by 2020, including about EUR 140 billion between
2007 and 2013.
In order to fulfil the Community’s targets as defined in the
guidelines of 1996, the total investments necessary can be roughly
estimated to be around EUR 550 billion, at 1999 prices. To date,
three of the first set of 14 priority projects are already in operation.
However, only around EUR 170 billion had been invested until 2001,
which means that only approximately 30% of the network had been
completed. Due to the high dependency on public investments,
which fell from 1.5% of GDP to less than 1% between 1980 and
1990, many projects faced delays. Hence, at the current rate of
investment, the global targets set for 2010 will not be achieved in
time. While for road less than 4 % of the length of the planned links
will not be completed by 2010, up to 50% of the length of the
planned railway lines will remain uncompleted. Long delays could be
observed in particular where cross-border projects are concerned.
According to the traffic forecasts presented in the 2001 White Paper,
road freight transport is expected to rise by 38% and passenger
transport by 24% between 1998 and 2010 if no major efforts to
rebalance traffic growth are made. This was the reason for the
Commission’s proposal of a revision of the TEN-T guidelines in
October 2001. The proposal strengthened the priority of the 14
projects of the “Essen list” and defined six new priority projects.
Among these six projects, Galileo, the first satellite positioning and
navigation system designed specifically for civil purposes (in contrast
to the US GPS), is of a special nature. Firstly, Galileo can be conceived
of as a European core infrastructure with possible applications not
only for the transport sphere but also in other sectors of the economy
including energy, agriculture and finance. Secondly, it will be financed
mainly by private investments instead of national budgets. The TEN-T
budget for Galileo averages EUR 750 million until 2007 while total
costs for the development and deployment of Galileo are currently
estimated at EUR 3.2 to EUR 3.4 billion. A crucial question for the
progress of Galileo will thus be the embodiment of the foreseen
concession scheme in the form of a public-private partnership.
New guidelines and financial rules
Since current funding by Member States is insufficient to complete
all planned projects by 2010 as scheduled in the 1996 guidelines and
since no significant increase in public expenditures is expected,
funding remains the main problem of the TEN-T projects. Another
important aspect is insufficient confidence from the private sector,
especially related to uncertainty in project planning (esp. railways,
trans-border projects). Therefore, in 2003, the Commission
introduced additional measures in order to enhance financial co-
ordination and to increase synergies between the public and the
private sector. This new approach includes a revised definition of
project priorities and the introduction of legal and financial
management structures, the promotion and active co-ordination of
trans-border projects as well as the setting up of trans-national
European Companies.
The revision of the TEN-T guidelines and financial rules following
the 2003 proposal of the Commission and adopted in April 2004
complements and updates the 2001 proposals. The central element
is the concentration of financial resources on priority infrastructure
projects. The revision includes as main aspects the definition of new
priority projects, the reinforcement of coordination instruments and
new financial rules for trans-border projects.
Definition of new priority projects
The latest priority projects come as an addition to the six new
projects and two new extensions proposed by the European
Commission in October 2001 and approved by the European
Parliament in May 2002. An important new priority project concerns
the development of “motorways of the sea” aimed at ensuring that
trans-national maritime links between countries, isolated for
geographical reasons or affected by road congestion, are treated
with the same importance as inland transport infrastructure. The
objective is to concentrate freight transport at selected key links in a
limited number of ports to increase the viability of these links.
Member States will be encouraged to jointly establish trans-national
maritime links in a way to avoid distortion of competition.
Furthermore, the development of the European railway network is
promoted by six new projects dealing exclusively with rail
infrastructure as well as by the combined rail/ road link between
Ireland, the United Kingdom and continental Europe. Two other
projects introduce the motorway link between Gdansk and Vienna
via Bratislava as well as the Seine-Escaut Canal. The new list also
contains the amendment of sub-projects to eight of the previously
defined priority projects (this concerns the projects 1, 3, 6, 7, 16, 17,
18 and 20).
Reinforcement of coordination instruments
Since investments have to be synchronised along trans-national
routes in order to ensure the profitability of investments with regard
to the international dimension of the projects, the Commission
introduced new co-ordination mechanisms which included:
• The setting up of a European co-ordinator for large projects
• A declaration of European interest calling on Member States to
co-ordinate procedures and evaluation methods of projects. For
certain cross-border projects, single trans-national enquiries will
have to be performed by the Member States.
New financial rules for trans-border projects
The new guidelines adopted in April 2004 also contain a revision of
the financial rules, such that cross-border projects of European
interest can benefit from EU funds up to a co-financing level of
20% instead of 10%. Moreover, a multi-annual financial plan was
introduced, giving guarantees to investors and allowing for flexibility
in the financial progress.
Technical status of the TEN-T
In 2001, the share of motorways and high-quality roads of the
TEN road network reached approximately 60%. According to
national plans, this share is expected to increase up to
approximately 70% by 2010 and to remain more or less constant
thereafter. Between 1996 and 2001 significant network extension
was realised in the United Kingdom, southern France, Spain,
Portugal, Sweden and Finland. Developments in Central Europe, on
the other hand, are less visible. By 2010, network development is
expected to continue in Spain and Portugal. Significant efforts are
also planned in Greece.
With respect to railway infrastructure, the share of high-speed
lines in the TEN rail network in the EU-15 increased to almost
15% in 2001 and is expected to reach approx. 25% by 2015. In
1996, high-speed trunk lines existed in France, Germany, Spain
and Italy, with the most developed system in place in France. By
2001, the network was improved particularly in the northern and
eastern parts of Germany, in the region of the channel tunnel and
in southern
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France. In Austria and Italy, conventional lines were also upgraded to
high-speed lines. The growth of the high-speed rail network length
was accompanied by a growth of passenger volumes on these links.
Links in the inland waterway network are distinguished between
ECMT5 classes. The core of the network is located in Central Europe
with a length of about 10800 km.
The TEN-T network as defined in the Community guidelines of 1996
and in the TINA study contains 407 ports in the EU-15 and 73 ports
in the New MS. The majority of these are commercially operated but
publicly owned. Nevertheless, a relevant part of the harbour facilities
is completely in private hands. This is especially true for container
harbours and various passenger quays.
Table 2-5: The 30 TEN-T priority projects according to the revision of the guidelines adopted in April 2004
No. Project name Status Distance Investments as Total as in km reported in reported in
2003 2003(EUR million) (EUR million)
1 Railway line Berlin-Verona/Milano-Bologna-Napoli-Messina-Palermo ongoing 958 5839 20166
2 High-speed railway line Paris-Bruxelles/Brussel-Köln-
Amsterdam-London ongoing 1065 15961 22578
3 High-speed railway line South-Western Europe ongoing 1601 7489 19263
4 High-speed railway line East ongoing 551 1358 5667
5 Conventional rail/combined transport: Betuwe line ongoing 160 2913 4712
6 Railway line Lyon-Trieste-Divaca-Ljubljana-Budapest-Ukrainian
border ongoing 770 1900 32218
7 Motorway Igoumenitsa/Patra-Athina-Sofia-Budapest ongoing 1580 6931 12604
8 Multimodal connection Portugal/Spain with the rest of Europe ongoing -
9 Railway line Cork-Dublin-Belfast-Larne-Stranraer completed 502 357 357
10 Malpensa Airport (completed in 2001) completed - 964 964
11 Fixed rail/road link between Denmark and Sweden (completed
in 2000) completed 52.5 4158 4158
12 Nordic Triangle rail/road link ongoing 2517 2223 6966
13 United Kingdom/ Ireland/Benelux road link ongoing 1530 3149 3949
14 West Coast Main line ongoing 850 1002 16900
15 Galileo ongoing - 100 3200
16 Freight railway line Sines/Algeciras-Madrid-Paris ongoing 150 5000
17 Railway line Paris-Strasbourg-Stuttgart-Wien-Bratislava ongoing 672 1368 8164
18 Rhine-Meuse-Main-Danube waterway ongoing 70 - 137
19 Interoperability of the high-speed rail network on the
Iberian peninsula ongoing - 742 23746
20 Femer Bælt/Fehmarnbelt railway ongoing 19 - 2800
21 Motorways of the sea new project
- Motorway of the Baltic Sea (linking the Baltic Sea Member
States to those in Central and Western Europe)
- the Western Europe motorway of the sea (linking Portugal and
Spain, via the Atlantic Arc, to the North Sea and the Irish Sea)
- the South-Eastern European motorway of the sea (linking the
Adriatic Sea to the Ionian Sea and to the eastern Mediterranean
in order to include Cyprus)
- the South-Western Europe (Western Mediterranean) motorway
of the sea, linking Spain, France, Italy and Malta, and linking up
with the South-Eastern European motorway of the sea
22 Railway line Athina-Sofia-Budapest-Wien-Praha-Nürnberg/
Dresden new project
23 Railway line Gdansk-Warszawa-Brno/Bratislava-Wien new project
24 Railway line Lyon/Genova-Basel-Duisburg-Rotterdam/Antwerpen new project
25 Motorway Gdansk-Brno/Bratislava-Wien new project
26 Rail/road link Ireland/United Kingdom/continental Europe new project
27 “Rail Baltica”: line Warszawa-Kaunas-Riga-Tallinn-Helsinki new project
28 “Eurocaprail” on the railway line Bruxelles/Brussel-
Luxembourg-Strasbourg new project
29 Railway line on the Ionian/Adriatic intermodal corridor new project
30 Seine-Escaut Canal new project
Sources: European Commission, TEN-T implementation report 1998-2001, Commission TEN-T priority projects, 2002
5 ECMT: European Conference of Ministry of Transport. This is a definition of waterways
categories used in Europe
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EU - Priority projects"Essen list" adopted in1996and priority projects proposedby the European Commissionin 2001 and 2003
Projects by mode
Rail
Road
Motorways of the sea
Inland waterway
Interoperabilityof the Spanish high-speed network
Galileo
Figure 2-5: Priority transport projects of the European Union
Source: IWW. TEN-STAC 2004
40
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Since the number of TEN-T ports is not expected to change
significantly, the most important aspect is the potential for
intermodal activities and the connection to the inland TEN-T
network. This view is strengthened by the concept of “motorways of
the sea” laid down in the new TEN-T guidelines of April 2004.
Financial sources and total investments
The EU Member States obtain financial support for the
construction of TEN-T links from the TEN-budget, the Cohesion
Fund as well as in form of loans from the European Investment
Bank (EIB) and from the European Investment Fund (EIF, until
2000). Since this support accounts only for limited part of the
total costs, the role of Community funding is mainly to act as a
catalyst to lever other investment sources.
Between 1998 and 2001 the TEN-T budget provided EUR 2.1
billion. Approximately 50% of this amount was allocated to the
14 priority projects of the “Essen List”. The Cohesion Fund
contributed EUR 5.5 billion. Additionally, the commitments from
the European Regional Development Fund (ERDF) used for TEN-T
projects can be estimated to amount around EUR 3 billion. In the
same period, the loans of the EIB and the EIF averaged EUR 24
billion. Overall, European financial sources contributed more than
EUR 30 billion or 23% of the total investment in TEN-T projects
between 1998 and 2001. The highest share with almost two thirds
(62.4%) of Union support was allocated to rail while road projects
received 13.5%. Traffic management projects (including Galileo)
were supported with 14.5% of total Community support. The
remaining funds were granted to airports, inland waterways,
combined and multimodal transport and airports.
