Plans for a radical shake-up of European Union energy markets look set to be watered down after several states declined on Thursday to back a break-up of giant utilities or make targets for renewable fuels mandatory. In their first discussion of proposals on climate change and the bloc's internal market in electricity and gas, EU energy ministers agreed to require biofuels make up 10 percent of the petrol and diesel used in vehicles by 2020.

The European Commission proposed measures last month to cut greenhouse gas emissions, boost energy production from renewable fuel sources and spur competition by separating distribution networks from the generation activities of big utility groups. The 27 EU leaders meet next month to discuss a broad common energy strategy that the executive Commission aims to turn into legislative proposals later this year.

Ministers supported the Commission's call for some form of action to break the stranglehold that large energy companies have over gas and electricity distribution, which keeps prices high by shutting out new entrants. But they differed over the best way to do that. EU Energy Commissioner Andris Piebalgs and Competition Commissioner Neelie Kroes pushed their proposal for "ownership unbundling", which would require power giants such as Germany's E.ON and RWE to split their generation and distribution activities by selling off one business.

The Commission's alternative option would allow utilities to hand over management of grids to independent operators while retaining ownership. Ministers called in a unanimous statement for "effective unbundling" but declined to endorse either option.

Change tack?
German Economy Minister Michael Glos, whose country holds the EU presidency, said nothing had been ruled out. Piebalgs said the discussion represented progress. "At this stage, the (ministers') council is ready to endorse strengthened unbundling, so it is already a huge step forward," he said. But he acknowledged the Commission might have to change tack on the ownership issue.

Belgium, Britain, Denmark and Sweden supported ownership separation, while France, Estonia, Latvia, Slovakia and the Czech Republic opposed it, one EU official said. Piebalgs sought to reassure countries such as France, where the issue is acutely politically sensitive, that Brussels was not pressing for privatisation of energy companies.

The Commission also proposed that low-polluting renewable sources, such as wind and solar power, should make up 20 percent of the bloc's energy mix by 2020. But ministers could not agree whether to make that target compulsory. They endorsed the goal but omitted the word binding. Glos said EU leaders would tackle the issue in March. The Commission contends non-binding targets do not work. The EU already has a voluntary goal to raise renewable fuels to 12 percent of the energy mix by 2010 but it is likely to be missed.

Germany supports a mandatory target. But Britain says it would prevent nations determining their energy mix and France wants to maintain its priority for non-carbon nuclear energy. Environment groups called for binding renewable targets. "This is the worst possible signal that energy ministers could send to investors in clean energy technologies and the environment," Greenpeace said in a statement.

"Their decision can only be interpreted as evidence of a worrying lack of resolve to combat climate change through encouraging the earth's most sustainable energy sources." The Commission has also proposed cutting EU greenhouse gas emissions unilaterally by at least 20 percent by 2020 from 1990 levels, rising to 30 percent if other developed nations join in. EU environment ministers will address those goals next week.
(Por Jeff Mason, David Lawsky e William Schomberg, Planet Ark, 16/02/2007)