Hungary on Scale – Analysis of the EU’s Impacton Hungary’s Energy Sector

UNIVERSITY OF GRONINGEN Faculty of Arts

International Relations and International Organization

MA THESIS

Hungary on Scale – Analysis of the EU’s Impact on Hungary’s Energy Sector

by

Marcell Leiszter

Superviser:

Prof. dr. J.H. (Jaap) de Wilde

15 August 2010

TABLE OF CONTENTS

CHAPTER I INTRODUCTION...5

CHAPTER II THE EUROPEAN COMMUNITIES AND THE EVOLUTION OF EUROPEAN ENERGY POLICIES: 1951-1990...10

I. THE EUROPEAN ENERGY CONCEPTIONS FROM 1951 TO 1957 ...10

II. THE PERIOD OF 1957-1990...15

CONCLUSION...23

CHAPTER III ADVANCEMENT OF COMMON ENERGY POLICY FROM THE TREATY OF MAASTRICHT UNTIL THE FIFTH ENLARGEMENT...24

I. PROBLEMATIC ASPECTS OF TREATY CONTEXT...24

II. SECTORAL MEASURES OF EU ENERGY MARKET: DIRECTIVES AND REGULATIONS BETWEEN 1990-2004...26

III. THE EXTERNAL RELATIONS...37

CONCLUSION...41

CHAPTER IV HUNGARY’S ENERGY SECTOR FROM THE TRANSITION UNTIL THE EU ACCESSION...42

I. THE EU’S EFFECT ON HUNGARY’S LEGISLATION AND DOMESTIC ENERGY POLICY...42

II. ENERGY-RELATED LEGISLATION AND SECTORAL MEASURES...47

III. THE EU’S ASSESSMENT ON HUNGARY’S ACCESSION COMMITMENTS...55

CONCLUSION...57

CHAPTER V TENDENCIES IN THE EUROPEAN ENERGY POLICY: THE POST-2004 PERIOD...59

I. THE FIRST ENERGY ARTICLES...59

II. NEW POLICY GUIDELINES AFTER THE FIFTH ENELARGEMENT...61

CONCLUSION...70

... CHAPTER VI HUNGARY’S GOALS AND ACHIEVEMENTS OF ENERGY POLICY SINCE 2004…………...72

I. HUNGARY’S POLICY REACTION TO EU’S REQUIREMENTS...72

II. NEW ACHIEVEMENTS OF HUNGARIAN ENERGY POLICY...74

CONCLUSION...80

... CHAPTER VII CONCLUSION...81

LIST OF REFERENCES...87

LIST OF ABBREVIATIONS

bcm billion cubic metres

CAP Common Agricultural Policy

CHP combined production of heat and power COMECON Council of Mutual Economic Assistance

EC European Community

ECSC European Coal and Steel Community ECT Energy Charter Treaty

EEA European Economic Area

EEC European Economic Community

EESC European Economic and Social Committee EFTA European Free Trade Association

ERGEG European Regulators’ Group for Electricity and Gas

ESA Euratom Supply Agency

ESAP European Saving Action Plan

EU European Union

Euratom European Atomic Energy Community GCC Gulf Cooperation Council

GDP Gross Domestic Product GEF Global Environment Facility

GHG greenhouse gas

GWh gigawatt-hour

HAEA Hungarian Atomic Energy Authority

HUF Hungarian Forint

IEA International Energy Agency IEF International Energy Forum

INOGATE Intergate Oil and Gas Transport to Europe

ISPA Instruments for Structural Policies for Pre-Accession

KAC Environmental Target Fund

KKKSZ Crude Oil and Oil Product Stocking Association LNG liquefied natural gas

MAVIR Hungarian Power System Operator Company mcm million cubic metres

MEH Hungarian Energy Office (HEO) Mtoe Million Tonnes of Oil Equivalent MVM Hungarian Electricity Companies

MW Mega Watt

MW

megawatt thermal

NEEP National Energy Efficiency Plan NPP nuclear power plant

OECD Organisation for Economic Co-operation and Development OPEC Organization of the Petroleum Exporting Countries

PHARE Poland and Hungary Assistance for Economic Restructuring

PJ Petajoule

PV Photovoltaics

RD&D research and development and demonstration

RE renewable energy

RES Renewable Energy Source

RTD Research and Technical Development SEA Single European Act

TACIS Technical Assistance for Commonwealth of Independent States TENs Trans-European Networks

TEU Treaty on European Union

TJ TeraJoule

Toe Tonne of oil equivalent TPA third-party access

TPES total primary energy supply TVK Tiszai Vegyi Kombinát

UNDP United Nations Development Programme

USSR Union of Soviet Socialist Republics

CHAPTER I INTRODUCTION

AREA OF RESEARCH

This thesis endeavors to pursue a two level comparative analysis, focusing on the shaping of EU’s supranational energy policy which influences Hungary’s national level energy policy. Hence, the main question is ‘How has the formation of European policy level in energy issues shaped Hungary’s national energy policies?’ Thus, I clearly distinguish three periods, namely, from the establishment of ECSC, Euratom, EEC until 1990; from 1990 until 2004 - the date of the fifth enlargement; and from 2004 until the recent tendencies. Regarding their justification, we can assess that 1990 was a turning point in the Hungarian history since this year indicates the political transition from the one-party system towards democracy. The date 2004 is of the same importance as the EU accession had considerable effect on the country’s domestic affairs, such as the field of energy policy. I attribute the same attention to the pre- and post-accession periods. These separated epochs are designed to support the analysis by providing a time frame for the sub-questions which are the following, respectively the five main chapters: What major policy features have evolved during the period from the establishment of European Coal and Steel Community until 1990 which determined the main traits of European energy policy afterwards?; How can we characterize the EU’s energy policy before 2004?;

What are the characteristics of the EU’s energy policy after 2004?; How can we characterize Hungary’s energy policy before the EU accession?; What are the characteristics of Hungary’s energy policy after the EU accession?.