AT
BE FI FR DE EL IE IT LU NL PT ES SE UK
DK
1991
2001
0
6000
14000
4000
2000
8000
12000
1000010000
Motorways
km
AT
BE FI FR DE EL IE IT LU NL PT ES SE UK
DK
1990
2001
0
20000
40000
45000
15000
10000
25000
35000
3000030000
Railways
km
AT
BE FI FR DE EL IE IT LU NL PT ES SE UK
DK
1990
1998
0
4000
8000
3000
2000
1000
5000
7000
60006000
Inland Waterways
km
Figure 2-6: Length of motorway, railway and inlandwaterway networks in the EU-15
0
20%
10%
100%
90%
40%
30%
60%
50%
80%
70%
1996
1997
1998
1999
2000
2001
Belgium
Italy
Spain
Germany
France
Figure 2-7: Development of high speed railway network inthe EU-15
18000
16000
12000
8000
6000
20001000
0 0
3000
5000
6000
20002000
4000
4000
10000
14000
1996
1997
1998
1999
2000
2001
Passenger Volume - billion pkm (right axis)
Length - km
Figure 2-8: Development of length and passenger volumeson the high speed rail network in the EU-15
Source: Commission. Energy and Transport in figures
41
T022-079 2/05/05 14:03 Page 41
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
42
In accordance with the sustainable development priorities set for the
EU, investments in rail infrastructure increased significantly between
1996 and 2001. On roads, on the other hand, absolute investment
volumes remained fairly constant. Expressed in relative terms, the
modal share of total investments in 1998-2001 averaged 53.4% for
rail and 26.3% for road. Airports accounted for 11.2% and ports and
inland waterways for 9.1%. Altogether, the total investment in the
TEN-T network between 1996 and 2001 was around EUR 170 billion,
thereof approximately EUR 130 billion in the period 1998-2001.
National infrastructure programs
Transport planning processesPlanning processes in the EU-15 still vary significantly across
countries. In general, there is a tendency to enlarge the scope of
national transport infrastructure masterplans by integrating land use
policy, social cohesion, regional balance and protection of the
environment in a comprehensive planning process. Although
international transport is recognised in most countries as an
increasing component of transport volumes, references to the plans
of neighbouring countries in national masterplans can hardly be
found. This points to the fact that the TEN-T network is rarely
considered as a whole in the national plans. In contrast, European
integration and funding is a major argument for the prioritisation of
infrastructure projects for the New MS and the candidate countries.
Consequently, these countries do not consider European transport
policy merely as a possible source of funding for specific
international projects but treat it as an important element
complementary to their national transport policies.
Another observation relates to the fact that national concerns for
transport infrastructure investments differ between rather central
and peripheral European countries. Central countries like France,
Austria, Germany, Benelux and northern Italy are especially
concerned with transit traffic and focus on increases of capacity
and bypasses of high-density areas with a direct involvement of
the affected regions. On the other hand, peripheral countries,
which are more independent from international traffic in the
design of their network, particularly deal with the accessibility of
their network and the capacity of their cross-border points.
Central countriesIn Germany, after the development of the North-South corridors
in addition to the Rhine valley after unification, transport policy is
now focusing on East-West axes in order to cope with the
growing transport volumes on these links. In Belgium, the high-
speed rail links for passenger transport are the major projects in
the years to come. With respect to freight transport in the
Benelux countries, the development of the Rotterdam area, with
priorities given to inland waterways and rail, and the inland
Figure 2-9: TEN-T ports and their intermodality 2001
Road not categorised
Motorway
High quality road
Ordinary road
1996 2001 2010 20150
20%
80%
100%
40%
60%60%
Road
Not categorised
High speed line
Upgraded high speed line
Conventional line
1996 2001 2010 20150
20%
80%
100%
40%
60%60%
Rail
> EMCT class V
ECMT class V
ECMT class IV
< ECMT class IV
1996 2001 2010 20150
20%
80%
100%
40%
60%60%
Inland Waterways
Figure 2-10 : Estimation of the quality development ofTEN-T network in EU-15 by types of roads, railways andinland waterways up to 2015 according to current plans
Source: Planco, TEN-Invest, Essen 2003
T022-079 2/05/05 14:03 Page 42
EUROPEAN UNION ENERGY
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connection of Belgian ports are the outstanding projects on the
agenda. Since Austria is becoming a major transit country in an
enlarged European Union, its transport planning is based on a
vision of the development of major European corridors in relation
to national corridors. In northern Italy, the construction of new
rail links to the neighbouring countries (France, Slovenia,
Switzerland, Austria) and the improvement of access to maritime
ports are important elements of infrastructure policy.
Peripheral countriesDuring the last decades, Spain has almost completed its motorway
network. For 2005, it plans to start operating on the new link for
High-speed trains between Madrid and Barcelona. In the years to
come, further major efforts will concentrate on the construction
of a backbone network of new standard gauge links. Of special
relevance for Spain is the realisation of the interconnection with
its neighbouring countries Portugal and France. Portugal has also
made good progress in the completion of its motorway network,
with many current projects now dealing with cross border links to
Spain. In the Scandinavian area, infrastructure policy is facing two
major problems: the development of internal links, especially the
connection of maritime transport with inland infrastructure
routes, and the improvement of penetration corridors to the
European continent.
3. COSTS AND ACCESSIBILITY OF ENERGY AND TRANSPORT
The following sections assess the performance of the energy and
transport markets and their impact on companies operating in the
sector and the respective end-users.
Road
Rail
IWW
Ports
Airport
1996/1997
1998/1999
2000/2001
2002/2003
2004/2005
2006/2010
0
20%
80%
100%
40%
60%60%
Figure 2-11: Share of TEN-T investments by mode in theEU-15 until 2001 and estimation until 2010.
Table 2-6: Total investments in TEN-T infrastructure of the EU-15 in the period 1998-2001 per mode and country
in million EUR
Road Rail Inl. Waterway Ports Airports Total
Austria 639 2973 3 30 182 3827
Belgium 555 1507 320 1044 940 4365
Denmark 2050 3476 - 122 193 5840
Finland 469 501 16 397 229 1612
France 8373 9002 0 486 2139 20000
Germany 7567 9303 1460 2054 3522 23906
Greece 2223 1044 - 134 1904 5305
Ireland 1886 137 - 136 286 2446
Italy 1015 16114 - 204 915 18249
Luxembourg 62 18 - - 89 169
Netherlands 1550 7154 283 1395 2393 12775
Portugal 1376 1249 - 331 629 3586
Spain 3889 3998 - 2423 509 10818
Sweden 625 1472 - 356 201 2654
United Kingdom 1697 11121 - 647 327 13793
Total 33975 69068 2083 9759 14456 129342
Source: European Commission, TEN-T implementation report 1998-2001
• Energy prices have been falling steadily over the pastdecade. The sharpest reductions have occurred in the priceof electricity. Coal continues to be the cheapest source ofprimary energy.
• Energy Taxes and TPA charges vary widely by MemberState and by sector.
• An equivalent energy basket costs less in Member Statesin which energy market opening is more advanced. TPACharges were also systematically lower in these countries.
• The need to harmonise fuel taxes is still a major concern.
• The varied national infrastructure charging systems needsfurther harmonisation by common principles.
• Realisation of TEN-T priority projects will increaseaccessibility especially of peripheral countriessignificantly.
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EUROPEAN UNION ENERGY
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3.1. Cost drivers and comparative costs for users
Cost drivers common to energy and transport
Wholesale fuel prices Variations in international oil prices are directly reflected by
European wholesale prices, and affect transport activities through
the price of automotive fuels and oil products: but they also entail
a secondary and often overlooked effect on the costs of power
generation, and hence electricity prices. The latter effect arises from
the fact that gas prices are indexed (with a lag of around 6
months) on oil prices; the effect of movements in gas prices into
the power sector is magnified by nearly 100% because of the
generating efficiency of around 55%. Member States with heavily
traded gas markets such as the U.K. are increasingly using other
indices to price gas and have slowly begun to move away from the
oil indexation standard even if the resultant prices are often found
to be closely correlated to oil prices.
Real oil prices moved downwards till the mid 1990s, spiked
around 1996, and then continued to decline well into 1998. After
that year however, the trend reversed and oil prices began to
climb, attaining a 9-year high in 2000. Following the slump in
2001, prices have steadily risen, maintaining the upwards trend
started in 2002.
The fall of oil prices observed during the first half of the 90s
occurred in the context of a rising dollar, the currency in which oil
is traded in the world market. Between 1990 and 1995, the
USD/EUR ratio exhibited, in general terms, a downward slope
implying that the observed fall in real oil prices as measured in
2001 Euros corresponded in reality to an even steeper decline in
the world price for that commodity. The tendency is less clear
from 1995 onwards, where the value of the dollar began to
recede in comparison to that of the euro but where real wholesale
oil prices exhibited a more erratic behaviour.
European coal wholesale prices, which also depend upon the
world market price for that commodity, declined between 1990
and 2001. Although wholesale prices have fallen over the past
decade partly in response to a contracting demand from several
economic sectors, in particular from power generation sector, the
decreasing tendency was reversed in 2001 after a dry year forced
power producers to burn more coal to compensate for a reduced
offer of electricity from hydro-power.
Sector-specific cost drivers
Retail energy prices
Calculating the value of a typical energy basket at each Member
States’ retail prices (excluding taxes) makes a highly valuable
comparison of the competitiveness of the retail price structure
across Member States. Figure 2-13 presents the ordering of this
value for selected countries using the distribution by fuels and by
sectors of the EU-15’s Final Energy Demand in 2001 as the energy
basket and normalising its total value at EU-15 average prices to
100. The basket’s cost is highest in Italy, Belgium, Germany and
Spain and is lowest in Finland and the U.K., with the remaining
countries exhibiting intermediate values. The basket’s high price in
the first set of countries is mainly a result of their higher
electricity prices. The Netherlands, despite exhibiting a similar
value for electricity is at the lower end of the spectrum due to
low motor fuel and gas prices. The exercise also reveals that
energy prices to different sectors of the economy vary widely
across Member States. Italy’s price structure means that the
basket is relatively more costly to the residential and industrial
sectors, even if the value for the transport sector is not the
highest among the selected countries. The basket is cheapest in
the U.K. and the Finland, given that their markets exhibit low
prices to transport in the former country and low prices to
households, in the latter.
Between 1990 and 2001, real energy prices to the domestic and
tertiary sectors decreased for all fuels. Real electricity prices fell
almost steadily since 1990: their average rate of decline between
1990 and 2001 was nearly 4% per year. Heating oil, natural gas
and steam coal, also exhibited falling prices in real terms, albeit
less spectacularly, between 1990 and 2001. Steam coal continued
to be the cheapest energy source.
A grade has been given to each country ranging from 1 to 15
according to its price relative to the other countries, for each fuel.
