FRENCH PROPOSALS FOR AN EU ENERGY POLICY

UNCLAS SECTION 01 OF 03 PARIS 000762 SIPDIS SENSITIVE STATE FOR EUR/WE, OES/GC, ISN, EB/ESC, AND EB/CBA USDOC FOR 4212/MAC/EUR/OEURA DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80 USEU FOR TSMITHAM E.O. 12958: N/A TAGS: ENRG EPET SENV EIND EINV PREL PGOV FR SUBJECT: FRENCH PROPOSALS FOR AN EU ENERGY POLICY NOT FOR INTERNET DISTRIBUTION Summary -------------- ¶1. (U) As part of an on-going EU debate on an integrated energy policy, France recently presented a memorandum highlighting the contribution of nuclear power to the security of supply and the fight against climate change. France also stressed the importance of energy-saving initiatives and greater investment in environment-friendly alternative sources such as wind and solar power. France's contribution -- the first one so far -- included a call for greater and more resolute research and development in the energy field. End Summary. Describing familiar problems -------------- ¶2. (U) Following-up on the European Councils of October and December 2005, which particularly "stressed the importance of an integrated approach to climate change, energy and competitiveness objectives," French Minister of Economy, Finance and Industry Thierry Breton presented on January 24 his country's contribution to the European debate, which will climax in an EU Energy Summit on March 23 and 24. In an 18-page document setting out the French plans, Breton cites International Energy Agency forecasts that global energy consumption would surge by 60 percent by 2030, with two thirds of this rise being attributable to emerging and developing nations. On the basis of this scenario, fossil fuels (oil, gas, and coal) would provide 85 percent of the world's energy, with greenhouse gas emissions rising a further 60% over current levels. The French text also draws on a European Commission report from Spring 2005 on security of supplies within the European Union, which predicts an energy dependency level (meaning dependency on imported energy sources) of 70 percent in 2030, compared with 50 percent today. ¶3. (U) The French paper further raises the specter of higher EU electricity costs likely to harm the competitiveness of electricity-intensive industries and threaten employment. More specifically, the paper outlines three factors, which could lead to higher prices in spite of an increasingly deregulated market: 1) a new investment burden on utilities as a large number of production facilities are replaced in the next twenty years; 2) the creation of greenhouse gas emissions trading provided for in the October 2003 EU Directive, and 3) the choice by some member States to abandon nuclear power in favor of more expensive fossil fuel-based production and, to a much lesser degree, renewable energies. A long-term energy plan to ensure security of supply -------------- -------------- ¶4. (U) France believes that all these challenges require "a clear and forward-looking framework" in the form of medium and long-term forecasts of EU energy consumption, production and imports, an assessment of the impact of greenhouse gas emissions, and specific measures to improve energy efficiency in the residential sector, transportation, industry and agriculture. France offers as an example its own energy bill of July 2005, which sets out energy supply and demand projections, general goals and associated costs as well as various measures for achieving them. As a result, France expects to improve the overall energy intensity of its economy by two percent a year until 2015 and by 2.6 percent a year between 2015 and 2030. At the same time, France is intent on achieving an average yearly reduction of three percent in greenhouse gas emissions. ¶5. (U) In the power sector, France proposes that the EU adopt a system similar to its "balance estimates" which calls on the electricity transmission network manager to simulate the supply and demand balance for a 10 to 15 year period, taking into account production contingencies, climate and consumption. The French paper signals that this model enables the Government to include all these characteristics a Long-term Investment Program for Electricity Production (PPI),thus guaranteeing a certain level of security. France believes that this type of modeling could allow member States to discuss the risk of acceptable failure, thus leading to a long-term investment program for electricity production on a European scale, or within the framework of a comparable exercise conducted within each member state. Promoting energy savings -------------- ¶6. (U) While France concurs with the energy saving measures put forward by the EU Commission and Council, it also recommends that each member State draw up "energy saving certificates" which could then be traded on a European market. France is convinced that such a system motivates energy suppliers to make energy savings. France also proposes the establishment of a European guarantee fund to encourage funding of energy efficiency projects with funding from the European Investment Bank for the construction and renovation of very low energy consumption buildings. ¶7. (U) In the transportation sector, in which energy consumption and the resulting emissions are rising fastest, France is giving priority to investing in infrastructures that complement road transport. The French memorandum makes clear that this is a