ACADEMIC MOTIVATION

The topic of energy policy in the context of the European Union is a relevant issue as the

incessantly thriving dependence on resources has a considerable influence on European

political decision-making. The member states of the European Union, as one of the most

prominent powers, are reluctant to render this question under the competences of

supranational level. This phenomenon is a key motivating factor for me to discuss what

lies behind these tendencies. The diverging interests of Member States and the different geographical facilities constitute the main elements in this analysis. Although during all the three periods of analysis, we can observe occurrences, which are logically motivating to create a common energy policy, neither the series of oil crises nor the fact that Europe’s energy dependence is constantly raising, are enough to reform this policy area.

It is also important to note that the attempts to create a coherent policy sometimes do not lead to implementation. There were also too ambitious plans for the future which were promising but practically impossible to carry out. The problems of energy exposure are often discussed in policy papers with delineating possible solutions and measures which can ease the dependence like the stockpiling. These provisions are reactions to Europe’s unpleasant situation, rather than a clear policy. From this point of view, it is a challenging task to assess what the EU should expect from the newly acceded countries, like Hungary, if the Western European more developed Member States are tending to fall short. As a Hungarian, I like to examine how the European energy policy affects my home country and how we can evaluate its achievements in the light of European tendencies. Hungary is highly dependent on energy resources and is a key gas transmitter from Russia through the Ukrainian pipelines, and at the same time the most dependent on natural gas compared to other EU Member States. Among others, it is also my purpose to give a profound overview of this topic, to inform Hungarian citizens regarding Hungary’s commitments and to contribute to the hitherto written studies.

RESEARCH METHODOLOGY

After the preliminary introduction the second chapter is designed to provide an analytical

framework, in order to gain a deeper insight into the problematic features of European

energy policy. Its time frame covers the period of 1952-1990, and discusses the main

attributes of formulating European energy policy. The method, how this issue was tackled

has significant relevance for the period of 1990-2010. Firstly, it determines the main

tendencies in the European Community, then in the European Union, and it is also

necessary to evaluate the performance of Hungarian administrations before and after the

EU accession. The third chapter examines the EU achievements from 1990 to 2004. Its

relevance lies in the fact, that the new set of objectives, which was determined during this

period, manifests the expectations towards the newly acceding countries of fifth enlargement, among others, Hungary.

The fourth chapter focuses on Hungary’s commitments to meet the requirements of EU accession. The aim is to picture the domestic situation after the political transition and to summarize all efforts that were taken in order to integrate into the European Communities not just politically, but from economic perspective, as well. The fifth chapter analyzes the recent EU tendencies in energy-policy from the fifth enlargement until nowadays. It also evaluates the role of energy articles in the Constitutional and Lisbon Treaty and their effects on recent and future energy policy. The sixth chapter introduces Hungary’s approximation to EU legislation with special attention to the still problematic sectors, namely the gas and electricity markets and the future perspectives to become a fully integrated Member State. Finally, the seventh chapter draws the conclusions and provides final remarks on the three periods of analysis.

STRUCTURE

During my research, I am comparing the policy objectives and their implementation both on the supranational and the national level. The second chapter as a summary of hitherto energy policy measures has a key role in the later discussion and evaluation of both EU and Hungary level policy objectives and their results. From the third chapter I examine both the EU and Hungary in parallel, first from its period from its political and economical transition until the accession, and then its commitments as an EU Member State until nowadays. Through this I can measure how the European Union has affected my country’s energy policy and I can also answer during which period the political administration was more willing to meet the Union’s requirements. I examine first the EU’s measures to tackle the energy dependence in general, than its sectoral measures, after that I compare Hungarian political reactions with their practical implementations.

The two separate eras bring two outcomes which are discussed in the final conclusion.

THEORETICAL BACKGROUND Andrew Moravcsik: Preferences and Power in the

European Community: A Liberal Intergovernmentalist Approach

In my thesis I will use Moravcsik’s intergovernmental approach to European integration to argue why and how the European Union and the Hungarian government cooperate in the field of energy policy. According to Moravcsik’s assessment, “the EC can be analyzed as a successful intergovernmental regime designed to manage economic interdependence through negotiated policy co-ordination.”

His basic assumption is that the states are rational actors and their behavior is constrained by domestic social pressure and their strategic environment.

There are three essential elements which represent the core conception of liberal intergovernmentalism, i.e., the assumption of rational state behavior, a liberal theory of national preference formation and finally, an intergovernmentalist analysis of interstate negotiations.

“The assumption of rational state behaviour provides a general framework of analysis, which the costs and benefits of economic interdependence are the primary determinants of national preferences while the relative intensity of national preferences, the existence of alternative coalitions, and the opportunity for issue linkages provide the basis for an

intergovernmental analysis of the resolution of distributional conflicts among governments.”

This model of rational state behaviour can be pictured as a process which implies two successive stages. Firstly, governments determine a set of interests; secondly, they bargain among themselves in order to realize those preferences. Thus, the international conflict or co-operation can be constructed by employing two types of theory: one of

1 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993 p 474

2 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993

From: http://courses.essex.ac.uk/gv/gv546/Moravcsik%20preferences%20and%20power.pdf, 12 August 2010

3 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993 p 480

national preference formation and a theory of interstate strategic interaction.

The states’

domestic preferences are determined by the potential benefits of policy co-ordination according to the national governments’ perceptions (demand), while the interstate strategic interaction determines the EU’s possible reactions to pressuring national interests. National governments are susceptible to co-operate since the policy coordination can be a tool to enhance their control over the outcomes of domestic policy, which permits them to reach goals that otherwise could not be possible. Liberal intergovernmentalism can be seen as a unique theory of European integration, since it provides a framework in which two contradictory approaches of IR are integrated: the liberal theory of national preference formation and an intergovernmentalist analysis of interstate bargaining and institutional creation.

Regarding the liberal part of the theory, it is important to note that the economic interdependence motivation considers the EU as a means of coordinating policy to manage flows of goods, services, factors of production and economic externalities in a more effective way than unilateral policies.