By averaging the four grades, the average price position for each
country is obtained. As observed in the Table 2-7, the ranking for
prices to residential and commercial customers shows that U.K.,
Finland, France and Austria exhibited the best average fuel price
50
100
150
200
250
300
0.2
0.4
0.6
0.8
1.0
0.0
1.2
Crude Oil (Brent)
Natural Gas (German border)
Solid Fuel (ARA)
Exchange Rate (right axis)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2001 E
UR /
toe
USD
/EU
R
Figure 2-12: Average wholesale fuel prices in the EU-15
T022-079 2/05/05 14:03 Page 44
EUROPEAN UNION ENERGY
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45
positions, whereas Denmark, Luxembourg and Italy present the
least favourable price positions.
Real energy prices to the industrial sector have also decreased for
all fuels over the 1990-2001 period. The drop in the price of
electricity to industry was even more spectacular than that
observed for domestic and commercial customers because it was
not diluted by distribution costs: prices fell by an average 6% per
year between 1990 and 2001. The ranking of fuel prices for
industrial customers was different from that of residential and
commercial customers: the U.K found itself once more with the
best average position for this customer group, with France,
Austria and Spain amongst the countries with the lowest average
ranking. Denmark, Portugal and Greece closed the list with the
highest average ranking of prices to industrial customers.
Energy taxesNational energy tax systems are the result of a combination of
factors within each Member State, many of which have a long
history. As a result, energy taxes vary widely across the EU-15. For
instance, Italy, Sweden, Netherlands and Denmark levied the
highest residential energy taxes, whereas Belgium, Spain, France,
Ireland, Greece and the U.K. have chosen to levy relatively low
energy taxes from this sector.
Austria, Germany and France are the sole countries to have
applied taxes on natural gas sales to the power sector, although
the levies are not in excess of EUR 0.3/MWh. Taxes on fuel oil
sales to the power sector were more frequent and probably the
most homogeneous among Member States, with the highest
having been levied by the U.K. and Austria. On average, Member
States levied the highest energy taxes on residential customers,
followed by commercial customers, industrial sector customers
and power sector customers.
In October 2003, the EU Council of Ministers adopted a Directive
which widened the scope of the EU minimum rate system,
previously limited to mineral oils, to all energy products including
coal, natural gas and electricity.
By Fuel
0
160
20
60
120
140
40
100
80
IT BE
DE ES AT
FR EL IE NL
UK FI
Electricity
Motor Fuel
Natural Gas
EU-15 =100
EU-1
5
By Sector
0
160
20
60
120
140
40
100
80
IT BE
DE ES AT
FR EL IE NL
UK FI
Households
Industry
Transport
EU-15 =100
EU-1
5
Residential and Commercial Customers
2001 EUR/toe Heating oil Natural gas Steam coal Electricity Average
Price Rank Price Rank Price Rank Price Rank
United Kingdom 360 1 517 2 456 8 1316 5 4.0
Finland 464 4 234 1 486 10 1003 2 4.3
France 472 5 747 7 251 2 1250 4 4.5
Austria 477 6 617 4 239 1 1654 8 4.8
Spain 674 9 963 9 259 3 1459 6 6.8
Germany 431 3 624 5 513 11 1667 9 7.0
Sweden 745 11 - 12 375 5 1068 3 7.8
Greece 586 8 - 12 520 12 912 1 8.3
Belgium 383 2 654 6 785 13 1732 12 8.3
Ireland 524 7 757 8 423 7 1900 13 8.8
Portugal 969 13 - 12 300 4 1537 7 9.0
Netherlands 720 10 528 3 832 14 1693 11 9.5
Denmark 872 12 1058 11 464 9 2605 14 11.5
Luxembourg n.a. 15 n.a. 12 391 6 n.a. 14 11.8
Italy 970 14 1010 10 n.a. 14 1667 10 12.0
Table 2-7: Ranking of 2001 prices by fuel in the EU-15
Figure 2-13: Final energy demand of the EU-15, valued at each member state’s retail prices in 2001 (excluding taxes)
T022-079 2/05/05 14:03 Page 45
In particular, the Directive was intended to reduce distortions of
competition between Member States as a result of divergent
rates of tax; reduce distortions of competition between mineral
oils and the other energy products that were not previously
subject to EU tax legislation; increase the incentive to use energy
more efficiently (so as to reduce dependency on imported energy
and cut carbon dioxide emissions); and allow Member States to
offer companies tax incentives in return for specific undertakings
to reduce emissions. The Directive entered into force on 1st
January 2004.
Third party access (TPA) charges to electricity and gas infrastructure Due to the natural monopoly nature of electricity and gas
transmission networks in nearly every Member State, third party
access to transmission capacity is necessary to permit competition
in the electricity and gas markets.
A survey performed by the Commission for the Third
Benchmarking Report showed that Finland, the U.K., Sweden and
Greece had the lowest average tariffs for access to the medium
and low voltage power transmission networks. For medium
voltage networks, the average TPA charge ranged from EUR
10/MWh in Sweden to EUR 26/MWh in Germany. Italy charged
the lowest average tariff for TPA to its low voltage networks at
EUR 30/MWh, whereas the highest average charge was EUR
70/MWh in Belgium. Average TPA charges for the EU-15 stood at
EUR 17/MWh and EUR 46/MWh for medium and low voltage
networks, respectively.
The survey also showed that third party access charges to gas
transmission networks in the EU-15 also varied significantly. The
average TPA charge for delivery of up to 25 mcm in the EU-15
was EUR 2.4/MWh. The lowest charge for this range was observed
in the Netherlands at EUR 1/MWh, while the highest was in
Sweden with EUR 5.5/MWh.
For the 0.1 mcm range, the lowest average TPA charge was once
more in the Netherlands (EUR 2.8/MWh) and the highest was in
Ireland at EUR 14.8/MWh, with the EU-15 average settling at
EUR 7.6/MWh.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
46
1996
2001
2000
1999
1998
1997
1995
1994
1993
1992
1991
1990
Electricity
Fuel Oil
Steam Coal
0
200
400
600
800
1000
1200
1400
2001 E
UR /
toe
Industrial Sector
Natral Gas
Industrial customers
2001 EUR/toe Fuel oil Natural gas Steam coal Electricity Average
Price Rank Price Rank Price Rank Price RankUnited Kingdom 202 4 167 2 90 7 625 10 5.8France 198 3 233 8 141 11 469 2 6.0Austria 223 8 185 4 83 6 560 7 6.3Spain 232 9 218 7 69 3 547 6 6.3Ireland 237 10 212 5 66 2 573 9 6.5Finland 239 11 157 1 151 12 495 3 6.8Sweden 211 6 365 14 106 8 208 1 7.3Germany 172 2 278 12 271 14 534 5 8.3Italy 211 5 265 11 74 4 1107 14 8.5Netherlands 220 7 218 6 158 13 690 11 9.3Greece 246 13 319 13 122 9 495 4 9.8Portugal 263 14 252 10 74 5 860 13 10.5Denmark 241 12 241 9 128 10 782 12 10.8Luxembourg n.a. 15 n.a. 15 n.a. 15 n.a. 15 15.0
1996
2001
2000
1999
1998
1997
1995
1994
1993
1992
1991
1990
Electricity
Heating Oil
Coal
0
500
1000
1500
2000
2500
3000
2001 E
UR /
toe
Domestic and Tertiary Sectors
Gas
Figure 2-14: Average retail fuel prices in the EU-15
T022-079 2/05/05 14:03 Page 46
It should be noted that a direct comparison of gas and electricity
tariffs may be oversimplified: other factors such as quality of
service, main technical characteristics and environment of the
networks are not taken into account by the above analysis. With
some exceptions, the lowest tariffs were systematically observed
in the more open markets.
Automotive fuel prices and taxesAlthough some common rules on the harmonisation of the
structures of excise duties on mineral oils are in force since 1992,
prices for automotive fuel still vary widely across the EU-15, mainly
due to the differences in taxation. According to the Commission’s
White Paper ‘Time to decide’, further harmonisation in this area is
still necessary. With the exception of the United Kingdom, taxes on
diesel fuel are noticeable lower than for petrol in all countries,
ranging from approximately 60% of the petrol taxes in the
Netherlands, Finland, Belgium and Portugal up to 83% in Greece.
The countries with highest petrol prices are the United Kingdom,
Italy and Denmark, not surprisingly, the countries with the highest
tax rates. An exception is Germany, where the petrol prices are
relatively low compared to the tax rate. For diesel, the highest price
is found in the United Kingdom, which is also the only country with
a higher price for diesel than for petrol. Between 1996 and 2002,
the average price increase in the EU-15 for diesel was 26%, slightly
above the average increase of 21% in petrol prices.
Infrastructure charging
Charging policy and instruments
Besides the costs and taxes for fuel and vehicle use, the cost of
using transport infrastructure is a major component influencing the
mobility of people, the transportation of goods and the supply of
transport services in general. While charging for the railway
network is performed by national systems of distance and slot-
dependent rail track charges, road-pricing systems generally take
the form of time-based vignette solutions or distance-based
network charging systems. Additionally, certain passages like alpine
crossings, tunnels and bridges are priced separately. Vignette
solutions provide a more flexible instrument as they apply to all
vehicles and can consider the vehicle type, the frequency of
journeys and to a certain extent the network categories used.
However, an adequate reflection of the distance driven on
particular networks is not possible by vignette pricing systems.
Nevertheless, the little effort associated with their implementation
and operation has made them a standard instrument for road
pricing in some European countries. By contrast, sophisticated road
pricing schemes more accurately reflect the actual costs of using
transport infrastructures than taxes or vignette solutions do, as
they generally allow for differentiating charges by time of day,
location and vehicle type. These network pricing systems on
motorways have been applied with a long tradition in France, Italy,
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
47
Residential Sector
DK
EL
SENL
ITDEATFRFI
BEESUKPTIE
Gas Oil
Natural Gas
Electricity
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
EUR/MWh
Commercial Sector
IT
PT
ELSE
NLESATDEFRFIIE
UKDKBE
0.0 1.0 2.0 3.0 4.0
EUR/MWh
Fuel Oil
Gas Oil
Natural Gas
Power Sector
PT
BE
DEAT
FRIT
UK SENLIEELFIESDK
0.0 0.1 0.2 0.3 0.4
EUR/MWh
Coal
Fuel Oil
Natural Gas
Figure 2-15: Energy taxes in the EU-15
Industrial Sector
PT
AT
FISE
DKNLUKIEITELFRESDEBE
0.0 0.2 0.4 0.6 0.8
EUR/MWh
Coal
Fuel Oil
Natural Gas
T022-079 2/05/05 14:03 Page 47
the Brenner route and some other Alpine passes in Austria as well
as on selected motorways in Spain and Portugal. In Germany, a new
system is scheduled for introduction in 2005, while Austria already
put its new system into operation in January 2004. Usually,
charging of motorways includes charges for passenger cars and
heavy goods vehicles. However, the planned satellite-based system
in Germany will include only freight transport.
