updated 1/4/2007 10:46:18 AM ET 2007-01-04T15:46:18

The European Commission will call next week for “a new industrial revolution” in the energy sector to boost competition, protect the climate and ensure security of supply, a draft paper from the EU executive showed.

The draft strategy proposals, obtained by Reuters on Thursday before publication on Jan. 10, call for cutting carbon dioxide emissions further, increasing energy from renewable sources and curtailing the powers of large energy companies.

The draft lacks crucial details as the European Union’s executive Commission is divided over the scope of liberalization and where to set various targets, a Commission source said.

The EU’s priority should be to combat climate change, promote jobs and economic growth and reduce the bloc’s reliance on energy imports, the draft said.

“This means transforming Europe into a highly efficient and low CO2 energy economy by catalyzing a new industrial revolution, accelerating the change to low carbon growth and, over the period of years, dramatically increasing the amount of local, low emission energy,” it said.

The draft confirmed previous reports that the Commission would propose two options for reducing the might of big European utilities, rather than draw up new legislation.

The more radical option, which sources say is opposed by France and Germany, would break up companies that own power stations and distribution grids such as E.ON or RWE in Germany and France’s EDF.

The second option would create “a full Independent System Operator, where the vertically integrated company remains owner of the network assets and receives a regulated return on them, but is not responsible for their operations.”

New emission targets
Commission sources said Competition Commissioner Neelie Kroes and Trade Commissioner Peter Mandelson had pushed hardest for liberalization of the sector while Industry Commissioner Guenter Verheugen and Transport Commissioner Jacques Barrot, who are German and French respectively, opposed radical changes.

The draft leaves blank spaces for the targets for cutting greenhouse gas emissions, which are widely blamed for global warming, and for raising renewable energy production.

Senior Commission officials discussed those details on Thursday and are due to meet again on Monday before the full Commission meeting on Jan. 10.

The draft said global emissions should be halved by 2050 compared with levels in 1990 and that the EU should show world leadership on the issue.

The draft also said it should be up to national governments to decide whether to produce nuclear energy.

The electricity sector will need some $1.186 trillion (900 billion euros) in investment over 25 years to replace aging capacity and cope with rising demand, it said.

The draft envisaged three ways to improve regulation of the energy sector, with the most radical option being “a new body at Community level with the responsibility of setting rules for the EU electricity and gas market covering regulatory and technical issues relevant to make cross-border trade work.”

The measures, including others to improve management of oil and gas stocks and better interconnectivity of power grids among EU countries, will represent the core of a Common European Energy Policy, giving the bloc one voice in dealing with third countries.

The draft said the EU should consider proposing this year a major international agreement on saving energy with the aim of signing it during the Olympic Games in Beijing in 2008.

Copyright 2012 Thomson Reuters. Click for restrictions.


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