Policy co- ordination has two major goals, both aims to remove a negative policy externality. The first is the accommodation of economic interdependence through reciprocal market liberalization which has a primary importance concerning this thesis. The second purpose is the policy harmonization which is considerably difficult to reach in fields, such as the energy policy. According to Moravcsik, even though agreements are mutually beneficial, governments are often tending to set different preferences regarding the distribution which necessarily leads to conflict over the precise definition of co-operation. At the heart of the EC is its internal market which is designed to liberalize or eliminate market distortions for goods and services. From this perspective it is notable that in Hungary the integration into the European commercial system and the implementation of dramatic changes in market economy had utmost priority. The incentive for international policy co-ordination exists when domestic problems cannot be solved through domestic regulation. However, negotiated policy co-ordination implies surrendering some policy autonomy. Concerning intergovernmental bargaining, Moravcsik has three core

4 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993 p 482

5 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993 p 482

6 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993 p 484

assumptions, first, he emphasizes that the intergovernmental co-operation in the frame of the EC is voluntary; second, the environment in which the governments bargain is information-rich, furthermore, the transaction costs of bargaining are low.

CHAPTER II

THE EUROPEAN COMMUNITIES AND THE EVOLUTION OF ENERGY POLICIES:

1951-1990

INTRODUCTION

This chapter discusses the question:

What major policy features have evolved during the period from the establishment of European Coal and Steel Community until 1990, which determined the main traits of European energy policy afterwards?

I. THE EUROPEAN ENERGY CONCEPTIONS FROM 1951 TO 1957 1. European Coal and Steel Community Treaty

The central role and accentuated relevance of energy in European economy can be illustrated by the mere fact that two out of the treaties that established the EU were designed to tackle the European energy challenges.

The ECSC Treaty can be considered the inception of what we call European Union and at the same time the initial source of energy matters.

The aim of the Treaty, as it has been declared in Article 2, is to foster economic expansion, enhance the standard of living and further the growth of employment through the common market of coal and steel.

The Contracting Parties

transferred control of national coal and steel production to the supranational High Authority in order to guarantee the free movement of coal and steel and to ensure unhampered access to resources.

The declaration of ECSC’s institutional objectives are

7 Moravcsik, Andrew (1993): Preferences and Power in the European Community: A Liberal Intergovernmentalist Approach. In: Journal of Common Market Studies, vol. 31., no.4, December 1993

8 Barnes, Pamela M. & Barns, Ian G. (1999) Environmental policy in the European Union, Edward Elgar Publishing

9 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 10 Treaty establishing the European Coal and Steel Community,

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 11 Belgium, Federal Republic of Germany, French, Italy, Luxembourg and the Netherlands

12 Treaty establishing the European Coal and Steel Community, Article 3

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010

laid down in the Article 3 (a-g), as following tasks: (a) ensure orderly supply to the common market respectively the needs of third countries; (b) ensure that all customers in the common market have equal access to the sources of production (c) ensure the establishment of the lowest price; (d) ensure the maintenance of conditions which will encourage undertakings in order to enhance their production potentials and to promote a policy of using natural resources rationally; (e) promote working conditions and to improve the living standard for the workers; (f) promote the growth of international trade;

(f) promote the orderly expansion and modernization of production an the improvement of quality.

The ECSC Treaty took some serious measures to eliminate the potential obstacles of common market by abolishing the incompatible factors rehearsed in the Article 4. It urges the abolishment of (a) import and export duties; (b) the measures or practices which discriminate between producers, and between purchasers or customers, especially in prices and delivery terms; (c) subsidies or aids granted by States; (d) restrictive practices which tend towards the sharing or exploiting of markets.

The Article 5 contains, that the tasks should be carried out with the limited measure of intervention. According to this, the Community should provide guidance and assistance for the parties concerned; place financial resources at the disposal of undertakings for their investment and bear part of the cost of re-adaptation; ensure the establishment, maintenance and observance of normal competitive conditions, publish the reason for its actions.

Normally, the market anomalies should be tackled by cooperation with Governments to regulate or influence general consumption or by intervention as regards prices and commercial policy.

However, the restricted interventions are unsatisfactory and the Community suffers from serious problems cited in Article 58, such as (1) for the event of decline in demand and the period of massive crises the High Authority is in position to determine quotas on equitable basis.

The High Authority could procure necessary funds to cover the expanses set out in Article 50 and to accomplish its mission

13 Article 3, Treaty establishing the European Coal and Steel Community,

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 14 Treaty establishing the European Coal and Steel Community, Article 4

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 15 Treaty establishing the European Coal and Steel Community, Article 5

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 16 Treaty establishing the European Coal and Steel Community, Article 57

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 17 Treaty establishing the European Coal and Steel Community, Article 58

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010

by placing levies and by contracting loans.

Moreover, it was in charge to finance and promote the technical and economic research of coal and steel production (Article 55).

Respectively the accentuated role of the High Authority, the ECSC Treaty provided instruments like fines and penalty payments (Article 58, 64, 65) to comply with the objectives like combating dumping and subsidized imports. The Treaty founded a system of regulated competition under the executive authority; however, it did not contain any specific articles relating to anti-competitive agreements.

The ECSC Treaty was the earliest attempt at integration of coal and steel industries which clearly marks the utmost importance and weight of energy issues. The overall achievements of the Treaty were definitely positive and significant because the Community could deal with crises as well as ensuring balanced development of production and distribution of resources.

Concerning the steel production, we can assess that is has been thriven fourfold as compared to the 1950s, however, meanwhile, the steel industry started to flourish due to the incessantly waxing demand, the coal has gradually lost its primary importance and declined.

In 1950s the coal accounted for the 2/3 of the Community’s fuel balance, while oil represented a meager 10%. By the 1970s the proportion of coal had fallen to 23%, and the oil and natural gas represented 60% and 12%.

The crude oil became the most substantial energy resource; as a result the Member States became highly dependent on import. As the coal has progressively been replaced by oil, natural gas, and nuclear power, the Treaty’s importance evaporated.

On 23 July 2002, after it had fulfilled its pivotal role at the end of fifty years, finally it has expired.