Diverse historical developments across Member States have resulted
in a very heterogeneous situation with a patchwork of national
charging policies exacerbating the fragmentation of European
transport taxes and charges and strongly opposing the fundamental
idea of the internal market. European action therefore concentrates
on new initiatives for harmonising road infrastructure charging
rules. The central objective of the European infrastructure charging
policy is the common implementation of the user pays and polluter
pays principles.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
48
Diesel
Petrol
2000
2001
1999
1998
1997
1996
1995
1994
1993
1992
1990
1991
0.0
0.6
0.8
1.0
1.2
0.4
0.2
EU
R p
er lit
re
2002
Figure 2-16: Development of average fuel prices in the EU-15 1990-2002
Medium voltage Rank Low voltage Rank Average rank
Estimated Approx. Estimated Approx.
average charge range high-low average charge range high-low
(EUR/MWh) (EUR/MWh) (EUR/MWh) (EUR/MWh)
Italy 13 n.k 2 30 n.k 1 1.,5
Finland 15 9-22 3 34 22-52 2 2.5
Sweden 10 8-11 1 38 33-45 5 3.0
U.K. 15 10-17 8 35 20-50 3 5.5
Spain 15 n.a. 7 45 n.a. 6 6.5
Netherlands 16 10-24 10 35 n.k. 4 7.0
Greece 15 n.a. 4 12 8
France 16 n.a. 9 50 n.a. 8 8.5
Luxembourg 15 10-20 5 12 8.5
Portugal 15 n.a. 6 12 9.0
Denmark 21 n.k. 12 45 n.k. 7 9.5
Ireland 17 n.a. 11 52 n.a. 9 10.0
Germany 26 20-39 15 55 40-75 10 12.5
Austria 24 18-36 14 60 44-75 11 12.5
Belgium 23 21-26 13 70 63-97 12 12.5
Table 2-8: Electricity TPA charges
Esrimated charge range (EUR/MWh)
25 mcm 0.1 mcm
Min Max Average Min Max Average Total Average
Netherlands 1 1 1.0 2.5 3 2.8 1.9
Belgium 1 1.5 1.3 3.5 4 3.8 2.5
U.K. 1.5 3 2.3 4 5 4.5 3.4
Denmark 2 2.5 2.3 5.5 6 5.8 4.0
Spain 2 2 2.0 6 6 6.0 4.0
Austria 1 4.5 2.8 1 14 7.5 5.1
Germany 1 3.5 2.3 9 12 10.5 6.4
Italy 1.5 3.5 2.5 12 13.5 12.8 7.6
Ireland 3.5 5 4.3 13.5 16 14.8 9.5
France 1.5 3 2.3
Luxembourg 1 1 1.0
Sweden 5.5 5.5 5.5
Source: Commission Third Benchmarking Report
Table 2-9: Gas TPA charges
T022-079 2/05/05 14:03 Page 48
Charging levels
Because of differences in the national infrastructure charging
policies, the level of charges varies widely across EU-15 states.
Charge levels are usually differentiated for different vehicle
classes (in road use) and for different patterns of network use
(in railways). Additionally, a high number of individual tariffs
exist for the use of priced road tunnels, bridges and alpine
crossings. Nevertheless, the national charging levels for freight
transport can be compared for certain EU-15 countries by using
a standard heavy goods vehicle with an average payload of
approximately 10 tonnes and a standard freight train with a
payload of 350 tonnes. Figure 2-21 shows that in general the
charge levels per tonne-kilometre in countries with a distance-
dependent road pricing system are higher for road freight
transport than for rail. Rail track charges vary between EUR 21
and EUR 1.50 per 100 tonne-kilometre with the highest track
charges in United Kingdom followed by Germany and Italy and
relatively low charges in Sweden and the Netherlands. Charges
for road freight transport are relatively low in Spain, Portugal
and Greece with around EUR 12 per 1000 tonne-kilometres and
especially low in the Eurovignette countries such as the
Netherlands and Denmark. The time-dependent charging regime
on roads together with the high number of kilometres driven
with a single heavy goods vehicle (HGV) per year lead to low
prices per vehicle-kilometre.
For passenger cars, the average charges on motorways per 100
vehicle-kilometres for the countries with a network pricing system
vary between EUR 3.50 in Greece and EUR 8 in Spain, though the
charges differ on regional sections of the motorways. In France
and Italy, the average charge per 100 vehicle-kilometres for
passenger cars is around EUR 5. Tunnels in the alpine region also
require extra payments. Similar charging levels exist in Portugal
and Spain. Most systems exclude motorways near the main cities
from charging. In Austria, for motorways and inter-urban
highways a vignette with a validity of 10 days is priced with EUR
7.60. For certain alpine crossings and tunnels such as the Brenner
motorway, additional charges are levied. Besides the Eurovignette,
Denmark and Sweden introduced road charges for the crossing of
the Great Belt between the isles of Fünen and Zealand and for the
Oeresund tunnel-bridge construction between Copenhagen and
Malmö connecting Denmark and Sweden.
3.2 Household expenditure and accessibility
Expenditure in energy and transport
Figure 2-22 presents an approximate measure of energy and
transport accessibility for EU-15 Member States based on the
proportion of household expenditure applied to these services. There,
countries are ordered from left to right by GDP per capita in
Purchasing Power Standards, once expenditure in energy and
transport has been deducted. Results show that accessibility is
lowest (i.e. households are left with a lower fraction of GDP per
capita) in the EU-15’s less mature economies, Portugal, Greece and
Spain, while accessibility is highest in the richer Nordic countries,
Austria, Ireland and Luxembourg. Furthermore, the exercise shows
that there is no direct relationship between a country’s relative
richness (as measured by GDP per capita) and the amount that a
household spends on its energy and transport needs (c.f. the cases of
France and Denmark). This decoupling occurs, among other things,
as a result of Member States’ diverging tax policies.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
49
1996
2002
0
0.40
1.20
1.40
0.20
0.60
1.00
0.800.80
UK IT DE SE DK FI NL
FR IE BE AT
ES PT LU EL
EU
R/L
itre
Figure 2-17: Prices of automotive diesel in the EU-15 U
K IT DE SE DK FI NL
FR IE BE AT
ES PT LU EL
1996
2002
0.0
0.40
1.00
1.40
1.20
0.20
0.60
0.800.80
EU
R /
Lit
re
Figure 2-18: Prices of petrol in the EU-15
DE
UK Nl FI ER D
K IT SE PT BE AT IE ES LU EL
Diesel
Petrol
0
0.10
0.60
0.70
0.30
0.20
0.5.
0.400.40
EU
R /
Lit
re
Figure 2-20: Taxation of diesel and petrol in the EU-15(2002)
DK
UK Nl IT BE SE FI AT IE EL ES FR LU PT DE
Diesel
Petrol
0
0.10
0.50
0.60
0.20
0.40
0.30
EU
R /
Lit
re
Figure 2-19: Fuel prices excluding taxes and excises in theEU-15 (2002)
Source: Energy and Transport in Figures 2003
T022-079 2/05/05 14:03 Page 49
For a household within the EU-15, aggregate expenditure in energy
and transport ranged from an estimated 13% to 22% of total
expenditure in 2001 (18% on average). Expenditure for transport
represented the larger part in every Member State, with an average
13% while expenditure for energy averaged nearly 5%.
Energy ExpenditureWhereas oil and gas represent the highest proportion of
consumption by volume, electricity accounts for the highest
proportion of household energy expenditure (excluding transport
fuels) due to its much higher unit price.
Indeed, in 1999 electricity represented over 40% of a household’s
expenditure in non-transport energy in all Member States except
Portugal, Greece, Ireland, Italy and the Netherlands. In Luxembourg,
the U.K., Sweden, France and Finland the share of households’
energy budget spent on electricity exceeded 60%. The second major
component of households’ energy expenditure was natural gas,
which accounted between 20 and 30% of energy expenditures on
average, rising to over 40% in countries where gas penetration is
high such as the U.K., the Netherlands and Italy. It is expected that,
with the decline in consumption of solid fuels and oil products for
heating in the EU-15 and with the ongoing development and
penetration of gas and electricity, the share of these two energies
will represent an ever increasing part of households’ energy
expenditures. Oil products exceeded 20% of total energy
expenditures only in Greece, Luxembourg, France and Ireland. In
turn, the value of heat consumption represented an important part
of total expenditures in Denmark (nearly 40%) and Germany
(>20%). Solid fuels (coal) represented the smallest share of
households’ energy budget in 1999, and only exceeded 20% of total
energy expenditures in Ireland.
Transport Expenditure
During the last decades, transport volumes and motorisation have
developed in parallel with the increase of real GDP, and the share of
household expenditures for transport remained nearly constant
between 11% and 15% for most EU-15 countries between 1995 and
2002. Only Greece shows an increasing but still lower share of 8.5%.
However, a strong differentiation of taxation schemes in the
transport sector as well as culture-specific factors cause significant
variations of transport indicators in these countries. Recent statistics
show, for example, that ecological taxes (on top of increasing oil
prices) have resulted in declining passenger road transport volumes
for Germany, while volumes are still increasing in the other
countries. Similarly the Danish taxation strictly limits the growth of
the low motorisation level. These observations indicate that
household expenditures for transport have reached a share that is
not likely to increase significantly in the future, especially if no
significant rise in economic growth occurs. Increasing prices for
energy and transport are thus likely to induce changes in
households' mobility behaviour.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
50
EU
-15=
100
0
250
200
150
100
50
0
10%
20%
25%
5%5%
15%
Transport Exp./ Household Exp.
Energy Exp./ Household Exp.
GDP/capita in PPS (right axis)
PT EL ES DE IT FR UK FI BE
DK SE AT
NL IE LU
Figure 2-22: Estimated households’ expenditure in energyand transport in the EU-15 and GDP per capita in PPS,including taxes (2001)
Electricity
Gas
Coal
Oil Prods.
Heat
0 20 40 60 80 100 120 140
ELPT
LU
ESIEITFI
NLBE
SEFR
ATDEDKUK
Figure 2-23: Breakdown of energy expenditure perhousehold (1999)
AT
DK FI FR DE EL IT NL PT ES SE UK
Rail
Road
0
25
30
10
5
20
1515
EU
R /
1000 t
km
Figure 2-21: Infrastructure charges for freight transport onroad and rail per 100 tonne-kilometre*
*HGV : 10,2 t payload ; freight train : 350 t payload, Source: IWW
Total average energy expenditure per household in the EU-15 =100
T022-079 2/05/05 14:03 Page 50
Public service and vulnerable customers
EnergyUnder EU law, public service obligations are understood as those
that an energy company might not cover in part (or at all) based on
a normal commercial consideration, such as continuity of supply or
non-discriminatory supply to all citizens and regions.
With regards to universal service, nearly all households in the EU-15
were connected to the electricity grid in 2001. According to the
Commission’s annual energy markets assessment publication6, only
in Austria – where figures stated that 99.5% of households were
connected to the network – did the number of connected
households not reach the 100% mark.
The situation was altogether different for natural gas, which
contrary to electricity is a substitutable fuel and is not an essential
need. There, the number of households connected to the gas grid
varied significantly across Member States, respectively ranging from
98% and 80% in the Netherlands and the U.K., to 17% and 15% in
Austria and Denmark. No information was available for Finland,
France, Greece, Portugal and Sweden. According to the same
benchmarking report, whereas every country in the EU-15 had a
predetermined or regulator-designated electricity supplier in 2001,
only Belgium, Denmark, France and Germany had established a
default supplier for gas.