promising way of reducing the European economy's dependence on oil and of reducing CO2 emissions. For example, in France, energy consumption by the transportation sector fell by 1.1 percent in 2003, despite an increase in the number of individual journeys. For more rational use of energy in the field of ground transport, France suggests that the EU examine measures such as voluntary agreement by European car makers to reach an average emissions level for new vehicles of 140 grams of CO2 per kilometer by 2008. What energy mix? -------------- ¶8. (SBU) While the French memorandum stresses the need for each member state to determine its own energy mix and make use of its own natural resources, it unsurprisingly makes a pitch in favor of nuclear power and renewable energies. Nuclear power today generates only 34 percent of European electricity, but over 75 percent of French electricity. France therefore argues that it is of strategic importance to maintain the current contribution of nuclear power to the European energy mix and preserve Europe's technological and industrial edge in this area. Given France's importance in the European energy market, we can expect nuclear power to be revived on a continental scale, also on the basis of growing energy needs from Central and Eastern European countries. France has already held informal talks with the British Government on developing a common EU approach to energy production. These talks come at a time of apparent growing support for nuclear power in Britain. ¶9. (U) At the same time, the French memorandum stresses the need for the nuclear industry to be closely monitored, particularly with regards to nuclear waste, through a reinforced EURATOM treaty. The French paper further notes that the EURATOM Treaty should serve as the basis for EU- wide nuclear training programs. ¶10. (U) On renewable energies, France claims considerable progress over the past three years. In terms of volume, France is currently Europe's leading producer of renewable energy. In three years, its installed wind power base has increased five-fold, while its installed power using photovoltaic panels has doubled. However, given the higher cost of renewable energies, France thinks it important that Europe increases its research efforts in this field in order to improve the competitiveness of the various technologies. The French memorandum calls for a thermal renewable energies directive to supplement the existing directives on the production of electricity from renewable energies and bio- fuels. Oil and Natural Gas -------------- ¶11. (U) Amid growing concern about dependence on oil and gas, the French memorandum makes a number of suggestions aimed at reducing tensions. In particular, France proposes joint European action to examine measures to encourage replacement of oil in applications suitable for substitution (heating and generation of electricity),and to speed up the use of bio-fuels, natural gas and LPG in transportation, notably for captive fleets. France is also calling on the EU to regularly publish an inventory of European oil and gas stocks, as is already done in the United States. ¶12. (U) Given Europe's increasing dependence on gas, the French memorandum outlines both short-term and long-term solutions. In the short term, France urges implementation of the April 2004 Directive on the security of natural gas supplies in the event of extreme climatic situations or partial interruption of supply. In the longer term, France is calling for compliance with the Energy Community South East Europe Treaty signed in October 2005 to promote the free circulation of gas and the construction of new energy transport infrastructures in this region. Boosting Research -------------- ¶13. (U) Reflecting its own "innovation and energy science strategy" outlined in the 2005 French energy bill, France recommends an EU Research and Development policy in the field of new energy technologies and energy savings to consolidate resources and meet market needs more rapidly. In particular, France supports the proposal by Commissioner Piebalgs for a strategic European energy-environment research plan and proposes that the European Investment Bank be called upon to finance European research initiatives. It further suggests that the technological platforms at community level, such as those which exist for hydrogen and fuel cells, bio-energies, photovoltaic systems, CO2 capture and storage, etc., be reinforced in order to stimulate the emergence of strategic visions in the field of the new energy technologies. These platforms should enable Europe to play a major role in the new international energy partnerships, such as the IPHE (International Partnership for Hydrogen Economy) or the CSLF (Carbon Sequestration Leadership Forum). Comment -------------- ¶14. (SBU) All in all, the French proposals support the EU Commission's Green Paper on the security of energy supply as well as the EU action plan for energy efficiency. These EU documents have already greatly influenced France's recent energy regulations. The interest of France's contribution lies mostly in its suggestion that each member state adopt the centralized French supply and demand management system. It is also the first individual member state contribution and may lead other member states to do the same, thus enriching the debate prior to the upcoming March summit. End Comment. Stapleton