2. The European Atomic Energy Community Treaty

The Euratom Treaty

was a reaction for the Suez Crisis of 1956 in the Middle East and aimed to mitigate energy dependence upon the region, according to Cameron’s

18 Treaty establishing the European Coal and Steel Community, Article 49

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010

19 Daintith, Terence & Hancher, Leigh (1986) Energy Strategy in Europe: The Legal Framework, Walter de Gruyter & Co., Berlin 20 Treaty establishing the European Coal and Steel Community, ECSC Treaty

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm, 8 July 2010 21 Palánkai, Tibor (2003) Economics of European Integration, Akadémiai Kiadó

22 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 23 http://europa.eu/ecsc/index_en.htm, 8 July 2010

24 Note: It came into force on 01.01.1958 From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_euratom_en.htm, 8 July 2010

argumentation which I support.

On 25 March 1957 the ECSC’s signatory parties established the Euratom, at the same time as the European Economic Community, but by another treaty.

Its objectives were to tackle the general shortage of “conventional”

energy resources in the 1950s by the means of nuclear energy and achieving energy independence.

More precisely, the declaration of mission can be found in the Article 2 which distinguishes the following areas of action: “promote research and ensure the dissemination of technical information; establish uniform safety standards to protect the health of workers; facilitate investment and ensure, particularly by encouraging ventures on the part of undertakings, the establishment of the basic installations necessary for the development of nuclear energy in the Community; ensure that all users in the Community receive a regular and equitable supply of ores and nuclear fuels; make certain, by appropriate supervision, that nuclear materials are not diverted to purposes other than those for which they are intended; exercise the right of ownership conferred upon it with respect to special fissile materials; ensure wide commercial outlets and access to the best technical facilities by the creation of a common market in specialized materials; establish with other countries and international organizations such relations as will foster progress in the peaceful uses of nuclear energy.”

It sought to foster and enhance the cooperation in development of nuclear power and considered it the primary energy source of the Community.

Concerning the Euratom Treaty, however, it is vital to remark that it did not confer on the Community in respect of usage of nuclear materials for military purposes.

It transfers powers only over a meager sector of activity like the research and the dissemination of knowledge.

The Treaty establishes the Euratom Supply Agency (ESA) which has a discretional right of option concerning the ores, source materials and fissile materials produced in the Community, and it bears an exclusive right in

25 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 26 Mozley, Robert Fred (1998) The politics and technology of nuclear proliferation, University of Washington Press

27 Treaty establishing the European Atomic Energy Community (Euratom)

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_euratom_en.htm, 8 July 2010 28 Consolidated version of the Treaty establishing the European Atomic Energy Community

Official Journal C 84 of 30.3.2010, From:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:084:0001:0112:EN:PDF, 7 July 2010 29 El-Agraa, Ali M. (2004) The European Union Economics and Policies – 7^th edition, Prectice Hall 30 Article 84, Consolidated version of the Treaty establishing the European Atomic Energy Community Official Journal C 84 of 30.3.2010, From:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:084:0001:0112:EN:PDF, 7 July 2010

31 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press

contracting supplies of resources coming in-and outside of the Community.

The Treaty provides certain powers to the Commission, such as, to issue directives to prevent the infringement of basic standards, or to make recommendations concerning the level of radioactivity (Article 38).

3. European Economic Community

The Treaty establishing the European Economic Community was signed in Rome by the six original Member States in 1957. When the EEC was formulated, no articles have been devoted to the creation of common energy policy.

In the past five decades the Member States were reluctant to ‘communitize’ this domain, and the energy policy essentially remained a national competence.

Despite, the Treaty of Rome has ignored to devote a separate part dealing with this issue, the Article 2 consists rules pertaining to energy policy.

According to this, by establishing the Community’s Common Market the Member States are progressively approximating the economic policies.

Rules falling under the Article 28 to Article 31 prohibit the quantitative restriction on imports and exports, together with the Article 86 bear accentuated relevance.

According to the Article 37, the Member States “should progressively adjust any State monopolies of a commercial character so as to ensure, that no discrimination regarding goods which are produced”

, which provision pertains to energy resources, as well. The market liberalization is a relevant factor regarding the energy policy. The EEC Treaty prohibits the abuse of dominant market position.

In trade, it clearly disposes about the abolition

32 Article 52 (b) Consolidated version of the Treaty establishing the European Atomic Energy Community Official Journal C 84 of 30.3.2010 From:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:084:0001:0112:EN:PDF, 8 July 2010

33 Sands, Philippe & Tarasofsky, Richard (1995) Principles of international environmental law, Manchester University Press 34 Palánkai, Tibor (2003) Economics of European Integration, Akadémiai Kiadó

35 Horváth, Zoltán (2005) Handbook on the European Union – 2^nd edition, translation of the sixth Hungarian edition, HVG-ORAC Publishing House Ltd.

36 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 37 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version)

From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

38 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 39 EEC Treaty (1957) Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 37, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

40 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 82, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

of quantitative quotas and measures having equivalent effect.

The lists of forbidden manners which are incompatible with the conception of common market are clearly delineated: the directly or indirectly fixed purchase or selling prices; limitation or control of production, market, technical development, or instruments; shared markets or sources of supply, the application of dissimilar conditions to equivalent transactions with other trading parties; or to make conclusion of contracts subject to acceptance by other parties of supplementary obligations, which have no connection with the subject of such contracts.

However, the state aids are compatible recited under the definitions of Article 92, if they are not willing to distort or threaten to distort the competition by favoring certain undertakings.

The aid system is under the supervision of the Commission which is responsible for giving notices as a reaction to infringement.

However, if the state concerned is reluctant to comply with the opinion within the period laid down by the Commission, the latter is in the position to bring the case before the Court of Justice,

in addition, this action also could be done by another Member State.

Article 115 determines: “in order to ensure the execution of measures of common commercial policy, the Commission should recommend the methods for the requisite cooperation between Member States.”

The domestic policy modification in between the framework of common market is allowed exclusively at times of economic difficulties.

Under the provision of Article 86 the Commission is in charge to guarantee the adherence to rules of the Treaty.