The electricity and gas Directives that were in force in 2001 laid
down provisions for vulnerable customers, such as special tariffs,
prepayment meters, a free amount of supply (for electricity), and
restrictions on disconnection. The second benchmarking report
indicated that advances in protection of vulnerable customers had
advanced very slowly in the electricity sector and not at all in the
gas sector. In the former sector, only Finland, Ireland, Portugal and
the U.K. had established special tariffs; prepayment meters were only
available in the U.K. and Ireland and a free amount of supply was
only offered in Belgium and Ireland. Restrictions on electricity
disconnection were more common among Member States, although
less than half of them had implemented such measures. In regards
to implementing provisions for vulnerable customers, the gas sector
was also lagging behind electricity. Although this may be partly
attributable to the fact that gas is less of an essential commodity
than electricity, in some countries special tariffs were nonetheless
inexistent among Member States and only Belgium and the U.K.
offered pre-payment meters as well as restrictions on disconnection.
The new Directives adopted in 2003 include new provisions to
continue to increase the protection of vulnerable customers.
Regional accessibility transportThe improvement of European transport infrastructure through
the completion of the TEN-T priority projects is an important
element to enhance the goals of establishing the internal market
and increasing social cohesion in the European Union. The positive
impacts of the construction of this new transport infrastructure
on regional accessibility can be measured by comparing the
situation in the year 2000 with a European infrastructure scenario
containing those elements of the TEN-T infrastructure that can
realistically be completed by 2020 (see Figure 2-25). The
comparison is based on an index of centrality for both freight and
passenger transport, which takes into account the travel and
transportation times on the two land-based modes (rail and road)
and weighs these times according to the regions' population (for
passenger transport) and GDP (for Freight transport). In this
calculation, the scaling of these regional masses is done in such a
way that the impact of population and GDP on centrality
decreases by 50% for a travel distance of 3 hours. For passenger
transport, the diagrams show considerable improvements of
regional accessibility for the relatively peripheral countries Spain,
the United Kingdom and Ireland as well as in wide parts of Italy
and the south of Finland. Albeit less clearly, this also seems to be
true for more central countries like France, Germany, Austria and
for the wider Stockholm area. With respect to freight transport,
the results illustrate that central and eastern European New MS
will make substantial centrality gains from the assumed
infrastructure scenario in 2020, as will certain regions in Finland
and Sweden, although to a lesser extent. The impacts on regions
within the European Union’s economic centre of gravity will be
very moderate. Modest changes in the accessibility of freight
transport for some EU-15 countries underlie the assumption of
increasing motorway charges of heavy goods vehicles in various
countries until the year 2020, together with the use of
generalised costs, which include cost of time and cost of distance.
Thus, savings of transport times will be compensated by an
increase of other cost components.
4. LINKS BETWEEN THE ECONOMY, TRANSPORT AND ENERGY
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
51
0% 20% 40% 60% 80% 100%
SE
NL
ELFRFI
DKATBE
ESIE
LUDEIT
UK
Figure 2-24: Households connected to the gas grid (2001)
6 Commission second benchmarking report on electricity and gas markets.
• GDP grew from 1993, and then declined in 2001.
Average yearly growth between 1990 and 2001
was 2.1%.
• Growth in consumption of primary energy was less than
proportional to economic growth due to progressive
industrial restructuring coupled with efficiency-
increasing measures.
• Freight transport volumes increased significantly
between 1990 and 2001. Road and intra-EU sea
transport grew on average by 2.7% and 2.6%
respectively per year. Inland waterway transport services
rose by 1.5% and rail freight transport by 0.5% per year.
Increasing freight transport volumes have been
accompanied by clear shifts to road transport,
particularly at the cost of rail transport.
T022-079 2/05/05 14:03 Page 51
4.1 Economic drivers common to the energy and transport sectorsActivity levels in the energy and transport sectors are determined
principally by overall economic performance (Gross Domestic
Product), the volume of industrial production (Industrial
Production Index), consumer expenditure, climate conditions and
demographics. To a certain extent, the evolution of energy and
transport activities is also sensitive to the wholesale price of
primary energy, especially oil, which is an important source of
energy for both industries.
Figure 2-26 illustrates the relative evolution of the principal drivers
common to energy and transport activities. Between 1990 and
2001, the EU’s real GDP grew by over 25%, passing from nearly EUR
6 100 billion to over EUR 7 600 billion (at 1995 market prices and
exchange rates), representing nearly 30% of total world output. In
a period of moderate economic growth experienced by most of the
developed world, the EU witnessed uninterrupted growth between
the slowdown in 1993 up to 2001. Average growth, which was
2.1% per year over the 1990-2001 period for the 15 countries,
dropped to 1.6% between 2000 and 2001. Among Member States,
however, the speed of economic development varied significantly
(see Figure 2-28 below). Among the best performers were some the
EU’s less mature economies such as Ireland, Greece and Spain,
which along with Finland achieved average growth rates as high as
7.6% p.a. over the 11-year term (for Ireland). On the other hand,
Germany, the EU’s largest economy, grew on average by no more
than 1.5% per year. In recent years, its already modest growth rate
further dropped to approximately 1%. In between the two ends, the
EU’s average growth floated around that of the three other
heavyweights: France, Italy and the U.K., which expanded their
economies by around 2.2% per year between 1990 and 2001.
Industrial production, which declined in the first half of the
1990s, grew steadily from 1993 onwards. Consumer expenditure,
which measures the volume of households’ purchases, has also
been rising steadily since 1994. In fact, its more than proportional
growth with respect to GDP, in particular during the later half of
the 1990s, is a good measure of the favourable economic climate
that prevailed during that period. Figure 2-26 also shows that the
relation between the tend of the GIC-weighted average of fuel
prices and economic and industrial activity is not direct:
perturbations of fuel prices have not had a unidirectional effect
on economic indicators.
Figure 2-28 illustrates certain decelerations in the development of
economic activity in the short term compared to the medium
term. This is especially the case for Ireland, whose impressive 10-
year average annual growth rate of 7.6% slowed down to just
over 5% p.a. if measured over the last three-year period. Other
slowdowns were observed in Luxembourg, the U.K. and the
Netherlands. Conversely, Greece was the sole country within the
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
52
Source: NEA, COWI, IWW, NESTEAR, PWC, TINA, IVT, Herry, Mkmetric. TEN-STAC: Scenarios, traffic forecasts and analysis of corridors onthe trans-European network. Study on behalf of the European Commission. Final inception report. 2003
Figure 2-25: Change of regional accessibility in Europe through the realisation of the TEN-T Priority-projects defined in 2001by 2020 (base year is 2000, calculated by using an index of centrality)
T022-079 2/05/05 14:03 Page 52
EU to present a higher average annual growth rate in the short
term in comparison to the medium term.
4.2. Energy-specific driversEnergy consumption is mainly a function of overall economic
performance and weather. At constant efficiency and structural
conditions, expanding economic activity inherently requires more
energy. However, the rate of growth of energy demand in the EU
has typically been lower than that of GDP, mainly due to
important structural changes within the economies (productivity
growth and evolution towards post-industrial production, but also
owing to increases in energy efficiency and consumption patterns.
Weather is the second principal driver of energy consumption.
Colder years imply that more primary and electrical energy is
consumed for heating in the winter. More recently, warmer years
have also begun to increase energy consumption through the
growing use of air conditioning, particularly in southern Europe.
Heating Degree-days (HDD) is the measure used to reflect the
impact of climate on energy demand. A HDD is defined as 18° C
minus the daily average temperature. The number of HDD in a year
is simply the sum of the daily figures. The relation between final
energy demand and climate variations is shown in Figure 2-29.
Colder years (peaks) are associated with higher final energy
demand. In fact, due to changing climate conditions over the
years, demand can only be accurately compared to actual
economic fluctuations if corrected for the effects of weather.
Once weather effects are adjusted for7, the true correlation
between economic activity and the main indicators of energy
activity become apparent (see Figure 2-30): gross inland
consumption (or GIC, often also referred to as Total Primary Energy
consumption, or TPE) and final energy demand (FED) both follow
the same trend as the many economic indicators. In particular, the
figure illustrates the close connection between industrial
production and the two main energy indicators. It is worth noting
that apparent surges in final energy demand such as those
occurred in 1996 and 2001 (cf. Figure 2-29) were in fact
reductions, if one considers the weather corrected figure. Indeed,
when the extra effect from the cold year is removed, it is easy to
see that primary and final demand for energy actually declined in
1996 and 2001, hand in hand with the declines in GDP and
industrial production during those years.
4.3. Transport-specific drivers Transport activities are predominantly driven by demographic
trends, behavioural patterns, technological structures, disposable
income, industrial output and trade. Though the individual time
budget used for mobility has remained nearly constant for
decades, passenger transport performance has been increasing
continuously. To some extent the slowly growing population
accounts for this development, with population increases ranging
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
53
70
80
110
140
100100
120
9090
130
1991
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Consumer Expenditure
Population
Industrial Production
GDP
GIC-Weighted Wholesale Prices
Index
1995 =
100
Figure 2-26: Principal economic drivers in the EU-15
0
800
1600
2000
400
1200
200
1000
1800
600
1400
1%
2%
3%
4%
5%
6%
0%
8%
7%
2001 GDP
IE LU EL ES FI PTFR UKSE NLIT AT
BE
DE
DK
Ave
rage
Gro
wth
Rat
e
GD
P (
EU
R b
illion a
t 1995 p
rice
s)
3-year AGR 10-year AGR
Figure 2-28: EU-15 real GDP in 2001 and average annualgrowth rates (AGR) by member state
9%5%
3%
3%
2%
9%
24%18%
15%
15%
DE
FR
UK
IT
ES
NL
BE
SE
AT
PT
EL
DK
FI
IE
LU
Figure 2-27: Distribution of GDP in the EU-15 (2001)
GDP in 2001: EUR 7634 billion (1995 prices)
7Corrected by dividing demand by (HDD of the year / Average HDD between
1990-2001)^0.5
T022-079 2/05/05 14:03 Page 53
between from slightly more than 2% in Italy to slightly less than
6% in the Benelux region between 1990 and 2001. However, more
significant is the growth in income, which leads to higher car-
ownership and modal choice in favour of faster modes, especially
air transport. Together with the slightly increasing population and
stable time budgets for transport activities, the increasing travel
speed has lead to significantly longer travel distances that
constitute the major driving force of growing passenger transport
performance in the EU-15.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
54
800
820
840
860
900
920
940
960
980
880
2000
2200
2400
2600
2800
3000
3200
FED (mtoe)
Heating Degree Days (right axis)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
mto
e
Figure 2-29: Correlation of climate and final energydemand in the EU-15
1990 2001 2001/ 2001/1991* 2000*
Austria GDP (1995EUR billion) 163 208 2.2% 0.7%
GIC (mtoe) 25 30 1.9% 6.8%
Electricity Demand (mtoe) 3 4 2.4% 7.3%
Final Energy Demand (mtoe) 19 24 2.2% 5.3%
Belgium GDP (1995 EUR billion) 196 244 2.0% 0.8%
GIC (mtoe) 47 56 1.5% -2.7%
Electricity Demand (mtoe) 5 6 2.7% 0.8%
Final Energy Demand (mtoe) 31 37 1.6% 0.8%
Denmark GDP (1995 EUR billion) 125 159 2.2% 1.0%
GIC (mtoe) 18 20 1.1% 1.4%
Electricity Demand (mtoe) 2 3 1.1% 1.7%
Final Energy Demand (mtoe) 14 15 0.6% 1.3%
Finland GDP (1995 EUR billion) 102 128 2.1% 0.7%
GIC (mtoe) 29 33 1.3% 1.8%
Electricity Demand (mtoe) 5 6 2.5% 2.5%
Final Energy Demand (mtoe) 22 25 1.2% 0.5%
France GDP (1995 EUR billion) 1128 1382 1.9% 1.8%
GIC (mtoe) 223 262 1.5% 3.1%
Electricity Demand (mtoe) 24 32 2.5% 2.7%
Final Energy Demand (mtoe) 136 156 1.2% 4.8%
Germany GDP (1995 EUR billion) 1701 2070 1.8% 0.6%
GIC (mtoe) 356 349 -0.2% 2.6%
Electricity Demand (mtoe) 36 39 0.9% 1.6%
Final Energy Demand (mtoe) 227 215 -0.5% 0.7%
Greece GDP (1995 EUR billion) 85 111 2.5% 4.1%
GIC (mtoe) 22 29 2.4% 3.1
Electricity Demand (mtoe) 2 4 4.2% 3.2%
Final Energy Demand (mtoe) 15 19 2.5% 3.3%
Table 2-10: Relative evolution of GDP and energy activity in the EU-15
90
95
100
110
115
120
125
130
105
GDP
Weather Corrected FED
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Industrial Production
Figure 2-30: Correlation of energy and economic indicatorsin the EU-15 (1990=100)
T022-079 2/05/05 14:03 Page 54
Whether users, young or old, decide on individual or public
transportation depends on life-styles, habits and exogenous
incentives. Setting the right incentives may result in behavioural
changes, if, and only if, individual thresholds are overcome in favour
of a change of habits and daily routines. In general, high quality of
services and cheap tariffs for seniors, families and youngsters push
the demand for public transport services in a direct way. Indirectly,
public services could benefit from the taxation of or charging for
the full user cost of competing motorised transport as well.
