STATEMENT ON ELECTRICITY MARKET RESTRUCTURING BY THE CLIMATE CHANGE, CLEAN AIR AND ENERGY WORKING GROUP OF THE TRANSATLANTIC ENVIRONMENT DIALOGUE

Energy has significant repercussions for environment, human health, economic development, employment, and social cohesion. Energy policies must promote, as their central rationale, a transition to sustainable and equitable patterns of production and consumption. In view of this, electricity market liberalisation and restructuring is not an end in itself, but should support the urgent objectives of climate protection through domestic greenhouse gas emissions reduction as well as the reduction of other emissions that threaten the environment. Furthermore, it should be implemented in a well-designed manner that creates a level playing field, eliminating distortions and creating incentives for sustainable technologies and practices. Liberalisation/ restructuring as is being implemented in the EU and the US is NOT on course to achieve these aims, and indeed puts them at risk. In order to achieve these objectives, TAED proposes:

1. Binding targets for renewable and clean energy sources. The definition of renewable energy must be explicit and rule out inclusion of waste and large hydropower. The EU Directive on Renewable Energy must contain legally binding targets for member states. Any electricity restructuring legislation adopted in the US should specify a renewable portfolio standard of 10% by 2010.

2. A timetable, within a year, for a full phase-out of subsidies for conventional fossil fuels and nuclear energy in the EU and the US, and in their Export Credit Agencies. Liberalisation should create a level playing field. Current market conditions reflect a legacy of historic and ongoing subsidies for fossil fuel and nuclear power, including unjustified treatment of stranded costs for polluting plants, that leaves clean energy and energy efficiency at a disadvantage even after liberalisation/ restructuring. Renewable energy and efficiency should receive the needed support to achieve their promise and compensate for market failures that are not addressed by liberalisation alone. Nuclear, for financial and environmental reasons, cannot be viewed as a sustainable energy source. These demands extend to Export Credit Agencies; additionally, the EU should follow the US example in supporting full greenhouse gas accounting of ECAs and upward harmonisation of policies.

3. Economic instruments to include environmental externalities. Environmental protection is a social good that will not happen by itself in the market. The EU must finally take action and approve the Monti Directive on energy taxation, and introduce majority voting on environmental taxation with the current Treaty reforms. The US should move quickly to adopt a “cap and trade” system for carbon in the US economy.

4. Full disclosure of the origin of electricity through labelling and certification. Transparency is essential to effective liberalisation. Customers have a right to know the environmental impacts of their purchases. The article on guarantee of origin in the European Commission directive on renewable energy should be extended to cover all electricity sources equally. Full disclosure is already current in some US states and should extended to all through federal legislation.

5. Governments to set the example on energy efficiency and renewable energy. : Environmental criteria, including energy efficiency and preference for clean energy sources, should be incorporated in public procurement decisions. The EU and US should agree to modify WTO rules and their own internal legislation to ensure that this is done. The US should also adopt the 2 mill per kWh levy to support energy conservation activities in the States.

6. The implementation of energy legislation should be subject to strategic environmental assessment. In the EU, this reflects the obligation for environmental integration in the Amsterdam Treaty. In the US, any efforts to reform the electricity sector should build in comprehensive environmental assessments. New US legislation should also enforce a multi-emissions control strategy.