Using Morvacsik’s theory we can conclude that the Treaties of ECSC, Euratom and EEC were designed to serve intergovernmental bargaining because in the 1950s the European countries’ economic consolidation could not be implemented by the

41 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 31 & Article 32, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

42 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 85 (1/a-b), From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

43 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 92 (1), From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

44 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 93, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

45 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 169, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

46 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 170, From:

http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

47 Treaty establishing the European Economic Community, EEC Treaty - original text (non-consolidated version), Article 115, From: http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_eec_en.htm, 8 July 2010

48 Fábián, Anna (2007) Towards a new community energy policy In: Public Finance Quarterly, 2007, 3-4, page 566.

49 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press

separate national governments unless they harmonize their energy and commercial policies.

II. THE PERIOD OF 1957-1990

1. The first steps towards the European Energy Policy

In 1964 the first attempt to formulate a common energy policy resulted the ‘Protocol of Agreement on Energy Problems’ reached among the Member States of the European Communities on 21 April in Luxembourg.

This pivotal moment was the consequence of lacking co-ordination and harmonized strategy among the three separate Treaties regarding the energy issues.

The Commission had urged the closer co-operation in its

‘First Guidelines for a Community Energy Policy’ which emphasized the importance of common framework of action, based on forecasts; the establishment of a common market and the joint provision of cheap and secure supplies.

Due to the growing oil demand along with the exacerbating energy exposure, the Council urged the accumulation of stocks respectively the crude oil and petroleum products in order to avert the impact of crisis occurring unexpectedly.

According to Council Directive 68/414/EEC, the Member States should stock a corresponding quantity of fuels to at least 65 days’ average daily internal consumption.

This has been modified in 1972 by the Council Directive 72/425 which imposed obligation on Member States to maintain 90 days stock or crude oil/ or petroleum products instead of the 65 days’ demand.

The Council Regulation (EEC) No. 1055/72 has enriched the Community’s legal materials and disposed as regards the approval of communication principles. The Member States should communicate to the Commission the basic information they obtained including the crude oil and natural gas which enter the customs territory of the Community, furthermore the intension of fuel transition in case of a third country which is not belonging to the circle of Member States should be notified.

On 27 July 1973 the Council furthered the energy

50 Protocol of Agreement on Energy Problems , Official Journal 069 , 30/04/1964 P. 1099 – 1100, From: http://eur-lex.europa.eu/Notice.do?

val=5116:cs&lang=hu&list=5340:cs,5083:cs,5116:cs,5317:cs,1540:cs,1417:cs,1327:cs,&pos=3&page=13&nbl=127&pgs=10&hwords =, 9 July 2010 51 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 52 Daintith, Terence and Hancher, Leigh (1986) Energy Strategy in Europe: The Legal Framework, Walter de Gruyter & Co, Berlin

53 Council Directive 68/414/EEC From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31968L0414:EN:HTML, 9 July 2010 54 Council Directive 68/414/EEC

55 Council Directive 72/425, Official Journal L 291 , 28/12/1972 P. 0154 – 0154, From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?

uri=CELEX:31972L0425:EN:HTML, 10 July 2010

56 Council Regulation (EEC) No 1055/72, Official Journal L 120 , 25/05/1972 P. 0003 – 0006,

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31972R1055:EN:HTML, 10 July 10, 2010

regulation by another Directive which was designed to consolidate the previous one. It urged the regulation of prices in order to prevent the abrupt increase. Furthermore, it imposed certain restriction on consumption in accordance with the foreseeable shortages and gave priorities to certain groups of users.

Despite the attempts on policy formation and implementation, the Community’s record was negative, both concerning the development to solve energy problems and even with respect to the application of achievements intending to affect this domain.

2. The oil crisis and its influence

The 1973/74 oil crisis was a turning point which clearly proved the consequences of a missing policy-making and the lack of profound codification. Since that time, the focus of energy policy was directed on the obviation and reduction of consequences of an oil crisis with the intensive development of energy security as constantly emerging difficulty.

The next vital step which should be taken into account is the ‘New Energy Policy Strategy for the Community’.

It clearly delineated the urgent need for Community Energy Policy and emphasized the key role of communication along with the implication of close coordination among Member States. The new strategy proposed the harmonization of national interests which were unfortunately tending not to coincide.

“This means preparing joint target figures constituting guidelines for national policies and, at the same time, major indicators for Community energy producers and consumers.”

It adopted three guidelines pertaining to energy demand, supply and environmental protection. As regards energy demand, (a) the reduction of consumption and rational use of domestic energy to such an extent which brings reasonable result meanwhile, the economic growth remained unhindered. The last aim was the environmental protection as a new factor of economic consideration (c). Concerning the energy supply, (b) the core conception is the enhancement of security intertwined with economic stability. Hence, the accentuation of nuclear power facilities together with the

57 Council Directive 73/283/EEC of 24 July 1973

58 Daintith, Terence & Hancher, Leigh (1986) Energy Strategy in Europe: The Legal Framework, Walter de Gruyter & Co., Berlin 59 Barnes, Pamela M. & Barns, Ian G. (1999) Environmental policy in the European Union, Edward Elgar Publishing

60 Council Resolution of 17 September 1974 concerning a new energy policy strategy for the Community, Official Journal C 153 , 09/07/1975 P. 0001 - 0002 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975Y0709%2801%29:EN:HTML, 9 July 2010

61 Council Resolution of 17 September 1974 concerning a new energy policy strategy for the Community Official Journal C 153 , 09/07/1975 P. 0001 – 0002

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975Y0709%2801%29:EN:HTML, 9 July 2010

assurance of hydrocarbon and solid fuel resources should be in the focus of energy policy. The third guideline highlighted environmental protection focusing both on production and consumption.

Concerning the emerging role of renewable resources, due to the resource exposure and partly thanks to the more environmental conscious trends in Europe, the Commission was desperate to support the research and technical development (RTD) since the 1970s.

After the oil crisis induced by the Kippur War between Arab countries and Israel, the United States took the initiative to discuss the case at an international conference in Washington in February 1974 which was culminated in the establishment of the International Energy Agency under the auspices of OECD.

The IEA indicated that the participant states concluded to accumulate common oil reserves for the hard times of possible crisis.