Considering freight transport, behavioural changes of households
can also affect the development of transport volumes. This is true if
changing activity patterns finally result in an increasing or
decreasing demand for goods and services. In that respect especially
the growing significance of e-commerce may alter freight transport.
More important for freight transport are organisational and
structural changes of the industry. Globalisation, ‘just-in-time
production’, ‘day-by-day delivery’ and an increasing diversification
of production constitute the most prominent examples. In order to
fulfil these new requirements of industries, transport undertakings
improved logistics and renewed their vehicle fleets, which in turn
enhanced the degree of flexibility.
Changing production processes have diverging effects on
transport activities and can only be estimated in a case-by-
case study. However, in recent years, the level of industrial
output proved to be the most important driver for freight
transport performance. In general, growing economies
presented increased freight transport activity despite the
ongoing process towards a service-dominated economy.
Consequently, real GDP growth is an important growth driver
for the sector. The relatively strong correlation of GDP and
freight transport activity (for all modes) can be observed in the
majority of cases. Figure 2-31 shows that this coupling trend is
exemplary in the case of the Netherlands. Economic
development in Spain and to some extent in Austria was
accompanied by even higher growth rates of tonne-kilometres
compared to GDP. Spain's peripheral position and strong
growth in its economy accompanied by increasing participation
in the Single Market are responsible for longer distances and
subsequently strongly increasing tonne-kilometres. Austria’s
stronger growth in transport activity compared to GDP can
again be explained by its geographical position. The alpine
transit (by road and rail) mainly contributes to the high freight
transport performance. Conversely, the decoupling of GDP and
transport trends, as could be expected in the increasingly
service-oriented EU-15 economies, can hardly be identified.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
55
Ireland GDP (1995 EUR billion) 40 86 7.1% 5.7%
GIC (mtoe) 10 14 3.1% 3.2%
Electricity Demand (mtoe) 1 2 5.3% 3.6%
Final Energy Demand (mtoe) 7 11 3.8% 2.8%
Italy GDP (1995 EUR billion) 789 938 1.6% 1.8%
GIC (mtoe) 155 177 1.2% 0.5%
Electricity Demand (mtoe) 17 22 2.4% 1.8%
Final Energy Demand (mtoe) 109 130 1.6% 3.0%
Luxembourg GDP (1995 EUR billion) 11 19 4.9% 1.0%
GIC (mtoe) 4 4 0.5% 3.8%
Electricity Demand (mtoe) 0 0 2.9% -1.5%
Final Energy Demand (mtoe) 3 4 1.0% 4.1%
Netherlands GDP (1995 EUR billion) 286 386 2.8% 1.3%
GIC (mtoe) 67 78 1.4% 2.6%
Electricity Demand (mtoe) 6 8 2.8% 1.5%
Final Energy Demand (mtoe) 43 51 1.6% 2.1%
Portugal GDP (1995 EUR billion) 75 101 2.7% 1.7%
GIC (mtoe) 17 24 3.3% 0.5%
Electricity Demand (mtoe) 2 3 4.9% 4.1%
Final Energy Demand (mtoe) 11 17 4.1% 2.5%
Spain GDP (1995 EUR billion) 415 554 2.7% 2.7%
GIC (mtoe) 89 126 3.2% 2.8%
Electricity Demand (mtoe) 10 16 4.4% 6.6%
Final Energy Demand (mtoe) 57 83 3.6% 4.8%
Sweden GDP (1995 EUR billion) 184 225 1.8% 0.8%
GIC (mtoe) 47 52 0.8% 7.8%
Electricity Demand (mtoe) 10 11 0.9% 3.1%
Final Energy Demand (mtoe) 31 33 0.8% -3.9%
United Kingdom GDP (1995 EUR billion) 797 1022 2.3% 2.0%
GIC (mtoe) 210 232 0.9% 0.8%
Electricity Demand (mtoe) 22 27 1.8% 1.1%
Final Energy Demand (mtoe) 137 152 1.0% 0.5%
EU-15 GDP (1995 EUR billion) 6098 7634 2.1% 1.5%
GIC (mtoe) 1319 1486 1.1% 2.1%
Electricity Demand (mtoe) 145 183 2.1% 2.4%
Final Energy Demand (mtoe) 861 971 1.1% 2.1%
* Compound Average Annual Growth Rate
T022-079 2/05/05 14:03 Page 55
Only Ireland and Sweden (although only in the late 1990s)
show higher GDP growth rates relative to transport activity.
In fact, the coupling of the two trends is linked to another
dimension of economic activity. Over the period, growth of
international trade clearly exceeded GDP development. Total EU
exports added up to more than EUR 2 500 billion in 2001,
significantly boosting transport activity.
4.4 Changes in activity levels
Gross inland consumption (GIC) of primary energy
The EU-15 is among the largest energy-consuming regions in the
world. In 2001 it accounted for about 15% of world consumption. In
absolute terms, the demand for primary energy in the EU grew at an
average annual rate of 1.1% between 1990 and 2001, and the
volumes consumed accelerated in recent years: their compound
annual growth rate rose to an average 1.6% per year in the 1999-
2001 period, and reached 1486 mtoe in 2001, a 2.1% increase with
respect to the previous year. The rise however, is largely attributable
to climatic conditions. Indeed, when demand is corrected for climate
variations, the situation is quite different: weather-corrected GIC
grew at the slower pace of 0.8% per year between 1990 and 2001.
Moreover, the apparent increase of GIC in 2001 with respect to the
previous year was, after weather correction, actually a contraction of
-2.6%, reflecting the deceleration of economic activity in that year.
The EU’s main source of primary energy continues to be crude oil, for
which demand continued to expand as a result of an increasing use
of road transport, and despite the structural changes mentioned
above. In 2001, the EU consumed over 612 mtoe of oil, representing
just over 41% of its total primary energy requirements. Although
demand for oil grew at around 1% per year over the 1990-2001
period, demand in 2001 retreated by 0.7% with respect to the
previous year. Natural gas is the number two component of the EU’s
primary energy needs: consumption relative to other sources of
energy continued to increase and the absolute volumes consumed
rose at over 4% per year between 1990 and 2001. Consumption in
2001 was nearly 344 mtoe (a 2.4% rise over the previous year),
which represented nearly a quarter of GIC within the EU. The third
largest component of GIC is nuclear energy, which accounted for
some 15.5% of the EU’s total primary energy requirements. Higher
utilisation of installed nuclear capacity allowed consumption to rise
in 2001 by 3.2% with respect to previous year.
Primary consumption of solid fuels (hard coal and lignite) rose to
nearly 217 mtoe in 2001, or almost 15% of the EU-15’s gross inland
consumption. Solid fuel intake is the only one that has declined in
the medium term. In fact, over the 1990-2001 period, the compound
annual growth rate for lignite (-5.5%) was lower than that of coal (-
2.2%). In the shorter term, consumption of lignite grew over 8% in
2001, as a result of a particularly dry year, but accounted for a mere
3% of total primary consumption, whilst hard coal continued to
represent just over 11%.
The consumption of primary energy from renewable sources
(hydropower, wind & solar energies and biomass & wastes)
presented the fastest growth in the EU-15 in the short term and was
second only to gas in the medium term, though it remained the
smallest component of GIC through 2001. Whereas the average
annual growth rate between 1990 and 2001 was 3%, consumption
of renewable energies grew by 4.8% per year in the 1999-2001
period. With an intake of more than 92 mtoe in 2001, renewable
energies represented 6.2% of the EU-15’s GIC.
At a Member State level, the breakdown of primary energy
consumption varies widely. The most significant extremes are France,
which derived almost 42% of its primary energy supplies from
nuclear energy in 2001; the oil-intensive economies of Belgium,
Italy, Portugal and Spain, where that fuel represented between 56%
(Belgium) and 46% (Spain) of their gross inland consumption for the
same year; and the Netherlands and the U.K., where important gas
reserves continued to allow these countries to respectively obtain
45% and 37% of their primary energy requirements from gas alone.
Austria, Finland and Sweden shone by their high use of renewable
energies – due mainly to their natural endowment of hydraulic
power – obtaining between 22% (Austria) and 29% (Sweden) of
their primary energy supplies from this source.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
56
100
200
ES GDP
NL GDP
SE GDP
ES tkm
Nl tkm
SE tkm
300
400
500
600
700
40
80
100
120
140
160
180
60
1995
1996
1997
1998
1999
2000
2001
EUR
bill
ion (
PPS)
billi
on t
km
Figure 2-31: Decoupling of freight activity and economicoutput in selected EU-15 countries
100
200
300
4000
500
600
700
200
400
600
800
1000
1200
1400
1600
Oil
Natural Gas
Coal
Nuclear
Renewables
GIC (right axis)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
mto
e
mto
e
Figure 2-32: Gross inland consumption by source in the EU-15
T022-079 2/05/05 14:03 Page 56
Final energy demand (FED)
The households, commerce and tertiary sector represents the bulk
of final energy demand in the EU-15. In 2001, final energy demand
from that sector amounted to 389 mtoe, or just over 40% of the
total. Second in place was final demand from transport, which
accounted for 32% of the total in the same year. Industry’s final
demand for energy represented nearly 28% of the EU-15’s total
(270 mtoe), although an additional 93 mtoe were consumed by
industry for non-energy uses such as feedstock.