At EC level the shaping energy policy was manifested in a form of recommendations to Member States. The Commission urged the exploitation of domestic resources instead of exacerbating the exposure by increasing volume of imports.

The strategy of rational utilization of energy, the reduction of oil imports and the promotion of the nuclear sector had a considerable effect on the European Community. As a result of the measures, the internal energy consumption decreased;

however, the promotion of nuclear sector did not live up the expectations due to green movements and economic difficulties.

The accumulation of security stocks continued and the Council Directive 75/339/EEC of 20 May 1975 obliged the Member States to maintain minimum level of stocks of fossil fuel at thermal power stations, which could cover the electricity demand of at least 30 days long period.

The Council also set up a short-term target for energy saving focusing on the two forthcoming years and emphasized inter alia the rational use of energy and asked governments to foster public awareness of energy-saving problem. Its objective was to maintain the 1976/77 oil

62 Council Resolution of 17 September 1974 concerning a new energy policy strategy for the Community Official Journal C 153 , 09/07/1975 P. 0001 – 0002

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975Y0709%2801%29:EN:HTML, 9 July 2010 63 International Energy Agency (2004): Renewable Energy: Market & Policy Trends in IEA Countries, OECD/IEA 64 Moussis, Nicholas (2009) Access to European Union: law, economics, policies – 18^th edition, European Study Service

65 Werner Weider és Wolfgang Wessels: Az európai integráció: Tények és adatok – Translated by Kovács, Attile, (Original Title: Europa von A- Z:Taschenbuch der europäischen Integration – edited by Werner Weiderfeld & Wolfgang Wessels, Europa Union Verlag), Europa Institut Budapest 66 Palánkai, Tibor (2003) Economics of European Integration, Akadémiai Kiadó

67 Horváth, Zoltán (2005) Handbook on the European Union – 2^nd edition, translation of the sixth Hungarian edition, HVG-ORAC Publishing House Ltd.

68 Council Directive 75/339/EEC, OJ L 153, 13.6.1975, p. 35–37

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975L0339:EN:HTML, 9 July 2010

consumption approximately 10% below the 1973 level.

This aim also has been promoted as regards the rational use of energy in industrial undertakings with special attention to the requirement of preparation of an annual report which included energy- saving measures that have already been taken or planned.

The oil crisis necessitated certain reforms concerning the more accentuated use of nuclear power, but only in accordance with the promotion of nuclear safety.

This conception was supported by the closer co-operation among Member States with special regards to crude oil and petroleum products in the event of supply difficulties

, and by a more environmental conscious trend. Several Council recommendations urge the rational use of energy in public transportation,

along with the promotion of better driving habits.

Substantial approaches in the formulating European energy strategy were the encouragement of rational use of energy in heating

and the thermal insulation of buildings,

irrespectively whether they are industrial

or non-industrial.

The reduction of buildings energy requirements is a recurring subject of Council recommendations.

A new set of goals has been initiated by the Commission in 1979. The document called “Third report on the Community’s programme for energy saving” endeavored to determine a short-term energy-saving plan for 1985 and new medium-term objectives which should be adopted for 1990.

The Report contained the “new lines of action for the community’s saving

69 Council Resolution of 9 December 1975 setting a short- term target for energy saving 1976/77, Official Journal C 289 , 17/12/1975 P. 0001 - 0002 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975Y1217%2801%29:EN:HTML, 10 July 2010

70 77/713/EEC: Council recommendation of 25 October 1977 on the rational use of energy in industrial undertakings, Official Journal L 295 , 18/11/1977 P. 0003 – 0004 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31977H0713:EN:HTML, 10 July 2010 71 Council Resolution of 22 July 1975 on the technological problems of nuclear safety, Official Journal C 185 , 14/08/1975 P. 0001 – 0002, From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31975Y0814%2801%29:EN:HTML, 10 July 2010

72 78/890/EEC: Commission Decision of 28 September 1978 applying Council Decision 77/186/EEC on the exporting of crude oil and petroleum products from one Member State to another in the event of supply difficulties, Official Journal L 311 , 04/11/1978 P. 0013 – 0020,

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31978D0890:EN:HTML, 10 July 2010

73 76/495/EEC: Council recommendation of 4 May 1976 on the rational use of energy in urban passenger transport, Official Journal L 140 , 28/05/1976 P. 0016 – 0017 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31976H0495:EN:HTML, 10 July 2010

74 76/494/EEC: Council recommendation of 4 May 1976 on the rational use, through better driving habits, of energy consumed by road vehicles, Official Journal L 140 , 28/05/1976 P. 0014 – 0015, From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31976H0494:EN:HTML, 10 July 2010

75 76/493/EEC: Council recommendation of 4 May 1976 on the rational use of energy in the heating systems of existing buildings, Official Journal L 140 ,28/05/1976 P. 0012 – 0013 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31976H0493:EN:HTML, 10 July 2010

76 76/492/EEC: Council recommendation of 4 May 1976 on the rational use of energy by promoting the thermal insulation of buildings , Official Journal L 140 , 28/05/1976 P. 0011 – 0011 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31976H0492:EN:HTML, 10 July 2010 77 80/823/EEC: Commission recommendation of 29 July 1980 on the rational use of energy in industrial enterprises, Official Journal L 239 , 12/09/1980 P. 0026 – 0037 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31980H0823:EN:HTML, 10 July 2010

78 Council Directive 78/170/EEC of 13 February 1978 on the performance of heat generators for space heating and the production of hot water in new or existing non- industrial buildings and on the insulation of heat and domestic hot-water distribution in new non-industrial buildings, Official Journal L 052 , 23/02/1978 P. 0032 – 0033 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31978L0170:EN:HTML, 10 July 2010

79 79/167/ECSC, EEC, Euratom: Council recommendation of 5 February 1979 on the reduction of energy requirements for buildings in the Community, Official Journal L 037 , 13/02/1979 P. 0025 – 0026 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31979H0167:EN:HTML, 10 July 2010

80 COM(79) 313 final, “Third report on the Community’s programme for energy saving” From: http://aei.pitt.edu/13598/01/77978_1.pdf, 12 July 2010

programme” which distinguished three domains of action: the ‘Energy saving objectives’

(5.1) together with ‘Co-ordination and exchange of information’ (5.2), and finally the

‘New specific Community actions’ (5.3). These goals and measurements, however, did not meet the expectations and the results were meager. After several emergency measures and failed attempts in post-crisis period, formatting of common energy policy became redefined.

Albeit, the 1970s meant an important era as regards policy-making, the 1980s could be discussed as an advancing attempt and manifests a more consciously elaborated line of proposals.

3. The developments of common energy policy in 1980s

The period of 1974-1980 in policy-making brought ambitious goals, however, the directives and resolutions tended to fall short in practice. Despite of expression of political will to approximate the Member States individual energy strategies in order to reduce the considerable oil dependence brought slight success and the Community remained the single largest oil importer in the world.

The 1980s meant the reconsideration and redefinition of hitherto energy policy objectives by setting a revised energy strategy which endeavored to eliminate the shortcomings of uncoordinated or inadequately executed recommendations. The “New lines of action by the European Community in the field of energy saving” prompted a growing demand for a Community level progress by effectively involving all the Member States,

by encouraging the rational use of energy. According to this Council Resolution, the relevant measures should be taken concerning seven aspects. The circle of recommendations comprised the energy saving in the home, in industry, in agriculture, in offices and in commerce, in transport along with the energy production, information and education as distinguished sub-fields of attention.

The COM(81) 540 “The development of an energy strategy for the Community” summarized all the recurring challenges and problematic aspects of mismanaged European energy policy in the 1970s with special regards to the

81 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 82 COM(81) 540, “The development of an energy strategy for the Community”

From: http://aei.pitt.edu/1508/01/energy_30_May_COM_81_540.pdf, 12 July 2010

83 Council Resolution of 9 June 1980 concerning new lines of action by the Community in the field of energy saving, Official Journal C 149 , 18/06/1980 P. 0003 – 0005 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31980Y0618%2802%29:EN:HTML, 10 July 2010 84 Council Resolution of 9 June 1980 concerning new lines of action by the Community in the field of energy saving, Official Journal C 149 , 18/06/1980 P. 0003 – 0005 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31980Y0618%2802%29:EN:HTML, 10 July 2010

accentuation of series of crisis and their aftermath in European economies.

This document offered far more detailed and profound conception respectively the policy formation and its future in the Community. It urged sudden measures to be taken both concerning the energy demand side by promoting the rational use of energy along with energy saving thinking, and on a supply side by diversification. Concerning the latter, the core of re-conceptualization of common energy policy was the mitigation of oil dependence by a gradual replacement with coal, nuclear power and renewable energy.

The newborn strategy set five significant operational priorities for Community action:

“ensuring an adequate level of investment both in alternatives to oil and in the more rational use of energy; the development of a common approach to, energy pricing and taxation; the establishment of measures of Community solidarity to avoid instability on the markets; the reinforcement of common policies in the fields of research, development and technological demonstration; the further development of common approaches and initiatives in external energy relations”

The pursuits announced constituted the leading conception of forthcoming directives and recommendations, which generally confirmed or supplemented the provisions of “The development of an energy strategy for the Community”. The Council Recommendation 82/604/EEC of 28 July 1982 for instance, concerned with the encouragement of investments in the rational use of energy and inaugurated the regular examination at Community level. It emphasized the role of adequate continuity in financial and technical assistance programmes and the importance of continuous information of prospective investors in order to foster and spread the consciousness of lucrative attributes and future prospects of energy-saving ventures.

Council Regulation (EEC) No 625/83 of 15 March 1983 approached the energy issue from another angle and endeavored to broaden and deepen the co-operation and urged the interconnection networks for the transport of electricity and gas in the Community.

Furthermore, it promoted the research and development in the non-thermal field, recommended the enhancement of storage capacity concerning the crude oil and natural gas and bolstered further strengthening of energy supply. The 625/83/EEC Regulation

85 COM(81) 540, “The development of an energy strategy for the Community”

From: http://aei.pitt.edu/1508/01/energy_30_May_COM_81_540.pdf, 12 July 2010 86 COM(81) 540, “The development of an energy strategy for the Community”

From: http://aei.pitt.edu/1508/01/energy_30_May_COM_81_540.pdf, 12 July 2010

87 82/604/EEC: Council Recommendation of 28 July 1982 concerning the encouragement of investment in the rational use of energy, Official Journal L 247 , 23/08/1982 P. 0009 – 0011 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31982H0604:EN:HTML, 10 July 2010

disposed, that the projects and measures should be submitted to the Commission with all the information necessary to supervise their conformity with the objectives’ eligibility as regards the energy policy in the Community.

Inter alia, the methods of formation of natural gas prices and tariffs in the Community became a task to solve and a recurring pivotal part of common energy policy. Natural gas prices and tariffs are generally based on the following principles: “The formation of natural gas prices should make it possible to ensure the best possible use of gas supplies and the optimum allocation of this resource; Natural gas prices should be designed in such a way as to enable such prices to adjust to changes in the competitive situation; Prices should not be artificially low;

Adaptation of two-part tariff system, consisting of a fixed component to cover fixed costs; For larger users a single tariff should normally be applied; In the case of non-tariff sales to large users (i.e. contractual sales) prices should be calculated in the light of cost and market conditions; With the aim of transferring demand to off-peak periods or to allow load-shedding, provision should be made for special tariffs or prices linked to arrangements for interruptible supplies.“

The ECSC Consultative Committee contributed to the common energy policy formation by reaffirming the need for a policy aimed at maintaining Community coal-production capacity

and by calling upon the Commission to give priority ensuring the implementation of long-term measures, and urged to call in the strongest term on Member States to entirely adopt the policy guidelines, reiterated multiple times with special regards to substitution of oil and gas by solid fuels.