A common feature of final energy demand among Member States
is the predominance of petroleum products in the energy mix,
again a result of the importance of road transport and high
motorisation within the developed EU-15 economies. In fact, with
the exception of Finland and Sweden, petroleum products
represented over 41% of final energy demand in every Member
State and even exceeded the 60% mark in Greece, Ireland and
Portugal. At the aggregate level, petroleum products accounted
for 46% of final energy demand in the EU-15.
The second major component of final energy demand was natural
gas, which had a 24% (or some 234 mtoe) market share in the
EU-15’s total final demand in 2001. In Belgium, Germany, Italy
and the U.K., final consumption of natural gas exhibited a market
share in excess of 26% of final energy demand, and reached over
34% in the last country. At the other end of the spectrum, final
consumption of gas represented less than 6% of the total in
Finland, Sweden and Greece.
FED of electricity ranked third at the EU level, representing over
20% (196 mtoe) of total final energy demand in 2001. In the
majority of Member States, FED of electricity represented more
than 18% of the total, with the exception of Luxembourg (13.1%)
and Ireland (16.9%), which exhibit petroleum products-intensive
FED, and the Netherlands (16.8%), where a long history of
domestically available gas has favoured a high rate of penetration.
Electricity’s share of FED was highest in Sweden and Finland, where
it respectively attained 34% and 27% of the total in 2001.
Taken together, the remaining sources of energy (solid fuels,
renewable energies and derived heat) accounted for just below
10% of final energy demand in the EU-15 in 2001. Again, Finland,
Sweden and Austria stood out by their higher final demand for
renewable sources of energy, which exceeded 10% of the total in
all cases. On the other hand, the use of solid fuels for final energy
consumption is relatively homogeneous across Member States,
ranging from 2 to 9% of the total.
Industrial sector
FED from this sector experienced a slow expansion over the period
between 1990 and 2001, exhibiting an average annual rate of 0.1%.
That figure reflects, on the one hand, the positive effect of sustained
growth in aggregate economic activity over the period, the
countervailing effects of savings and efficiency gains in industrial
energy use, and a switch in the fuel mix, along with the more
fundamental restructuring of the European industrial sector, on the
other. The restructuring of the European industry includes renewed
investment, higher utilisation of installed capacity, relocation of
energy and labour-intensive production units and the continued
development of small and medium-sized enterprises specialised in
high value-added products. The effects on energy consumption
arising from industrial restructuring within the EU-15 are illustrated
in Figure 2-35, which clearly depicts the generalised contraction in
final energy demand. Almost all energy intensive sectors, with the
exception of paper and printing, reduced their consumption of final
energy by some 0.8% per year between 1990 and 2001. The largest
reductions of final energy consumption occurred in the energy
intensive iron & steel industry, but also in the textiles, leather &
clothing industries, both of which respectively reduced their intake
by 3.3 and 4.1% per year, reflecting to some extent the
implementation of efficiency enhancing measures in the former, but
more importantly the re-location of production units to non-EU-15
countries offering lower energy and labour costs. Conversely, the
paper and printing industry – a sector that grows hand-in-hand with
a services-intensive economy and whose re-location is less
technically viable due to the high transportation costs of the goods
produced – was the sole sub-sector that experienced a positive
average annual growth rate of 2.5% over the 11-year period.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
57
100
150
200
450
300
400
450
50
350
200
400
600
800
1000
1200
HouseholdsTertiary
Industry
Transport
Final Non- Energy Demand
FED (right axis)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
mto
e
mto
e
Figure 2-33: Final energy demand by sector in the EU-15
100
150
200
300
350
450
500
50
0 0
250
400
200
400
600
800
1000
1200
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
mto
e
mto
e
Coal Electricity
Derived Heat
FED (right axis)
RenewablesPetroleum Products
Gas
Figure 2-34: Final energy demand by source in the EU-15
T022-079 2/05/05 14:03 Page 57
In the short term however, results were more diverse. From 1997
onwards to 2001, final energy demand from nearly all industrial
sectors showed positive annual average growth rates ranging
from 1.1% (non-metallic mineral products) to 2.3% (paper and
printing), with the exception of the iron & steel and the textiles,
leather & clothing industries, which continued to recede (-0.1%
and -2.1%, respectively).
With regards to the fuel mix, the use of solid fuels and crude oil
and petroleum products in the industrial sector declined steadily
between 1990 and 2001, with average annual reduction rates of
-4.7% and -0.7%. The use of gas, electricity and derived heat, on
the other hand, experienced continued growth over the same
period. In particular, final consumption of the first two fuels grew
by about 1.5% per year and they passed from respectively
representing 29% and 26% of industrial final energy consumption
in 1990 to 34% and 30% in 2001.
Households and tertiaryFinal energy demand from the households and tertiary sectors is
directly linked to climatic conditions, given that a large part of
their demand is driven by energy consumption for space heating.
The high correlation between climate and demand is illustrated in
Figure 2-36. Weather-corrected final energy demand from the
households and tertiary sector experienced three clearly distinct
periods between 1990 and 2001. Growth occurred between 1990
and 1992 and then again between 1994 and 1999, after the
recession in 1993. In 2000 however, demand dropped again in
weather-corrected terms, but went back up in 2001 and settled
just over its 1998 level, at 389 mtoe.
The bulk of final energy demand from this sector was met by natural
gas, which represented 36% in 2001. Electricity and oil products
followed, with 28% and 25%, respectively. Demand for natural gas
and electricity increased the most over the period between 1990 and
2001. Weather-corrected demand for those energy sources
respectively grew by 2.9% and 2.3% per annum over the period,
while year-on-year growth in 2001 was much slower in weather
corrected terms. As in the industrial sector, increased demand for the
latter two fuels has continuously displaced demand for solid fuels
and petroleum products in the fuel mix. Demand for solid fuels in
the households and tertiary sector thus followed the general
downwards trend for this energy source, and fell by an impressive
14.5% per year between 1990 and 2001, passing from 27 mtoe
(about 8% of households and tertiary weather corrected final
consumption) to barely 5 mtoe (or just over 1%). Consumption of
petroleum products also fell steadily over the 1990-2001 period,
averaging -0.5% growth per year.
TransportDemand from the transport sector (excluding marine bunkers)
grew impressively despite the fact that vehicles now consume less
energy per kilometre than only a few years ago. These efficiency
increases were largely offset by rapidly growing traffic volumes:
with an average annual growth of almost 2%, FED from transport
was the fastest growing component of total FED in the period
between 1990 and 2001.
Significant growth was observed in the demand for oil products
for air transport, which passed from 28 mtoe in 1990 to almost
43 mtoe in 2001, representing a compound annual growth rate of
4%. Demand of oil products for road transport also increased
substantially, by an average 1.7% a year over the period, and
passed from 212 mtoe in 1990 to 256 mtoe in 2001.
In the rail sector, the modernisation of rail transport and the
associated switch from diesel to electrical locomotives implied a
substantial increase in electricity demand while demand for oil
products slumped. In fact, a clear trade-off was observed: the
positive average annual growth rate in electricity demand from
this sector, which was 2.2% over the 1990-2001 period, was
exactly equal to the average annual reduction in the demand for
oil products.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
58
60
80
110
140
100100
120
9090
130
1991
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
70
Chemical Industry Non-Ferrous Metal Industry
Engineering & Other Metal Industry Non Metallic Mineral
Products Industry
Paper & Printing Industry
Ore Extraction (Except Fuel) Industry
Iron & Steel Industry
Index
1990 =
100
Figure 2-35: Final energy demand in the EU-15‘s energyintensive industries
330
340
350
360
370
380
390
400
2000
2200
2400
2600
2800
3000
3200
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Households' FED Weather Corrected
Heating Degree Days (right axis)
Figure 2-36: Households & tertiary final energy demand
T022-079 2/05/05 14:03 Page 58
Over the period in question, the most spectacular growth occurred in
the demand for natural gas and renewable energies for road
transport. Notwithstanding, given the marginal shares that these
fuels represented in total demand (<1% of FED from road transport
in 2001), the observed increase is insignificant so far.
In total, FED from transport rose to 312 Mtoe in the year 2001,
out of which the highest share corresponded to road transport,
with 257 mtoe or 82% of total transport energy demand. It was
followed by demand from air transport with 43 mtoe (14%).
Compared to these figures, energy demand from rail transport (7.5
mtoe) and inland waterway transport (4.9 mtoe) was moderate
and well below the modal shares of these modes of transport with
respect to transport performance.
Energy indicators
Energy intensityEnergy intensity is measured in the number of energy units
consumed per unit of economic output, as measured by GDP. The
indicator not only reflects changes in the technical efficiency of
energy use, but also productivity increases and structural changes
such as re-location of production or sectoral re-composition.
Over the 1990-2001 period, energy intensity decreased constantly
within the EU-15 both when measured in terms of GIC as well as
in terms of FED. Whilst the EU-15 required some 0.22 toe per
1000 EUR (at 1995 prices) produced within the economy in 1990,
intensity had dropped by nearly 10% to about 0.20 toe per 1000
EUR in 2001.
With respect to the fuel mix, fossil fuel intensities fell sharply
between 1990 and 2001, whilst electricity intensities have
remained relatively flat. This reflects the ongoing structural
mutation of the EU, which continued to transform its economy
away from the energy and labour-intensive manufacturing economy,
and towards the high-value added, service-intensive economy of the
post-industrial world.
Other technological and political developments have also
contributed to the decline in the intensity of coal and oil. The
negative environmental aspects of burning of coal and fuel oil for
power generation have generated fuel switches but also the
development of more efficient and cleaner plants. The 90s also
witnessed the multiplication of a new type of power generation
technology, the Combined Cycle Gas Turbine (or CCGT), which
produces less greenhouse gas emissions than other fossil fuels and is
replacing coal, oil and older gas-fired plants in many EU countries.
Moreover, with the EU firmly committed to attaining its targets
under the Kyoto protocol, several countries have up scaled the
development of renewable energies within their economies.
The most significant reduction in energy intensity occurred in
Germany, not only in terms of the magnitude of its reduction (23.3%
reduction in final energy demand intensity between 1990 and 2001)
but especially in its condition as Europe’s largest energy consumer.
The reduction followed the vast renewal of old industry and power
generation units after unification. In relative terms however, the
largest intensity reductions occurred in Luxembourg, which between
1990 and 2001 reduced its intensity by over 35%, and in Denmark,
whose heavy taxes on domestic energy prompted a reduction in
intensity of nearly a quarter over the same period and placed it as
the least energy-intensive country in the EU-15. Other important
reductions took place in the Netherlands, Sweden and the United
Kingdom. With respect to the EU-15’s less mature economies, the
trend was mixed. In Ireland – which continued its way to
modernising its industrial sector towards high value added goods –
GIC intensity was reduced by an impressive 44%. Greece, which
experienced an increase in its energy intensities during the first half
of the 1990s, managed to reduce it in the second half, so that
intensities in 2001 were roughly equivalent to their 1990 levels but
continued to be among the highest in the EU-15. Only Portugal and
Spain exhibited sustained growth in their energy intensities over the
1990-2001 period, resulting from a strong economic growth partly
powered by energy intensive industries, but also from the limited
application of energy savings and efficiency policies.