Following the reconsidered energy strategy, series of Council Resolutions endeavored to consolidate the Community’s policy by a constant strengthening and reiteration of core conceptions. Special measures like financial support for a creation of strategies

, exploitation of alternative energy sources,

the adaptation of research and

88 Council Regulation (EEC) No 625/83 of 15 March 1983 establishing specific measures of Community interest relating to energy strategy, Official Journal L 073 , 19/03/1983 P. 0008 – 0010 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31983R0625:EN:HTML, 10 July 2010

89 83/230/EEC: Council Recommendation of 21 April 1983 on the methods of forming natural gas prices and tariffs in the Community, Official Journal L 123 , 11/05/1983 P. 0040 – 0041 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31983H0230:EN:HTML, 10 July 2010 90 Resolution of the European Coal and Steel Community Consultative Committee on the working programme on solid fuels, Official Journal C 191 , 16/07/1983 P. 0002 – 0003 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31983Y0716%2802%29:EN:HTML, 10 July 2010 91 Resolution of the ECSC Consultative Committee on the Commission's review of Member States' energy policies, Official Journal C 160 , 20/06/1984 P. 0002 – 0004 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31984Y0620%2802%29:EN:HTML, 10 July 2010

92 85/535/EEC: Commission Decision of 25 November 1985 amending Decision No 84/511/EEC granting financial assistance within the framework of specific measures of Community interest relating to energy strategy, Official Journal L 333 , 11/12/1985 P. 0031 – 0032,

From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985D0535:EN:HTML, 10 July 2010

93 Council Regulation (EEC) No 2126/84 of 23 July 1984 amending Regulation (EEC) No 1972/83 on the granting of financial support for demonstration projects relating to the exploitation of alternative energy sources and to energy saving and the substitution of hydrocarbons, Official Journal L 196 , 26/07/1984 P. 0004 – 0004 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31984R2126:EN:HTML, 10 July 2010

development programmes in the field of non-nuclear energy,

the interconnection of networks for the transport of gas and electricity, the enhancement of crude oil storage capacity

and the improvement of energy-saving programmes in building, transport and industry sector

were frequently accentuated. However, as it turned out, the mere series of recommendations and directives were unsatisfactory without an appropriate treaty context.

4. The Single European Act

In order to further the progress in integration, the modification of Treaty framework was required. The Single European Act (SEA) brought notable changes by the amendment of all three Treaties through the elimination of remaining barriers in internal market. These reforms affected the Community’s energy sector considerably in particular, the following ones: (1) the implementation of internal market as an objective by the end of 1992, (2) the intention of streamlining the Council’s decision-making process as regards the issues of internal market, and finally (3) the enforcement of the role of European Parliament in the review of legislation were the most relevant achievements.

The SEA Treaty complemented the range of goals and tools, declared by the ‘White Paper from the Commission to the European Council’ with special regard on a field of approximation of indirect taxations.

Although, the SEA did not contain special provisions concerning the energy policy, and it rather devoted accentuated attention to the creation of common market together with trade harmonization

, it also urged “to ensure a prudent and rational utilization of natural resources.”

It mentioned the growing relevance of steady development considering scientific and technological improvements of European industry

94 85/198/EEC: Council Decision of 12 March 1985 adopting a research and development programme in the field of non-nuclear energy (1985 to 1988), Official Journal L 083 , 25/03/1985 P. 0016 – 0019 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985D0198:EN:HTML, 10 July 2010

95 Council Regulation (EEC) No 1890/84 of 26 June 1984 introducing special measures of Community interest relating to energy strategy, Official Journal L 177 , 04/07/1984 P. 0007 – 0009 From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31984R1890:EN:HTML, 10 July 2010

96 Council Resolution of 15 January 1985 on the improvement of energy-saving programmes in the Member States, Official Journal C 020 , 22/01/1985 P. 0001 – 0004, From: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985Y0122%2801%29:EN:HTML, 15 August 2010 97 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 98 Cameron, Peter Duncanson (2007) Competition in Energy Markets: Law and Regulation in the European Union – 2^nd edition, Oxford University Press 99 Article 100a, Single European Act (1986) From: http://ec.europa.eu/economy_finance/emu_history/documents/treaties/singleuropeanact.pdf, 13 July 2010

100 Article 130r (3), Single European Act (1986) From: http://ec.europa.eu/economy_finance/emu_history/documents/treaties/singleuropeanact.pdf, 13 July 2010

in order to further the Community’s competitiveness at international level.

The importance of SEA Treaty rested on the growing cohesion among Member States even though; the direct provisions were missing respectively the formation of common energy policy. The diverging interests could not be harmonized, but this Treaty constituted a vital milestone of integration and established the foundation of further advancements in the future.

CONCLUSION

Since the establishment of European Coal and Steel Community, the intention for guaranteeing the uninterrupted supply of energy resources became a pivotal question for some member states, but they were unwilling to give this top priority at the EEC/EU level. The energy, since it provides the cornerstone of economic reconstruction of the post-war Europe, the West-European countries became motivated to start formulating a coherent policy, which endeavors to re-organize the collapsed or exhausted economies.

The focus of the discourse was on heavy industry. As the articles of ECSC and Euratom Treaties indicate, the ‘energy’ was considered to be a commodity and there has been no special attention devoted to dispose on this specific field. The series of economic crises however, proved the relevance of common energy policy, even though the Member States envisaged different goals for the future and a grand solution of problem on supranational level became impossible. The Protocol of Agreement on Energy Problems in 1964, along with series of directives and stockpiling measures were designed to fill the policy-gap.

They made ambitious plans for the future, but the implementations of objectives, unfortunately have tended to fall short. In spite of the fact, that there have been no considerable achievements towards a common energy policy in the treaty context during this early period, the relevant measures have been taken which became the foundations of future results. The core conceptions of energy policy were formulated by the early directives which encouraged the reduction of energy dependence of Europe through the sector reforms and stockpiling initiatives. The liberal intergovernmentalist theory supports a clear reasoning for this early period, since as Moravcsik wrote the internal market was a leading priority to offer an adequate environment for governmental

101 Article 130f, Single European Act (1986) From: http://ec.europa.eu/economy_finance/emu_history/documents/treaties/singleuropeanact.pdf, 13 July 2010