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
59
0.0
3.0
6.0
2.02.0
4.0
1.01.0
5.0
1991
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Electricity Oil & Oil
mtoe
Figure 2-37: Final energy demand for rail transport: EU-15
mtoe
0
50
100
150
200
250
300
0.0
0.2
0.4
0.5
0.6
0.7
0.8
0.3
0.1
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Gas - Road (right axis)
Oil & Oil Products - Road
Oil & Oil Products- Air
Renewables - Road (right axis)
Figure 2-38: Final energy demand for road transport: EU-15
T022-079 2/05/05 14:03 Page 59
GIC per capitaBetween 1990 and 2001, the population of the EU-15 grew by
nearly 4% from 364 to 378 million inhabitants. During that period
however, weather-corrected GIC rose more than twice as fast, at an
average 9.4% per year . The combined effect was that per capita GIC
increased during the period from 3.72 toe/capita in 1990 to 3.93
toe/capita in 2001.
Transport indicators
Freight transport intensityTransport intensity is defined as transport services absorbed in
order to produce one additional unit of economic output. The
discussion in chapter 2.4.3 illustated the correlation between the
development of transport performance and GDP. This in turn points
to the fact that, despite a declining share of industrial GVA and
increasing shares of services, transport intensities did in general
not change (see Figure 2-42). Though the physical throughput of
the highly developed economies might decrease per unit of output,
the high degree of international diversification, which causes long
distances, and the absolute growth of output compensates for
technological and structural changes.
Passenger transport intensityPassenger transport intensities, defined as passenger-kilometres per
capita per year, show continuously increasing tendencies for road
and air transportation. While slightly more than 8600 km per capita
were travelled by car in 1990, the average EU-15 inhabitant
travelled slightly less than 10000 km per year by car in 2001. With
regard to air transportation, average distances per person increased
from 430 km in 1990 to more than 750 km by the year 2001. Rail
intensities were stagnating between 1990 and 1995, but, due to the
development of the high speed network, they have increased slightly
in recent years (see Figure 2-43).
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
60
EL FI PT SE ES BE
UK NL
LU FR IT DK IE AT
DK
1990 2001
0.00
0.10
0.30
0.35
0.05
0.15
0.25
0.200.20
toe
/ '0
00 1
995 €
EU-15 average in 2001 = 0.2
Figure 2-39: GIC intensity by member state in the EU-15
0
20
40
60
80
100
120
140
160
180
200
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
tkm
/'000 E
UR G
DP (
road
, se
a)
15
20
25
30
35
40
45
50
55
tkm
/'000 E
UR G
DP (
rail)
Road Intra-EU Sea Railways
Figure 2-42: Freight transport intensity in the EU-15
80
100
120
105
9595
110
9090
8585
115
1991
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Weather corrected Intensity - GIC
Industrial Production
1990=
100
Figure 2-40: Decoupling of energy intensities and industrialproduction in the EU-15
3.2 300
3.3
3.4
3.6
3.7
3.8
3.9
4.0
4.1
3.5
310
320
340
350
360
370
380
390
Population (right axis)
toe/
capit
a
GIC*/capita
millions
Figure 2-41: Per capita energy consumption in the EU-15
T022-079 2/05/05 14:03 Page 60
4.5 Energy and transport in the context of the economy
As fundamental contributors to the economy, energy and transport
demand are strongly correlated to the level of economic activity. This
section highlights this relationship, and presents other factors that
may induce demand to develop either faster or slower than
developments in GDP.
Share of GDP accounted for by the energy and
the transport sectors
Value of final energy demand and energy taxesIn 2001, the value of final energy demand in the EU-15 accounted
for 4.4% of GDP (or over EUR 314 billion at 2001 constant prices)
when evaluated at demand-weighted base prices (i.e. excluding
taxes and VAT). On a pre-tax basis, the bulk of the value was
attributable to consumption of electricity, which represented nearly
half (48%) of the total value of FED. The remaining half was nearly
evenly distributed between the value of demand for motor fuels –
gasoline and diesel – with 24% and natural gas (26%).
Taxes and VAT included, the value of FED represented 6.4%, of the
EU-15’s GDP in 2001, or some EUR 456 billion. Yet here, the
distribution of value changes dramatically from the pre-tax case,
principally as a result of the high excise taxes levied on motor
fuels across Member States (nearly 60% of the value of FED of
motor fuels at final prices corresponded to taxes). These boost the
value of the latter fuels to 44% of the total value of final energy
demand on a final price basis, with electricity dropping to 36%
and natural gas to 18%. Indeed, the value of taxes on motor fuels
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
61
Others
Motor Fuels
Natural Gas
Electricity
0
500
450
400
350
300
250
200
150
100
50
at Base Prices
Val
ue
of
FED
(2001
EU
R b
illion)
Including Taxes
By Fuels in 2001
Figure 2-44: Value of final energy demand in the EU-15
7500
8000
8500
9000
9500
10000
105001990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
pkm
/ c
apit
a (p
asse
nger
car
s)
300
500
700
900
1100
1300
1500
pkm
/ c
apit
a (a
ir, ra
il)
Passenger cars Railways Air
Figure 2-43: Passenger transport intensity in the EU-15
0
500
450
400
350
300
250
200
150
100
50
at Base Prices
Val
ue
of
FED
(2001
EU
R b
illion)
Including Taxes
Industries
Household
Transport
By Sectors in 2001
Electricity
Motor Fuels
Natural Gas
Other
0.0%
0.5%
1.5%
2.5%
1.0%
2.0%
1995
1996
1997
1998
1999
2000
2001
2001
Evolution of FED* by Fuel as a % of GDP
(*) Weather –corrected
• Taxes excluded, the energy sector represented 4.4% of
the EU-15’s GDP in 2001 and estimates suggest that the
transport sector represented between 6% to 8%.
• When taxes are accounted for, the energy sector’s share
of GDP rises to 6.4%.
• GDP share of electricity fell between 1995 and 2001
whereas the share of oil and oil products and natural
gas increased.
• Transport is a major source of employment within the
economy accounting for some 10 million jobs in the
EU-15.
T022-079 2/05/05 14:03 Page 61
represented almost 84% of the total taxes levied on final energy
consumption in the EU-15 in 2001. Taxes on electricity
represented 9% of total taxes levied whilst taxes on natural gas
failed to reach 7%. Taken together, levies on final energy demand
rose to EUR 142 billion or about 2% of the EU-15’s GDP in 2001.
On a fuel-by-fuel basis, the evolution of FED value as a percentage
of GDP was mixed. The combined effect of the rebound in
wholesale oil and gas prices with a demand for both fuels
expanding at a higher rate than that of aggregate economic
activity meant that the value of FED for motor fuels and natural
gas increased significantly from 1998 to 2000.
On the other hand, FED value of electricity and other fuels (coal
and fuel oil) fell over the period, resulting from a concert of factors.
For the case of electricity, the drop in prices was accompanied by
an increase in demand that was less than the expansion of
economic activity. In the case of other fuels, the share of GDP
decreased due to an important contraction of demand for these
fuels, despite significant price increases. The value of FED at base-
prices as a percentage of GDP also varied significantly across
Member States. Italy was the country with the highest ratio in
2001, with FED representing nearly 7% of GDP. In the same year,
the indicator took the lowest value in Austria, Finland, France,
Ireland and the U.K., where it failed to exceed the 4% mark.
Due to similar fuel price conditions, 1995 and 1999 can be used to
benchmark the trends in FED value both at a European level and
across Member States. Figure 2-45 show that FED represented a
lower percentage of GDP in 1999 than in 1995 within nearly all EU-
15 countries. The same was also true for the EU-15 as a whole. The
exceptions were Greece, Italy and Spain, i.e. precisely those
countries whose energy intensity rose over the period. Falling
energy intensities linked principally to structural change and, to a
lesser extent, changes in the countries’ fuel mixes help to explain
the aggregate European trend.
Transport’s share of GDP According to the Commission’s White Paper on European transport
policy for 2010, transport can be considered one of the most
important sectors of the European economy. Harmonised European
input-output tables show sectoral shares of GDP that range from
2% (e.g. Greece, Luxembourg) to 6% (e.g. Denmark) for the basic
transport services. The inclusion of auxiliary transport services (e.g.
cargo handling, fuelling services, repair services) leads to shares
between slightly less than 3% to slightly more than 7%.
Furthermore, the production of transport equipment can be taken
into account. Transport’s direct contribution then amounts to more
EUROPEAN UNION ENERGY
AND TRANSPORT DEVELOPMENT
62
2001 EUR million FED at Base % of Total Excise Taxes % of Total FED at Final % of
Prices (1) Value & VAT (2) Value Prices (1)+ (2) Total Value
Electricity 150454 47.9% 12707 9.0% 163161 35.8%
Households 105674 33.6% 9117 6.4% 114791 25.2%
Industry 44781 14.3% 3590 2.5% 48371 10.6%
Total motor fuels 82553 26.3% 118637 83.6% 201189 44.1%
Gasoline for Transport 40264 12.8% 66732 47.0% 106996 23.5%
Diesel for Transport 42289 13.5% 51905 36.6% 94193 20.7%
Natural Gas 74407 23.7% 9513 6.7% 83920 18.4%
Households 56307 17.9% 8377 5.9% 64684 14.2%
Industry 18099 5.8% 1136 0.8% 19235 6.1%
Others 6658 2.1% 1030 0.7% 7689 1.7%
Households 1946 0.6% 288 0.2% 2234 0.7%
Industry 4713 1.5% 742 0.5% 5455 1.7%
Total value of FED 314072 100.0% 141887 100.0% 455959 100.0%
% of GDP 4.4% 2.0% 6.4%
Table 2-11: Value of final energy demand in the EU-15 (2001)
1995 1999 2001
2001 EUR Value of FED % of GDP Value of FED % of GDP Value of FED % of GDP
Austria 5931 3.5% 5842 3.1% 7335 3.5%
Belgium 9183 4.7% 9909 4.5% 13244 5.4%
Finland 7836 8.5% 5537 4.9% 4716 3.7%
France 39601 3.6% 40900 3.3% 53163 3.9%
Germany 63832 3.6% 65243 3.5% 84536 4.1%
Greece 2836 3.4% 4044 4.2% 5547 5.0%
Ireland 1646 3.5% 2202 3.2% 3234 3.8%
Italy 35149 4.5% 39396 4.7% 64733 6.9%
Netherlands 11266 3.8% 12091 3.5% 15953 4.1%
Spain 18563 4.5% 22090 4.5% 30121 5.4%
United Kingdom 33194 4.1% 33973 3.7% 38092 3.7%
EU-15 225136 3.9% 236542 3.7% 314072 4.4%
Table 2-12: Value of FED (excluding taxes) as a % of GDP in selected EU-15 countries
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